Cabinet Committee on Economic Affairs (CCEA) chaired by Prime Minister Narendra Modi, on Wednesday, approved ‘Deregulation of Sale of Domestically Produced Crude Oil’ whereby the Government has decided to cease allocation of crude oil and condensate with effect from October 1 this year.
The move is expeted to ensure marketing freedom for all exploration and production (E&P) operators.
The condition in the production sharing contracts (PSCs) to sell crude oil to government or the nominee or government companies will accordingly be waived off. All E&P companies will be free to sell crude oil from their fields in the domestic market.
The Government revenues from royalty, cess, etc. will continue to be calculated on a uniform basis across all contracts.
As has been the case earlier, exports will no longer be permissible.
The decision will further spur economic activities, incentivise making investments in the upstream oil and gas sector and build on a series of targeted transformative reforms rolled out since 2014. The policies relating to production, infrastructure and marketing of oil and gas have been made more transparent with a focus on ease of doing business and facilitating more operational flexibility to operators/industry.
The Government has carried out several progressive reforms in the Exploration and Production (E&P) sector in the last eight years such as pricing and marketing freedom for gas, the discovery of gas prices through a competitive e-bidding process, introduction of Revenue Sharing Contracts under Hydrocarbon Exploration Licensing Policy (HELP), etc.
A large number of blocks have since been allotted through several bidding rounds. As a result of these efforts, the allocation of the acreage has almost doubled as compared to the area awarded before 2014. Since February 2019, reforms have focussed on production maximisation with no revenue sharing for difficult basins other than windfall gain.