New auction policy for natural gas

by Mentors4ias · November 21, 2015

Ministry aims to have a new auction policy for hydrocarbon blocks ready by the end of the current financial year.

In the recently announced marginal field policy, the government has provided pricing and marketing freedom for the natural gas
The policy for the marginal fields was announced in September.
It involves selling natural gas at market-determined prices rather than at prices determined by the government.
In addition, oil and gas producers in these marginal fields were allowed to sell their hydrocarbons to any customer of their choice and not be bound by the government’s allocation policy.
On similar lines, it is proposed to provide pricing and marketing freedom for the natural gas to be produced from the areas to be awarded under the new contractual and fiscal regime in order to incentivise production from these areas

The consultation paper also proposes a unified licensing policy wherein the winner of a hydrocarbon block will be able to explore and extract any and all hydrocarbons in that block-including conventional hydrocarbons like oil and gas and unconventional hydrocarbons like shale oil, shale gas and coal bed methane (CBM).
This policy, too, was initially introduced for the 69 marginal fields, but could now be expanded to all future hydrocarbon block allocations if the proposal in the consultation paper are accepted.
Previously, companies need a separate license for each type of hydrocarbon they wanted to extract.
The proposed policy also seeks to move away from the current cost recovery/production-linked payment system to a revenue sharing model.
In this model, the paper says, the bidders will bid the percentage of revenue that they will share with the government in two scenarios: one when the revenue is less than or equal to the lower revenue point and the second when the revenue is more than or equal to the higher revenue point.
The government’s percentage share of revenue at revenue points between the higher and lower revenue points will be “interpolated on a linear scale