NEW DELHI: The Cabinet Committee on Economic Affairs chaired by the Prime Minister Narendra Modi has approved ‘Deregulation of Sale of Domestically Produced Crude Oil’, whereby Government has decided to cease allocation of crude oil and condensate w.e.f. 01.10.2022. This will 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 its Nominee or Government Companies shall accordingly be waived off. All E&P companies will now be free to sell crude oil from their fields in domestic market. Government revenues like Royalty, cess, etc. will continue to be calculated on uniform basis across all Contracts. As earlier, exports will not be permissible.
This decision will further spur economic activities, incentivize making investments in upstream oil and gas sector and builds 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.
Government has carried out several progressive reforms in Exploration and Production (E&P) Sector in last eight years such as pricing and marketing freedom for gas, discovery of gas price through 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, allocation of acreage has almost doubled as compared to area awarded before 2014. Since February 2019, reforms have focussed on production maximization with no revenue sharing for difficult basins other than windfall gain.