India to Overhaul Oil and Gas Exploration Policy

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Researched by Industrial Info Resources India (Delhi, India)--After unveiling major reform programs for the core sector industries, the Government of India now set to make major amendments to the country's oil and gas exploration policy to attract investors, spur energy output and revive the economy.

State-run explorer, Oil & Natural Gas Company Limited (ONGC) (BSE: 500312) (Dehradun, Uttarakhand) has been given stiff targets to reverse the declining trend in oil and gas output in recent years as it looks to cut on import dependence. The government has announced a 10-point reform for Production Sharing Contract (PSC) for early monetization of oil and gas fields.

The oil ministry wants to replace the 15-year old production sharing regime, which has produced more controversies and less oil and gas. Out of total of 252 blocks allotted, only three have come to production stage. The new regime aims to inspire confidence in investors and require minimal government intervention. The oil minister is specifically aiming to remove bottlenecks and red-tapism while doing business in India. Their other main priority is to monetize small and marginal fields lying with ONGC with help of private investment as well as technology.

As per the new policy, natural gas pipeline network in the country will be doubled to 30,000 kilometers by 2019 to expand the reach of environment-friendly fuel. Also state refineries are being asked to improve efficiencies to become globally competitive even as fuel retailing is opened up for competition. Priorities and targets at every level-- upstream, midstream and downstream have been set to deliver better results.

Global oil prices have slumped by 25% from about $115 per barrel in June 2014 to below $75 during the third week of November 2014. This has emboldened the government to ratify a politically risky decision of scrapping controls on diesel prices and raising natural gas tariff for the first time in four years, in a bid to revive the economy and to lure investors.

As per the data from Oil ministry, India spent $143 billion to import crude oil last year and it wants to diversify its purchases to guard against geopolitical risks in some of the world's biggest suppliers. The ministry is keen to import oil from US, which currently does not allow oil exports and are also exploring import from Russia and Latin America.

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