The high-level Vijay Kelkar Committee has favoured the current production-sharing regime for high-risk deep sea oil and gas exploration over the revenue-sharing model that is being considered for the next round of auction.
The Kelkar Committee submitted the first of its two-part report on a road map to enhance domestic oil and gas output to Oil Minister M Veerappa Moily this week.
While the first part of the report dealt with 'Quick Fixes' such as shifting to an open acreage regime, setting up a data repository, administering signed contracts and strengthening the Directorate General of Hydrocarbons (DGH), the second part covered pricing and taxation.
Part two of the report is expected to be submitted next month, sources briefed on the matter said.
The committee, under economist Vijay Kelkar, favoured the production sharing model for deep sea exploration because guarantees for the recovery of all sunk costs are important to attract oil majors with proprietary technology, sources said.
Under the current regime, oil companies can recover all costs - of successful and unsuccessful wells -from sales of oil and gas before sharing profit with the government. The Comptroller and Auditor General of India (CAG) had criticised this approach on grounds that it encourages companies to increase capital expenditure and delay the government's share.
A panel headed by Prime Minister's Economic Advisory Council Chairman C Rangarajan had last year suggested moving to a revenue-sharing regime that requires companies to state upfront the quantum of oil or gas they will share with the government from the first day of production.
Taking cues from the suggestion, the Oil Ministry proposed to auction at least 56 blocks for exploration in the next licensing round by asking bidders to quote the amount of oil or gas output they will share with the government.
Sources said the Kelkar panel favours the revenue-sharing model for shallow and onland blocks that are less cost intensive than deep sea exploration.
It also calls for moving to an open acreage regime where companies can pick exploration areas through the year rather than wait for periodic auctions that offer areas identified by the government.
To facilitate this, the panel has called for setting up a National Data Repository (NDR) that will preserve and promote the country's natural resources data.
Sources said the Committee also suggested administering Production Sharing Contracts (PSC) without any changes and strengthening the DGH for better administration.
Mr Moily appointed the panel headed by Mr Kelkar in March last year to prepare a road map for enhancing domestic production of oil and gas and reduce the nation's import dependency substantially by 2030.
India currently buys about 79 per cent of its oil needs and about half of its natural gas requirements from overseas.
The Oil Minister wants to cut reliance on imports to half. The panel was to have submitted its report by the month end.
India produces about 37 million tonnes of crude oil annually, which is enough to meet about 20 per cent of the demand for fuel. Natural gas production at 101 million standard cubic meters a day is just half of the demand.
The panel has been asked to suggest "steps to be taken for enhancing domestic oil and gas production from the unconventional energy sources and institutional mechanism (required) for appraisal of Indian sedimentary basins to the extent of 75 per cent by 2015 and 100 per cent by 2025".
It has also been asked to suggest "utilisation of Oil Industry Development Board (OIDB) cess and other innovative resource mobilisation approaches for appraising the unexplored/partly explored acreages and development and promotion of indigenous service industry in E&P sector".
The committee would also review the institutional mechanism for acquisition of oil and gas assets abroad as well as pursue diplomatic and political initiatives for import of gas from neighbouring and other countries with emphasis on transnational gas pipelines.
Besides, steps to be taken to ensure adequate finance for R&D to build knowledge infrastructure in E&P activities and measures needed to develop gas transportation infrastructure for establishing a countrywide marketplace are included in the panel's terms of reference.
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