Old/Present policy - New Exploration Licensing Policy (NELP)
Q. Which of the following is/are true regarding exploration and production of oil and gas?
1) The old policy regime for exploration and production of oil and gas is known as Hydrocarbon Exploration Licensing Policy (HELP).
2) It provides a unified license for all hydrocarbons.- Published on 11 Mar 16a. Only 1
b. Only 2
c. Both 1 and 2
d. Neither 1 nor 2
ANSWER: Neither 1 nor 2
- The present policy regime for exploration and production of oil and gas, known as New Exploration Licensing Policy (NELP) has been in existence for 18 years.
- Presently, there are separate policies and licenses for different hydrocarbons. There are separate policy regimes for conventional oil and gas, coal-bed methane, shale oil and gas and gas hydrates.
- In practice, there is overlapping of resources between different contracts. Unconventional hydrocarbons (shale gas and shale oil) were unknown when NELP was framed.
- This fragmented policy framework leads to inefficiencies in exploiting natural resources. For example, while exploring for one type of hydrocarbon, if a different one is found, it will need separate licensing, adding to cost.
- The Production Sharing Contracts (PSCs) under NELP are based on the principle of “profit sharing”. When a contractor discovers oil or gas, he is expected to share with the Government the profit from his venture, as per the percentage given in his bid. Until a profit is made, no share is given to Government, other than royalties and cesses.
- Since the contract requires the profit to be measured, it becomes necessary for the cost to be accounted for and checked by the Government. To prevent loss of Government revenue, there are requirements for Government approval at various stages to prevent the contractor from exaggerating the cost. Thus, leading to delays and disputes.
- Another feature of the current system is that exploration is confined to blocks which have been put on tender by the Government. There are situations where exploration companies may themselves have information or interest regarding other areas where they may like to pursue exploration. Currently these opportunities remain untapped, until and unless Government brings them to bidding at some stage.
