Hydro Carbon Exploration and Licensing Policy (HELP)

Hydrocarbon Exploration and Licensing Policy (HELP)

Four main facets of this policy are:
• Uniform license for exploration and production of all forms of hydrocarbon: will enable the contractor to explore conventional as well as unconventional oil and gas resources including CBM, shale gas/oil, tight gas and gas hydrates under a single license.
• an open acreage policy: allows an explorer to study the data available and bid for blocks of his choice and therefore will enable E&P companies choose the blocks from the designated area.
• easy to administer revenue sharing model 
• marketing and pricing freedom for the crude oil and natural gas produced.

Significance:
• The policy is also aimed at enhancing transparency and reducing administrative discretion
• The decision will enhance domestic oil & gas production
• bring substantial investment in the sector
• and generate sizable employment.

What were the earlier issues and how does HELP seeks to curtail them?
 

The earlier issues involved in the implementation of Exploration and Licensing Policy are largely associated with the uneasiness of doing business in terms of the profit sharing with the government and the high risks involved in the exploration which discourages any significant outcome in this regard.

The earlier contracts were based on the concept of profit sharing where profits are shared between Government and the contractor after recovery of cost.

Under the profit sharing methodology, it became necessary for the Government to scrutinize cost details of private participants and this led to many delays and disputes.

Under the new regime, the Government will not be concerned with the cost incurred and will receive a share of the gross revenue from the sale of oil, gas etc. This is in tune with Government’s policy of “Ease of Doing Business”.

In addition to this the higher risks and costs involved in exploration and production from offshore areas have been acknowledged and consequently lower royalty rates for such areas have been provided as compared to New Exploration Licensing Policy (NELP1997) royalty rates to encourage exploration and production. A graded system of royalty rates have been introduced, in which royalty rates decreases from shallow water to deepwater and ultra-deep water. At the same time, royalty rate for onland areas have been kept intact so that revenues to the state governments are not affected. On the lines of NELP, cess and import duty will not be applicable on blocks awarded under the new policy. This policy also provides for marketing freedom for crude oil and natural gas produced from these blocks. This is in tune with Government’s policy of “Minimum Government –Maximum Governance”

Critique:

• A shift in regime may not directly result in more revenues for the government although it ensures that as the contractor earns more, the government will get progressively higher revenue.
• Technolocial Inadequacies: In 2014, although 126 discoveries had been made in 41 active blocks, commercial production had commenced only in three blocks. The reasons for the delay was primarily the technological inadequacies. Therefore, though the regulatory barriers have been tackled, yet barriers in technology are also needed to be dealt with in order to reap the true benefits of this policy.

By: Vishal