India expands its exploration policy to include shale oil, shale gas, and coal bed methane, aiming to attract private and foreign investment in the upstream sector.
The cabinet recently passed a bill to amend the oil fields (Regulation and Development) Act of 1948, which now awaits Lok Sabha approval to become law.
Key Amendments to the Oilfields Act
The proposed changes include:
- Expanding the scope to cover unconventional resources like shale oil and gas.
- Granting companies the freedom to seek international arbitration in disputes.
- Offering longer lease periods for exploration and production (E&P).
Rahul Chauhan, upstream technical research country lead at S&P Global Commodity Insights, noted these reforms aim to make India more competitive globally by addressing longstanding issues faced by exploration companies.
Reforming the E&P Sector
India’s E&P sector has struggled with uneven growth over the past decade. However, recent reforms have begun to reshape the landscape.
Greater Marketing Freedom
Under the new policy, upstream companies no longer require government approval to sell crude oil and condensates domestically. This change gives producers more autonomy and flexibility in marketing their output.
Open Acreage Licensing Policy
The Open Acreage Licensing Policy (OALP) allows explorers to identify and propose areas for oil and gas exploration throughout the year.
These proposed areas are subsequently auctioned, enabling a continuous and investor-driven approach to exploration.
Abolition of Windfall Tax
The government recently abolished the windfall tax on domestically produced crude oil, which had been in place since July 2022.
Industry experts had criticized the tax for its adverse impact on producers recovering from a period of low prices.
Rajeev Lala, Director for upstream companies and transactions at S&P Global Commodity Insights said, “India should focus on expanding and incentivizing production instead”.
Investor-Friendly Future
By creating a more investor-friendly framework, India expands exploration policy to rejuvenate its E&P sector and attract global interest.
As reported by thehindubusinessline.com, the proposed reforms promise to address historical challenges while positioning the country as a competitive player in the energy market.
