India puts fields up for auction
NEW DELHI, September 2, 2015 – India’s cabinet on Wednesday approved the Marginal Fields Policy and the auction of 69 discovered state oilfields to private companies. The fields had been surrendered by the country’s state-owned Oil and Natural Gas Corporation, or ONGC, and Oil India.
The fields remained economically unfeasible to develop for a number of reasons, including marginal yields and high development costs on top of the kerosene subsidies that both state-owned companies have to pay.
“The fields will be bid out on the basis of revenue share or the share of oil and gas a bidder offers to the government upfront, and work programme,” India’s oil minister, Dharmendra Pradhan, said during a Wednesday press briefing. The winning companies will offer the government a sizable share of the profits and a commitment to continued production on those fields.
Pradhan also said the bidding would include an expanded licensing scheme on any and all hydrocarbons found in the field. Previously, operators in India would get a licence for only a single item, such as oil or gas. Under the new scheme, operators will be able to develop fields as they see fit.
The 69 fields hold hydrocarbons resources worth an estimated Rs700 billion ($10.6 billion) at market price. As India meets most of its oil needs through imports, the government is anxious to develop domestic sources. ONGC and Oil India would also have the option of bidding on the fields, in which case they would be exempt from paying government subsidies.
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