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Q. The new hydrocarbon policy: Will India succeed reducing its import dependency?
Apr 04, 2016 Related to : GS-Paper 1, 2 and 3

Ans :

Introduction-

Recently union government has unveiled the new hydrocarbon policy (HELP) to enhance domestic oil & gas production, bring substantial investment in the sector and generate sizable employment. New policy has undergone many significant shifts to that of earlier. Important features of HELP are-

  • Uniform license for exploration and production of all forms of hydrocarbon (deep water, ultra-deep water and high pressure high temperature) fields.

  • An open acreage policy.

  • Easy to administer revenue sharing model (Shift from production/ profit-sharing contracts).

  • Marketing and pricing freedom for the crude oil and natural gas produced.

Background-

India has more than 3 million sq km of area with potential for oil and gas, out of which about 1.8 million sq km is spread across 26 onshore and shallow water sedimentary basins, and about 1.3 million sq km lies in deep water. The Hydrocarbon Vision 2025, presented by Government of India in 2000, envisaged that 75 % potential area would be fully explored by 2015 (100% by 2025), but progress has been dismal, with only about 22 per cent area well-explored by 2015. This sector facing various issues like low investments, defence objections, pricing and production disputes and proxy wars etc. All these created a situation where India’s import dependency on hydrocarbons is projected to increase from 80 to 90 per cent by 2040.

HELP-2016 will reduce import dependency?


Recently unveiled HELP has a series of initiatives which definitely boost the hydrocarbon sector. The uniform licence will enable the contractor to explore conventional as well as unconventional oil and gas resources under a single license. The concept of Open Acreage Policy will enable producers to choose the blocks from the designated area. Revenue sharing model is in tune with ease of doing business without any cost scrutiny of production. HELP also provides for marketing freedom for crude oil and natural gas produced from these blocks.

There also exist some concerns like gas pricing framework, geological risks, revenue sharing model (contractual regime) etc. While the overall thrust is positive in boosting the oil and gas production and reducing the dependency on imports. Concerns regarding the contractual regime and gas pricing formula need to be addressed.


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