Context: As economies gather momentum through 2021, global oil and gas consumption would start bounding towards normalcy, pushing up prices.
Challenges in Oil and Gas Sector
Finding and developing new reserves: as well as more efficient exploitation of producing fields for ensuring supply security (India is the third-largest oil consumer after the US and China).
Cancellation of investments: due to turbulence in oil markets combined with a shift away from fossil fuels (to reduce carbon footprint).
Lack of commercial viability in a low-price environment: would result in some of the world’s oil and gas discoveries become ‘stranded resources’.
Inordinate delays in securing environmental and defence approvals: obstructs fast-track exploration and production activity in the new blocks.
Low profit for the producers: The majority of India’s crude output comes from ageing fields that pre-date the New Exploration Licensing Policy (NELP).
Under the previous regime, producers turned over a hefty 60-65% of their revenues to the government in the form of royalty, cess, profit petroleum and income-tax.
Measures Taken by India
Proposal for a special unit for approvals: could help widen the playing field (which has been limited to state (ONGC and Oil India) and also conduct basic due diligence on the blocks before they are offered.
Moved to digitalise and speed up approval of field development plans and budgets.
Halving of oil industry development cess: on blocks investing in enhanced recovery. But the scheme is applied only to oil from designated wells, rather than the entire production, diluted its benefit.
Awarding of contracts: along with successive reforms in the production-sharing contract framework.
Increasing the confidence of produces: by adopting a global framework for revenue sharing.