Govt simplifies oil, gas block processes; provides for self-certification, deemed approval

New Delhi: In perhaps the most far-reaching easing of rules, the government has simplified procedures for oilNSE -2.56 % and gas exploration and production by providing for self certification for a host of compliance, such as a discovery notification and deemed consent for investment in fields in a stipulated time. With a view to make it easier to do business, the government has provided that notification of a discovery and tests to confirm them will not require approval and documents will be accepted on self-certification basis, according to the notification issued on April 25.

Work programme and field development plan or their revisions will be deemed to be approved on expiry of 30 days of submission of documents under self-certification. Only issues requiring government nod will be grant of petroleum exploration or mining license, transfer of stake and extensions.

The Directorate General of Hydrocarbons (DGH) has issued a detailed notification, simplifying procedures and process under Production Sharing Contract (PSC) for pre-NELP and NELP oil and gas blocks.

Almost all of India’s oil and gas production comes from either areas given to state-owned ONGC and OIL on nomination basis or awarded to companies such as Reliance IndustriesNSE 3.36 % and Cairn in bid rounds since 1990s.

“Ease of doing businesses is one of the focus areas of the government in exploration and production (E&P) sector, with the objective to increase investment and production,” the DGH said in the April 25 order. “Simplification of procedures and processes make the system transparent and faster which facilitates investments in the sector.”

The areas or blocks awarded under New Exploration Licensing Policy (NELP) since 1999 such as RIL’s KG-D6 or fields given away in pre-NELP bid rounds like Cairn’s Rajasthan oil block will benefit from the easing of rules.

One of the critical aspects of the PSCs signed under pre-NELP and NELP, which also tends to be one of the most contentious, relates to cost recovery: the extent of cost recoverable by the operator from revenue generated in the oil and gas field.

Another important area of dispute is the investment multiple (IM) that determines profit sharing between the government and the contractor. India has seen a large number of disputes between the private contractors and the government, most of them around cost recovery claims of contractors and IM. The DGH said a review of processes for various approvals and submission of documents for the same under PSCs for NELP/pre-NELP was undertaken.

Following this, the processes have been divided into three categories – process where documents shall be accepted on self-certification basis and no approval is required; processes where approval will be deemed on expiry of 30 days of submission of documents under self-certification; and processes where approval shall be required.

The 22 processes where documents will be accepted on self certification basis and no approval is required include information of discovery, potential commercial interest, bank guarantee, notification of discovery confirmation test, inventory report, submission of data, environment impact assessment report, contingency plan, appointment of auditor, notice for entering next phase or relinquishment and commercial discovery.

Work programme and budget, appraisal programme or its revisions and field development plan or its revisions are the three processes where approval will be deemed after 30-days.

A dozen processes – including extension of exploration phase, grant of petroleum exploration licenses (PEL) and petroleum mining lease (PM), unit development plan, liquidated damages on account of cost of unfinished work programme, assignment/transfer of participating interest, extension of PSC, cost and profit petroleum calculations and audited accounts – will require prior approval.

“All self-certified documents shall be as per provisions of PSC and shall be duly supported with all the relevant documents duty attested by the authorised/signatories of the contractor,” DGH said.

All self-certified documents will be submitted to petroleum ministry/DGH at any time for alignment with relevant provisions of PSC, policies/guidelines issued by government/DGH, good international petroleum industry practices (GIPIP) and other statutory requirements, it said.

“In case any material deviation is observed in facts/figures and substance submitted by the contractor during review by Ministry of Petroleum and Natural Gas/DGH, the contractor shall be notified for modification/ rectification of the same as per provisions of PSC in a time bound manner,” it added. DGH also issued standard formats for submission of various documents.