Open Acreage Licensing Policy and National Data Repository
Recently, the petroleum Ministry introduced a new oil and gas block licensing policy that proposes to open up 2.8 million square kilometres of sedimentary basins in the country for exploration and production activities. The new policy provides the explorers to study the seismic data released by the NDR about all sedimentary basins in India before they apply for blocks for exploration and production purpose.
Background
The new hydrocarbon exploration licensing policy launched by the government offers single license to investors to explore conventional and unconventional oil and gas resources. It aims to increase the oil production in the country from current 80 million metric tons to about 150-155 million metric tons by 2022. This policy of the government is based on revenue sharing model. However, the most important feature of the policy is Open Acreage licensing Policy (OALP), which permits investors to select the exploration blocks on their own without having to wait for the formal bid round from the Government. The investor selects the option by analysing the geological & geophysical (G&G) and seismic data of the sedimentary basins released by the National Data Repository.
What is the issue?
As per petroleum ministry, about 52% of India’s sedimentary basins data have not been updated since last 25 years. This in turn is hampering the interest of investors and delaying the exploration and production (E&P) sector of the oil and gas industry. The ministry has asked the National Data Repository to upgrade the data and improve this situation.
What is sedimentary basin?
A sedimentary basin can be defined as a low lying area in the Earth’s crust, either on land or offshore, formed as a result of tectonic activity, and in which sediments accumulate. Sedimentary basins range in size from as small as hundreds of meters to large parts of ocean basins. There are 26 sedimentary basins existing in India covering an area of 3.14 million square kilometres.
Open Acreage Licensing Policy (OALP) Mechanism?
This policy changes the entire value chain of oil and gas sector. Under this, a bidder aiming to explore hydrocarbons like oil, gas, coal bed methane, gas hydrate, etc. may apply to the government for any unexplored block. The bidder may use the geological & geophysical (G&G) and seismic data of the sedimentary basins provided by the National Data Repository for selecting the best possible block. Further, when the bidder applies for the block, the government examines the interests and justification and puts that block up for bid. Thus, “OALP” can be treated as a very transformative step in India’s Exploration & Production policy as it reduces the administrative & regulatory burden, and fulfils the government’s promise of minimum government but maximum governance.
Problems associated with implementation of the Policy
The new policy incentivises the bidders with an extra five points for applying for a land if they have already invested in the exploration and development of that particular area. However, it is still not enough as an incentive, since the bidding involves huge investment risk. Further the exploration and production of oil and gas are capital intensive and involve high risk investment, use of expensive technologies and best management practices. So there is need to increase FDI in this sector for efficient exploration of the blocks. But country has failed to attract enough foreign investment in this field because it is facing stiff competition from foreign countries.
