In Major Move, Small Oil and Gas Fields to be Auctioned to Private Firms
In a hefty economic reform, the government has announced that it will, for the first time, auction 69 small and marginal oil and gas fields surrendered by state-run explorers like ONGC. The government hopes to raise 70,000 crores from the sale, said Oil Minister Dharmendra Pradhan.
The government expects private companies to boost output from the areas that hold resources of more than $10 billion.
The minister expects bidding to start in three months for the fields that were given up by ONGC and Oil India as they were uneconomical due to size, geography and state-set low sale prices.
India, the world’s No.4 oil consumer, meets only a fraction of its demand through local sources and wants to boost private and foreign participation in its industry, dominated by state-run Oil and Natural Gas Corp and Oil India and privately-held Reliance Industries Ltd.
Firms who successfully bid for the oil fields will be entitled to a share of the revenue. Companies offering the maximum revenue share or percentage of oil and gas to the government will win the field.
So far, nearly 250 oil and gas blocks that have been auctioned since 1999 have been modelled on the government receiving a cut of the profit after the company recovers its production costs.
ONGC and OIL will benefit from the auction because they need funds- they have to pay a part of their revenue they earn from selling the oil produced from their fields to help subsidise kerosene.