The Hydrocarbon Exploration Licensing Policy (HELP)

When was it announced?
It was announced by the Union government on March 10.

Q A
When was it announced?
  • It was announced by the Union government on March 10.
What aresignificant features of the policy which are appreciated?
  • The Hydrocarbon Exploration Licensing Policy (Help) has been welcomed by most commentators.
  • The most significant shifts under Help are: One, from production/ profit-sharing contracts (PSCs) to revenue-sharing contracts (RSCs); and two, pricing and marketing freedom for gas produced from deep water, ultra-deep water and high pressure high temperature (HPHT) fields. The Open Acreage Licensing Policy and single licence for all hydrocarbons are also important developments.
What is the view of critics? What are the apprehensions?
  • While it moves the policy framework in the right direction, the policy continues to be bedevilled by the conflict between consumers and producers.
  • The marketing and pricing freedom for new gas produced from deep water, ultra-deep water and HPHT fields, though better than before, is constrained by a cap on gas prices (there’s no such cap on oil prices). The introduction of coal price into the calculation is problematic since gas cannot be a substitute for coal for power generation, except at very low gas prices, as shown by the recent US experience.
  • An artificial depression of gas prices only seeks to perpetuate an untenable bias in favour of the power sector. Almost the entire current gas production continues to remain hostage to highly depressed prices. There’s no roadmap for moving to import parity pricing for gas, as has already happened for oil. India’s full gas potential can be exploited only when the policy for artificial suppression of gas prices is given up.
What is the way ahead?
  • As per the IEA report, India has proven oil reserves of 5.7 billion barrels (recoverable reserves of 24 billion barrels), compared with an annual crude demand of 1.4 billion barrels, and rising. The oil reserves are thus meagre. Gas resources are projected at a much larger 7,900 bcm of recoverable reserves (more than 200 times the present annual production).
  • There’s a compelling opportunity for gas, which India must seize to reduce import dependency and shift to a lower carbon trajectory. Natural gas is the cleanest fossil fuel and also has lower amounts of sulphur dioxide and nitrous oxides than other fossil fuels.
  • Help 2016 is more about gas than oil. While the overall thrust is positive, concerns regarding the contractual regime and gas pricing formula remain, and will need to be addressed.

WORD FROM TEAM GS-SCORE –

Relevant for

Infrastructure of GS:3
For further detail Refer article titled “The gas opportunity” from Indian express dated April 3, 2016

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