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MINISTRY OF PETROLEUM & NATURAL GAS RESOLUTION
New Delhi, the 10th February, 1999
No. 019018/22/95-0NG.D0. VI.-In order to attract private investment in oil sector Government of India had been offering exploration blocks to private companies from time to time. There have been so far nine rounds of exploration bidding and Government of India has entered into contracts for exploration by private companies through Joint venture arrangements. The demand for petroleum is expected to rise rapidly and it is necessary to step up the level of investment in exploration to hasten the pace of reserve accretion, which can serve as a base for higher levels of domestic production.
Against this back drop and in keeping liberalised policy of Government of India for Private investments in the oil and gas sector, of India has formulated the New Exploration Policy (NELP). The details of NELP are given with the attracting Government Licensing below :
(i) There will be no mandatory state participation through ONGC/OIL nor will there be any carried interest of the State,
(ii) ONGC and OIL to compete for obtaining the petroleum exploration licenses on competitive basis instead of the existing system of granting them PELs on nomination basis. At the same time, ONGC and OIL will also get same fiscal and contract terms as available to private companies.
(iii) Open availability of exploration - acreage to provide a continuous window of opportunities to oil companies. The acreages will be demarcated on a grid system and pending preparation of the grid, blocks will be carved out for offer.
(iv) Freedom to the contractors for marketing crude oil and gas in the domestic market .
(v) Royalty payments on crude oil at the rate of 12.5% for the onland areas and 10% for offshore areas. Royalty on natural gas will be 10% . Half of the royalty from the offshore area will be credited to a hydrocarbon development fund to promote and fund exploration related activities, such as acquisition of geological data on poorly explored basins, promotion of investment opportunities in the upstream sector, institution building etc.
(vi) To encourage exploration in deep water and frontier areas, royalty will be charged at half the prevailing rate for offshore deep ·water areas beyond 00 m bathymetry for first 7 years after commencement of commercial production.
(vii) Cess, which was earlier levied on crude production has been abolished for the blocks offered under NELP
{viii) Companies will be exempted from payments of import duty on the goods imported for petroleum operations.
(ix) There will be no signature, disovery and production bonuses.
(x) A seven year tax holiday from the date of commentment of commercial production available.
(xi) Contractor will be provided fiscal stability during the entire period of contracts.
(xii) A separate petroleum tax guide is in place to facilitate investors.
(xiii) Contractor will be allowed full cost recovery (i.e ..exploration cost, development cost and production cost) with unlimited carry forward period on contract area basis unlik the previous regime, where exploration cost was allowed to be recovered on contract area basis and development and production cost on field-wise basis .
(xiv) Companies, including ONGC/OIL to be paid international price for oil discoveries made in the offered under NELP.
(xv) Pre-tax sharing of profit oil based on investment multiple achieved rather than post ·- tax sharing as at present.
(xvi) A revised model contract has been prepared.
(xvii) The NELP to be implemented straight away for offshore areas as for this no consultation is required the State Government. However, for the onland areas, NELP will be implemented after obtaining the concurrence the concerned State Government.
(xviii) To process for effecting the necessary changes in the relevant Acts and Rules to implement the above proposals.
(xix) An Empowered Committee of Secretaries comprising Secretary (PNG), Finance Secretary and Law Secretary will inter-alia, consider bid evaluation criteria, conduct negotiations with bidders, wherever necessary and make recommendations to the CCEA on award of blocks.
(xx) This regime will apply only against contracts signed under NELP.
The decisions herein contained will come into force with immediate effect and will remain in force until further orders.
ORDER
Ordered that a copy of this Resolution be communicated to all the State Governments/Union Territory Administration, Lok Sabha and Rajya Sabha Secretariat and the concerned Ministries and Departments of the Government of India.
Ordered also that the Resolution be published in the Gazette of India for information
SHIVRAJ SINGH, It.Secy.
N0.0-19018/ 2/95-0NG.DO.VI
Government of India Ministry of Petroleum & Natural Gas
*****************
New Delhi, dated the 10th February, 1999
RESOLUTION
In order to attract private investment in oil sector Government of India had been offering exploration blocks to private companies from time to time. There have been so far nine rounds of exploration bidding and Government of India has entered into contracts for exploration by private companies through Joint venture arrangements . The demand for petroleum is expected to rise rapidly and it is necessary to step up the level of investment in exploration to hasten the pace of reserve [...], which can serve as a base for higher levels of investment production.
Against this backdrop and in keeping liberalised policy of Government of India for private investments in the oil and gas sector, Government of India has formulated the New Exploration Policy (NELP). The details of NELP are given below:
( i ) There will be no mandatory state participation trough ONGC/OIL nor will there be any carried interest of the State.
(ii) ONGC and OIL to compete for obtaining the petroleum exploration licenses on competitive basis instead of the existing system of granting them PELs on nomination basis. A t the same time, ONGC and OIL will also get same fiscal and contract terms as available to private companies.
(iii) Open availability of exploration acreages to provide a continuous window of opportunities to oil companies. The acreages will be demarcated on a grid system and pending preparation of the grid, blocks will be caved out for offer.
(iv) Freedom to the contractors for marketing crude oil and gas in the domestic market .
( v) Royalty payments on crude oil at the rate of 12.5% for the onland areas and 10% for offshore areas. Royalty on natural gas will be 10% . Half of the royalty from the offshore area will be credited to a hydrocarbon development fund to promote and fund exploration related activities, sue as acquisition of geological data on poorly explored basins, promotion of investment opportunities in the upstream sector, institution building etc.
(vi) To encourage exploration in deep water and frontier areas, royalty will be charged at half the prevailing rate offshore deep water areas beyond 400 m bathymetry for first 7 years after commencement of commercial production.
(vii) Cess, which was earlier levied on crude production has been abolished for the blocks offered under NELP.
(viii) Companies will be exempted from payments of import duty on the goods imported tor petroleum operations.
(ix) here will be no signature, discovery and production bonuses.
(x) seven year tax holiday from the date of commencement of commercial production available.
(xi) Contractor will be provided fiscal stability during the entire period of contracts.
(xii) A separate petroleum tax guide is in in placement for petroleum investors
(xiii) Contractor will be allowed full cost recovery (i.e., exploration cost, development cost and production cost) with unlimited carry forward period on contract area basis unlike the previous regime, where exploration cost was allowed to be recovered on contract area basis and development and production cost on field-wise basis.
(xiv) Companies, including ONGC/OIL to be international price for oil discoveries made in the offered under NELP.
(x) Pre- tax sharing of profit oil based on investment multiple achieved rather than post-tax sharing as at present.
(xvi) A revised model contract has been prepared.
(xvii) The NELP to be implemented straight away for offshore areas as for this no consultation is required with the State Government. However, for the onland areas, the NELP will be implemented after obtaining the occurrence of the concerned State Government.
(xviii) To process for the effecting necessary changes in the relevant acts and rules to implement the above proposals.
(xix) An empowered Comities of Secretaries comprising Secretary (PNG), Finance Secretary and Law Secretary will inter-alia, consider bid evaluation criteria, conduct negotiations with bidders wherever necessary and make recommendations to the CCEA on awards of blocks.
(xx) This Regime will apply only against contracts signed under NELP.
The decisions herein contained will come into force with immediate effect and will remain into force until further orders.
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