Recently, Union Minister for Petroleum, Natural Gas, Oil, and Steel talked about Discovered Small Field Policy
What is Discovered Small Field Policy?
The new DSF policy is based on the principle of ‘ease of doing businesses’. This policy is an outcome of a long consultation process between the government and the industry.
Government has initiated key reforms in the Upstream Hydrocarbon E & P Sector to increase domestic production of oil and gas. Marginal Field Policy (MFP) was notified on 14th October, 2015 to monetize marginal fields of Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL) under nomination regime which remained undeveloped for a long period of time. This policy was subsequently renamed as Discovered Small Field (DSF) Policy which is now among the country’s flagship energy policies, in alignment with other initiatives for securing energy needs of the country. The Government has decided to extend the Discovered Small Field (DSF) Policy for fast-track monetization of un-monetized small fields / discoveries of ONGC & OIL under the nomination regime and relinquished discoveries under the PSC regime, remaining un-monetized.
Key features DSF policy are as follows:
Single license for conventional and non-conventional hydrocarbons: A single license is provided to enable exploration & production operators to explore and extract all hydrocarbon resources covered under the Oilfields Regulation and Development (ORD) Act, 1948, and Petroleum and Natural Gas (PNG) Rules, 1959 under one PEL/PML.
No restriction on exploration activity during Contract Period: The contractor will be allowed to carry out exploration activity during entire contract duration. Exploration will be at the sole risk and cost of the contractors.
Model for inviting the bids: Bids will be invited for the Marginal Fields on a Revenue Sharing Contract (RSC) Model. To ensure viability of operations, it is proposed to cluster fields / discoveries, as may be required at the time of Notice Inviting Offer (NIO). This revenue sharing model will be based on a revenue-based linear scale. The contractor shall be required to pay biddable Government share of revenue (net of royalty or post-royalty).
Ease of Doing Business: A simple and easy to administer contractual model in line with Government’s efforts to promote ‘Ease of Doing Business’ requiring minimum regulatory burden for monetizing these fields has been developed.
Crude Oil Pricing and Sale: The contractor will be free to sell the crude oil exclusively in domestic market through a transparent bidding process on arm’s length basis.
Natural Gas Pricing: The contractor will have freedom for pricing and allocation of gas produced from a cluster / field / discovery on arm’s length basis. The Government share of revenue shall be calculated as per the Domestic Natural Gas Pricing Guidelines in vogue at relevant point of time.
Royalty: Royalty rates applicable under Hydrocarbon Exploration Licensing Policy (HELP) regime will be adopted in this Policy.
Oil Cess: No oil cess shall be applicable on crude oil / condensate production from Discovered Small Field
Customs Duty: Exemption from custom duty will be provided on all machinery, plants, equipments, materials and supplies related to petroleum operations as applicable in HELP.
Mining Lease Current Mining Lease / License holder will be required to transfer/assign the Mining Lease (ML) or Petroleum Exploration License (PEL) along with all available clearances to the awardee of the area / Contractor, to the extent legally possible, or else the Contractor has to obtain the same.
Contract Duration: The contract duration for development and production from the offered Discovered Small Fields would be a maximum of twenty (20) years from the effective date (effective date is the date of PEL/ML grant/ transfer /signing of deed) or till the economic life of the field as submitted by bidder along with development plan in the bid, whichever is earlier, unless the Contract is terminated earlier in accordance with its terms, but may be extended upon mutual agreement between the Parties for a further period not exceeding ten (10) years