Explained: Hydrocarbon Exploration Licensing Policy (HELP)

Hydrocarbon Exploration Licensing Policy makes essential changes with market oriented reforms while correcting defects of old policy.

Earlier Exploration Policy: New Exploration Licensing Policy (NELP)

Contract on the basis of model production sharing contract.
No custom duty on imports required for petroleum operations
Freedom to sell crude oil and natural gas in domestic market at market related price.
Biddable cost recovery limit up to 100 percent.
No cess on crude oil production.

The uniform licence will enable the contractor to explore conventional as well as unconventional oil and gas resources including CBM, shale gas/oil, tight gas and gas hydrates under a single license.

The concept of Open Acreage Policy will enable E&P companies choose the blocks from the designated area.

The earlier contracts were based on the concept of profit sharing where profits are shared between Government and the contractor after recovery of cost.
Under the profit sharing methodology, it became necessary for the Government to scrutinize cost details of private participants and this led to many delays and disputes.
Under the new regime, the Government will not be concerned with the cost incurred and will receive a share of the gross revenue from the sale of oil, gas etc.
The previous profit-sharing model’s pitfalls became more obvious in the KG D6 field dispute with Reliance.
This is in tune with Government’s policy of “Ease of Doing Business”.

Why? higher risks and costs involved in exploration and production in difficult areas.
Compared to NELP royalty rates to encourage exploration and production.
A graded system of royalty rates have been introduced, in which royalty rates decreases from shallow water to deepwater and ultra-deep water.
At the same time, royalty rate for onland areas have been kept intact so that revenues to the state governments are not affected.
On the lines of NELP, cess and import duty will not be applicable on blocks awarded under the new policy.
This policy also provides for marketing freedom for crude oil and natural gas produced from these blocks.

The energy consumption in India is the fourth biggest after China, USA and Russia.
The total primary energy consumption from crude oil (29.45%), natural gas (7.7%), coal (54.5%), nuclear energy (1.26%), hydro electricity (5.0%), wind power, biomass electricity and solar power is 595 Mtoe in the year 2013.
According to the International Energy Agency, Indian demand will hit 10 million barrels per day by 2040, the steepest rise for any country.
The vicissitudes of the global economy and geopolitics aside, the import bill is a constant drain on the exchequer.
Also, dependence on imported petroleum continues to grow and is ultimately impacting the country’s long term growth.
Lot of area has not been well explored.
The need of introduction of much-needed capital and state-of-the-art technology to explore the sector.