The Cabinet Committee on Economic Affairs, chaired by Prime Minister Narendra Modi, has approved the 'Deregulation of Sale of Domestically Produced Crude Oil,' under which the government has decided to stop allocating crude oil and condensate on October 1, 2022.
All Exploration and Production (E&P) operators will have complete marketing freedom as a result of this. The requirement in the Production Sharing Contracts (PSCs) to sell crude oil to the government or its nominees or government companies is thus waived.
All E&P companies can now sell crude oil from their fields in the domestic market. Government revenues such as royalties, cess, and so on will continue to be calculated uniformly across all Contracts. Exports, as previously stated, will be prohibited.
This decision will boost economic activity and encourage investment in the upstream oil and gas sector, and it builds on a series of targeted transformative reforms implemented since 2014.
Policies relating to oil and gas production, infrastructure, and marketing have been made more transparent, with a focus on ease of doing business and allowing operators/industry more operational flexibility.
In the last eight years, the government has implemented several progressive reforms in the Exploration and Production (E&P) sector, including gas pricing and marketing freedom, gas price discovery through a competitive e-bidding process, the introduction of Revenue Sharing Contracts under the Hydrocarbon Exploration Licensing Policy (HELP), and so on.
Several rounds of bidding have since resulted in the allocation of a large number of blocks. As a result of these efforts, acreage allocation has nearly doubled when compared to areas awarded prior to 2014. Since February 2019, reforms have prioritized production maximization over revenue sharing for difficult basins, with the exception of windfall gains.
