Cabinet delegates powers to oil, finance ministers to award oil blocks

New Delhi: In a bid to quicken award of licences, the Cabinet on Wednesday allowed ministers of finance and petroleum to award oil and gas blocks to their winners in the ongoing auction, bids for which are due on May 2.

Till now, only the Cabinet headed by Prime Minister had the powers to approve award of an block or area for exploration and production of oil and gas.

"In line with the Government initiative of ease of doing business, the Union Cabinet chaired by Prime Minister Narendra Modi has given its approval for delegating the powers to Minister of Petroleum and Natural Gas and Finance Minister to award the blocks/contract areas to successful bidders," an official statement said.

The two ministers will approve the award based on the recommendations of a panel of secretaries, called the Empowered Committee of Secretaries (ECS).

The delegation of power is for Open Acreage Licensing Policy (OALP) bid rounds under the Hydrocarbon Exploration and Licensing Policy (HELP).

Presently, the first round of OALP is underway, with bids for 55 exploration blocks on offer for prospecting of oil and gas due on May 2. These blocks are to be awarded by July.

"Under HELP, blocks are to be awarded twice in a year. Therefore, this delegation of powers will expedite the decision making process on awarding blocks and give a boost to the initiative of ease of doing business," the statement said.

India had, in July last year, allowed companies to carve out blocks of their choice with a view to bringing about 2.8 million sq km of unexplored area in the country under exploration.

Under this policy, called HELP, companies are allowed to put in an expression of interest (EoI) for prospecting of oil and gas in any area that is presently not under any production or exploration licence. The EoIs can be put in at anytime of the year but they are accumulated twice annually.

The blocks or areas that receive EoIs at the end of a cycle are put up for auction with the originator or the firm that originally selected the area getting a 5-mark advantage.

HELP replaced the New Exploration Licensing Policy (NELP) where government carved out areas and bid them out. Under the NELP policy, ECS make recommendations to Cabinet Committee on Economic Affairs (CCEA) for award of blocks after considering the bid evaluation criteria (BEC) and conducting negotiations with the bidders wherever necessary.

"The entire process, including inter-ministerial consultations (IMC) is quite lengthy and time consuming. In consonance with the Government initiative of 'Ease of Doing Business', it is desirable to shorten the duration of time taken for award of the blocks/contract Areas," the statement said.

Under HELP, the competitive bidding will be continuous and blocks will be awarded twice a year. HELP offers revenue sharing contract, single licence for exploration and production of conventional as well as unconventional hydrocarbon resources and marketing and pricing freedom.

OALP under HELP, is main innovative feature wherein investor can carve out blocks of their own interest and submit an Expression of Interest (Eol) throughout the year. Based on the areas for which expression of interest has been expressed bidding will be conducted every 6 months.

"Government received an overwhelming response in first Eol cycle of OALP which started on July 1, 2017 and closed on November 15, 2017. In the first Bid round, 55 blocks, having an area of 59,282 sq km spread across 11 states have been offered for bidding. The bidding process is being handled through a secured and dedicated e-bidding portal," it added.