India announced steps to attract investment in the nation’s oil and gas industry on Thursday to help meet Prime Minister Narendra Modi’s goal of cutting import dependence.
The nation’s cabinet approved measures including giving pricing freedom to explorers for natural gas extracted from deepsea fields that start production this year, except those under litigation, according to an oil ministry statement. The step will help boost gas output by 35 million standard cubic meters a day and unshackle projects worth 1.8 trillion rupees ($27 billion), Oil Minister Dharmendra Pradhan said.
Modi has made energy security a priority for the country, which imports most of its oil and gas. The initiatives may attract companies such as Exxon Mobil Corp., Chevron Corp. and Royal Dutch Shell Plc that have stayed away from India’s exploration-block auctions since they began in 1999. The country should incentivize gas production from deepwater, ultra deepwater and high pressure, high temperature areas, which haven’t been exploited because of cost and risk, India’s Finance Minister Arun Jaitley said on Feb. 29.
“Our aim is to attract investments, boost production and take away government discretion,” Pradhan said at a briefing in New Delhi.
The gas price will be capped according to a formula linked to four alternate fuels — liquefied natural gas, fuel oil, naphtha and imported coal. The price will be revised every six months, Pradhan said. The government also announced market rates for gas extracted from 69 small fields scheduled for auctions this year.
Local producers such as state-run Oil and Natural Gas Corp. had sought higher prices as the current gas tariff is too low to support the cost of exploration and production in deepwater areas.
India had reduced the price of locally produced gas by 18 percent for the six months beginning Oct. 1. The price, which is due for revision April 1, is expected to fall further due to a decline in international rates, hurting producers including ONGC, Oil India Ltd. and Reliance Industries Ltd.
The other steps taken to boost investments in the nation’s energy sector include introducing a new policy and a single license for exploration and production of all forms of hydrocarbon via a revenue-sharing model instead of a profit-sharing mechanism currently. The blocks under the new policy will be awarded through an open-acreage policy to allow companies to submit bids for areas of their choice, according to the statement.