KOLKATA (miningweekly.com) – Oil and gas exploration and production (E&P) majors are opposing terms for the renewal of licences for 28 fields, forcing the Indian government to mull alternatives.

Production sharing contracts (PSCs) for 28 oil- and gasfields, including the Panna/Mukta and Tapti fields operated by UK-based BG Group, were up for renewal, but the operators have claimed that new licence renewal terms were too “stiff”.

The E&P companies further claimed that the government’s licence renewal policy did not provide clarity, particularly in the case of these 28 oil- and gasfields, which had been awarded long before the New Exploration and Licensing Policy (NELP), which stipulates the auction of the resources, had come into play.

According to sources in the Oil and Natural Gas Ministry, the erstwhile government had drafted a renewal policy for oil and gas blocks but, in view of several representations received by the operators, the government would now have to relook the policy and “possibly” rework the terms and conditions for the renewal of existing licences.

The terms operators were opposed to included the continuation of payment of royalties at the current rate of Rs 481 ($7.5) a ton and a five percentage point increase in the government’s share of oil and gas production.

The operators noted that, under the NELP, which was introduced in 1999, the royalty payable had been fixed at 10% of well head value in the case of gas and, in the case of oil, at 12.5% for onshore production and 10% for offshore wells.

A previous committee, which laid down terms for the renewal of licences, had argued that since the oil- and gasfields had been in operation for a long time, capital costs for development of the fields had already been recovered by the operators and, hence, the government should have an increase in its share of production and royalty rates should be kept the same.

However, operators have countered that, since several of the 28 oil and gas blocks were “marginal” fields, the cost of operating these fields increased over time, while the recordable resource was depleted, the ministry official said.

The option to tweak the licence renewals was also limited for the government since the latter was still to work out migration from PSCs to revenue-sharing contracts (RSCs) for all oil- and gasfields, even though the government favoured RSCs with E&P companies.

One of the options being mulled for licence renewal was to continue with existing PSCs and terms for the rest of the economic life of the assets.