KOLKATA (miningweekly.com) – The Indian government is working on a draft proposal to offer upfront incentives, including a capital subsidy and liberal export rules, for foreign oil and gas companies that are expected to participate in the newly unveiled open acreage hydrocarbon bidding process.

According to an official familiar with the drafting of the proposal, the government is aiming to align hydrocarbon exploration with a mineral exploration policy, wherein fiscal incentives would be ‘loaded upfront’ for all upstream and downstream investments under the Open Acreage Licensing Policy (OALP) bidding process.

The fiscal incentives under consideration would range from exploration to production and distribution. It also covers ancillaries for production of related equipment, tools and India-specific research, the official said.

Mining Weekly Online reported last month that the Indian government had opened access to geological data of oil and gas fields to prospective investors under the OALP, which some sources say will put 26 unexplored oil and gas basins on auction.

Under OALP, any prospective bidder will be free to choose any of the potential oil and gas fields and put in bids, although the government will have the right to invite counter bids from rival companies before awarding the field.

An inter-Ministerial team, comprising various government bodies, would frame a three-year package of fiscal incentives to ensure that bidders were able to plan investments for every stage of the hydrocarbon chain, including local manufacturing of related plant and equipment, the official added.

He said that the inter-Ministerial body would also look at liberalising trade in oil and gas, so that foreign investors could plan downstream refineries and gas processing and storage facilities, factoring in export potential for which the government would intervene through export subsidies or incentives.

In the final version, the body is also expected to come out with two sets of documents – a three-year action plan for incentives and a 15-year vision linking the OALP to investments in production and distribution.

India imported $80-billion of oil in 2016/17, up 9% on the previous year. The country’s oil reserves have been pegged at 5.7-billion barrels.

Though it could not be officially confirmed, some of the fiscal sops could also be linked to foreign oil and gas companies’ application of enhanced oil recovery or improved oil recovery technologies, in addition to primary extraction processes.

Earlier this year, the Indian government permitted a ten-year extension of old and up-for-renewal production sharing agreements with private investors, based on the condition of adoption of such enhanced oil recovery or improved oil recovery technologies by existing exploration and production companies.