KOLKATA (miningweekly.com) – India will usher in a shift to revenue-sharing contracts and scrap production sharing contracts (PSCs) when the government auctions 60 discovered small oilfields next month.

The government will put up for auction 22 fields owned by national oil exploration and production (E&P) major ONGC, five of Oil India, 12 earlier allocated to E&P companies but relinquished after failing to develop them and 21 which were put up for auction earlier, but failed to attract any bids.

The shift to new revenue sharing contracts was significant as PSCs have taken flak, including from national auditors Comptroller and Auditor General, with E&P companies being accused of padding up development costs.

It has been substantiated by the government that E&P companies are inflating development costs and recovering higher amounts through sale of oil and gas and that this has led to lower profits, which was to be shared by the government resulting in notional loss of share of revenue.

Under the new revenue sharing contracts, E&P companies would have to base their bids on the amount of revenue they would commit to the government within a price and production range that was expected to be achieved from the awarded oil and gas blocks, government officials said explaining the new contract model.

In another first, a winning bidder would be granted a composite licence enabling the investor to explore, develop and produce all forms of conventional and non-conventional hydrocarbons from the awarded blocks, the officials said.

To facilitate the award of a composite licence, the government last week amended the legal definition of “petroleum” under existing rules and statutes.

In a notification, the Oil and Natural Gas Ministry amended the Petroleum and Natural Gas Rules 1959 to state that “petroleum would mean all naturally occurring hydrocarbons, in the form of natural gas, or in liquid, viscous or solid forms in a mix of some or all of these”.

However, it has been clarified that the changed definition of petroleum would not include coal, lignite or helium that might occur along with the expanded definition of petroleum products in the awarded blocks.

In a relaxation of eligibility criteria, the notification of the auction reveals that no prior experience in oil and gas exploration is mandatory for any investor to submit their bids.