Centre reduces oil, gas royalty burden across offshore and deepwater blocks

The Centre reduced royalty rates on offshore deepwater and ultra-deepwater oil production to boost exploration and ease industry costs amid global energy volatility. The revised framework lowers levies for initial production years while retaining existing rates for onland and shallow-water categories

New Delhi: The Centre has reduced the royalty burden on crude oil and casing head condensate production from offshore deepwater and ultra-deepwater blocks, according to revised royalty provisions notified in the latest schedule under the oil and gas regime.

Under the revised structure, royalty for deepwater areas has been fixed at 5 per cent for the first seven years from the commencement of commercial production and 10 per cent from the eighth year onwards. For ultra-deepwater blocks, no royalty will be charged for the first seven years of commercial production.

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In addition, a royalty rate of 5 per cent will apply from the eighth year onwards. Moreover, the revised royalty schedule covers areas awarded under various regimes, including nomination-based awards to national oil companies, blocks awarded before the New Exploration Licensing Policy (NELP), and areas awarded under the Hydrocarbon Exploration and Licensing Policy (HELP) and Discovered Small Field (DSF) Policy.

For onland and shallow water areas, royalty rates remain at 12.5 per cent in most categories, while certain offshore and ultra-deepwater production categories will attract lower levies. The government has also retained a 7.5 per cent royalty rate for some categories specified under the revised framework, while production-sharing contracts awarded under earlier policies will continue to follow rates specified in respective agreements.

The government’s move comes at a time when economies across the world are facing pressure due to the ongoing conflict in West Asia and rising volatility in global energy markets. Additionally, the government has said that we have adequate stocks of petroleum products, and LPG is being supplied for domestic cooking.

Earlier this month, US President Donald Trump said he was unhappy with Iran’s response to a US proposal aimed at ending the conflict in the region, calling Tehran’s position “completely unacceptable”.

Meanwhile, Prime Minister Narendra Modi had appealed to citizens to avoid non-essential gold purchases, cut down on foreign travel, and reduce fuel consumption in order to help conserve foreign exchange reserves amid the economic impact of the West Asia crisis.