Lok Sabha passes oilfield amendment bill to attract more investments

Over the last decade, the government has brought several reforms including a landmark shift from "production sharing" regime to "revenue sharing" regime for awarding contracts, simplified processes and reduced regulatory burden to promote exploration and production of oil and gas in India.

New Delhi: The Lok Sabha has passed the Oilfield (Regulatory and Development) Amendment Bill, 2024 which aims to reform the legal framework to attract more investments for the exploration and production of oil and gas in the country.

The Bill was earlier passed by the Rajya Sabha on December 3, 2024. Over the last decade, the government has brought several reforms including a landmark shift from “production sharing” regime to “revenue sharing” regime for awarding contracts, simplified processes and reduced regulatory burden to promote exploration and production of oil and gas in India.

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Besides, the release of previously ‘No-Go’ areas for new exploration, deregulation of crude as well as marketing and pricing freedom for natural gas were other steps taken in this regard.

“As a crucial outcome of these major reforms, more than 76 per cent of the active acreage under oil and gas exploration in India today has been awarded after 2014,” according to an official statement.

While introducing the amendment Bill, Minister of Petroleum and Natural Gas Hardeep Singh Puri stated that the present regime, focussing mainly on licensing, regulatory control and collection of royalties, needed reorientation to promote Ease of Doing Business and collaboration between the Government and the Contractors.

He stated that exhaustive discussions with industry leaders, potential investors and stakeholders were held to understand the pain points in the system. Given the long gestation periods and very high project risks involved, investors need a legal framework that is simple, stable, predictable and provides access to efficient expeditious dispute resolution mechanism.

The amendments proposed in the Bill are designed to meet investor expectations whilst promoting, protecting and prioritizing the interests of India, he added. The minister said the Amendment Bill seeks to do away with the historical erroneous practice of putting mining and petroleum operations in the same bucket.

It also introduces a single permit system namely, petroleum leases, which will substitute the extant system which requires the Contractors to take multiple licenses for carrying out various types of activities for different types of hydrocarbons.

The Bill will facilitate development of comprehensive energy projects and adoption of new technologies like Carbon Capture utilization and sequestration (CCUS) and green hydrogen.

He further stated that the Bill seeks to help small operators by enabling sharing of resources and infrastructure between different operators to improve viability of oil blocks. The Bill also aims to resolve one of the biggest grievances of global oil companies interested in investing in India by providing stability in operations, both in terms of tenure of the lease and conditions therein.

It emphasises efficient alternative dispute resolution mechanisms which will ensure disputes can be resolved in a timely, fair and cost-effective manner, the minister said. To promote enforcement of the provisions of the Act, penalty has been increased to Rs 25 lakh and up to Rs 10 lakh per day for continuing infraction so that they have deterrent effect.

To make the system effective and expeditious, the Bill creates an adjudication authority and an appellate mechanism for levy of penalties. Puri emphasised that the Bill intends to maintain cooperative federalism and does not impact the rights of the states in any manner. The states will continue to give petroleum leases, necessary statutory clearances and receive royalties, as before.

The minister emphasised that with the passing of the Bill, the provisions will improve the “ease of doing business”, make India an attractive destination for production of oil and gas and play an instrumental role in unlocking hydrocarbon potential of our resource rich nation.