Exploration of Blocks for production of Hydrocarbon resources

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The government notified the Hydrocarbon Exploration and Licensing Policy (HELP) in March 2016 to replace the NELP.
a. The new exploration policy provides for a single license for exploration and exploitation of conventional as well as unconventional hydrocarbon resources,
b. flexibility to carve out exploration acreages, a Revenue Sharing model and marketing and pricing freedom for the Crude oil & Natural gas produced.

Open Acreage Licensing Policy (OALP)
2. Open Acreage Licensing Policy (OALP) gives an option to a company looking for exploring hydrocarbons to select the exploration blocks on its own, without waiting for the formal bid round from the Government.

3. Under Open Acreage Licensing Policy (OALP), a bidder intending to explore hydrocarbons like oil and gas, coal bed methane, gas hydrate etc., may apply to the Government seeking exploration of any new block (not already covered by exploration). The Government will examine the Expression of Interest and justification. If it is suitable for award, Govt. will call for competitive bids after obtaining necessary environmental and other clearances.

4. OALP was introduced vide a Cabinet decision of the Government dated
10.03.2016, as part of the new fiscal regime in exploration sector called HELP or Hydrocarbon Exploration and Licensing Policy, so as to enable a faster survey and coverage of the available geographical area which has potential for oil and gas discovery.

5. (India has a sedimentary area of 3.14 million sq. km. comprising of 26 basins. At the end of 2012-13, about 48% of this sedimentary area remains unapprised. This includes, 65% of the total on-land sedimentary area, 22% of the shallow off-shore basin (bathymetry upto 400m) and around 49% of the deep off-shore (bathymetry beyond 400m) sedimentary area. Further, it is estimated that India has exploited only 3% of its proven natural gas reserves and around 5% of its proven oil reserves.

6. What distinguishes OALP from New Exploration and Licensing Policy (NELP) of 1997 is that under OALP, oil and gas acreages will be available round the year instead of cyclic bidding rounds as in NELP. Potential investors need not have to wait for the bidding rounds to claim acreages.

7. Successful implementation of OALP requires building of National Data Repository on geo-scientific data.

Hydrocarbon Exploration and Licensing Policy (HELP)

1. Hydrocarbon Exploration and Licensing Policy (HELP) is a policy adopted by Government of India on 10.03.2016 indicating the new contractual and fiscal model for award of hydrocarbon acreages towards exploration and production (E&P). HELP is applicable for all future contracts to be awarded.
2. HELP replaces the present policy regime for exploration and production of oil and gas, known as New Exploration Licensing Policy (NELP), which has been in existence for 18 years.
3. Four main aspects of HELP are:
   1. Uniform License: It provides for a uniform licensing system to cover all hydrocarbons such as oil, gas, coal bed methane etc. under a single licensing framework, instead of the present system of issuing separate licenses for each kind of hydrocarbons.
   2. Open Acreages: It gives the option to a hydrocarbon company to select the exploration blocks throughout the year without waiting for the formal bid round from the Government.
   3. Revenue Sharing Model: Present fiscal system of production sharing contract (PSC) is replaced by an easy to administer “revenue sharing model”. The earlier contracts were based on the concept of profit sharing where profits are shared between Government and the contractor after recovery of cost. Under the profit sharing methodology, it became necessary for the Government to scrutinize cost details of private participants and this led to many delays and disputes. Under the new regime, the Government will not be concerned with the cost incurred and will receive a share of the gross revenue from the sale of oil, gas etc. Bidders will be required to quote revenue share in their bids and this will be a key parameter for selecting the winning bid.  They will quote a different share at two levels of revenue called “lower revenue point” and “higher revenue point”.  Revenue share for intermediate points will be calculated by linear interpolation.  The bidder giving the highest net present value of revenue share to the Government, as per transparent methodology, will get the maximum marks under this parameter.
   4. Marketing and Pricing Freedom has been granted, subject to a ceiling price limit, for new gas production from Deepwater, Ultra Deepwater and High Pressure-High Temperature Areas. The policy provides marketing and pricing freedom to the gas production from existing discoveries which are yet to commence commercial production as on 1.1.2016 as well as for future discoveries. Considering the imperfections in gas markets in India, and to protect the interests of the consuming sector, a ceiling based on the landed cost of the alternate fuels has been imposed.
      1. The ceiling price shall be the, lowest of the Fuel oil import landed pri

Weighted average import landed price of substitute fuels (0.3 x price
of imported coal + 0.4 x price of imported fuel oil + 0.3 x price of
imported naphtha) and LNG import landed price	.

1. The ceiling will be calculated once in six months. The price data used shall be the trailing four quarters data with one quarter lag. To safeguard the Government revenue, the Government’s share of profit

will be calculated based on the higher of prevailing international crude price or actual price. All gas fields currently under production will continue to be governed by the pricing regime which is currently applicable to them.

4. Other features of HELP are:
5. Exploration is allowed through-out the contract period.
6. Exploration Phase
   1. for onshore areas have been increased from 7 years to 8 years and
   2. for offshore increased from 8 years to 10 years.
7. A concessional royalty regime will be implemented for deep water and ultra-deepwater areas. These areas would not have any royalty for the first seven years (instead of the 5% at present), and thereafter would have a concessional royalty of 5% (in deep water areas) and 2% (in ultra-deep water areas), instead of the 10% at present. In shallow water areas, the royalty rates are reduced from 10% to 7.5%. For onshore areas royalty has been kept same i.e. 12.5% for oil and 10% for gas so that there is no impact on revenue to the State Governments.
8. This policy provides for a uniform, non-discretionary framework for extension of contract in respect of 28 Pre-NELP discovered fields. The extension will be granted for a period of 10 years both for oil and gas. During the extension period, it is proposed to increase the Government take by way of charging normal royalty and cess in place of concessional royalty and cess charged during the original contract period.
9. The profit petroleum during extension period will also be 10 percent higher than the normal percentage
10. Objectives of HELP:
    1. enhance domestic oil and gas production
    2. bring substantial investment
    3. generate sizable employment
    4. enhance transparency and
    5. reduce administrative discretion

Unconventional Hydrocarbons

1. Unconventional Hydrocarbons are Coal bed methane, Gas Hydrates, Oil sands, shale oil etc.
2. Coal bed Methane (CBM),
   1. is an eco-friendly natural gas, stored in coal seams, generated during the process of the coalification (the degree of change undergone by coal as it matures from peat to anthracite).
   2. CBM exploration and exploitation has an important bearing on reducing the green house effect and earning carbon credit by preventing the direct emission of methane gas from operating mines to the atmosphere.
   3. Further, extraction of the CBM through degassing of the coal seams prior to mining of coal is a cost effective means of boosting coal production and maintaining safe methane level in working mines.

3. Gas hydrates

1. are naturally occurring, crystalline, ice-like substances composed of gas molecules (methane, ethane, propane, etc.) held in a cage-like ice structure. (clathrate).
2. Hydrates are a concentrated form of natural gas compared with compressed gas, but less concentrated than liquefied natural gas.
3. It is estimated that a significant part of the Earth’s fossil fuel is stored as gas hydrates, but as yet there is no agreement as to how large these reserves are. They are found abundantly worldwide in the top few hundred meters of sediment beneath continental margins at water depths between a few hundred and a few thousand feet and mainly in permafrost areas.

1. Oil sands or Tar Sands
   1. refers to crude trapped in sands in a semi solid form,mixed with sand and water.
   2. Tar Sands contain bitumen – a kind of heavy crude oil.
   3. They are found in Canada and Venezuela.
2. Shale Oil
   1. is found in shale source rock that has not been exposed to heat or pressure long enough to convert trapped hydrocarbons into crude oil.
   2. Oil Shales are usually fine-grained sedimentary rocks containing relatively large amounts of organic matter from which significant quantities of shale oil and combustible gas can be extracted by destructive distillation. The product thus generated is known as synthetic crude or more simply, syncrude.
   3. Oil shales are not technically shales and do not really contain oil. They are relatively hard rocks called marls – composed primarily of clay and calcium carbonate- containing a waxy substance called kerogen. The trapped kerogen can be converted into crude oil using heat and pressure to simulate natural processes. Included in most definitions of oil shale, either stated or implied, is the potential for the profitable extraction of shale oil and combustible gas or for burning as a fuel.
3. Tight Oil:
   1. Although the terms shale oil and tight oil are often used interchangeably in public discourse, shale formations are only a subset of all low permeability tight formations, which include sandstones and carbonates, as well as shales, as sources of tight oil production. Within the United States, the oil and natural gas industry typically refers to tight oil production rather than shale oil production, because it is a more encompassing and accurate term with respect to the geologic formations producing oil at any particular well.

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