India is preparing to launch its fourth bidding round for oil and gas blocks in June or July on new liberalized terms that incorporate the Open Acreage Licensing Policy (OALP).

The new policy focuses on incentivizing increased investment and production by changing the core goal of the Indian government from maximizing revenue to maximizing production.

Breaking the uniform contractual regime for all sedimentary basins in the country, the new policy provides different rules for the basins with established reserves and ones where resources have not been established yet.

The new policy stipulates the award of blocks in Category-I basins—such as Krishna Godavari and Mumbai offshore where potential is established—a 70% weightage on exploration works. The weightage of revenue sharing has been reduced from 50% to 30%.

“Also, in order to ensure that revenue sharing does not disincentivize higher production, the maximum revenue sharing has been capped at 50%,” the policy document said.

Timelines for completion of the minimum work program will be three years for onshore and shallow-water blocks up to 400 m (1,312 ft) water depth and four years for deepwater blocks between 400 m and 1,500 m (1,321 ft and 4,921 ft) depth and ultra-deepwater blocks beyond 1,500 m (1,491 ft) depth.

In the less prospective Category II and III basins, blocks will be allotted based on the exploration work program. If a discovery is made, the production and full revenue will accrue to the operator, with the government asking for no share.

If there is windfall gain and annual revenue exceeds US$2.5 billion, the government will take a share of additional revenue. It will take 10% of revenue exceeding $2.5 billion, 30% from the revenue above $5 billion and 50% from revenue above $10 billion.

To expedite production, concessional royalty rates will be applicable if production starts within four years for onshore and shallow-water blocks, and five years for deep water and ultra-deepwater blocks.

The concessional royalty rates range from 6% to 11.25% depending on the category of concession, compared to the normal 7.5% to 12.5%. Deepwater and ultra-deepwater blocks are exempted from royalty payments in the first seven years, going to between 1.4% and 4% afterward.

In addition, developers will get marketing and pricing freedom to sell the produced hydrocarbons on an arm’s length basis. “Discovery of prices will be on the basis of transparent and competitive bidding,” the document said. 

The marketing and pricing freedom will also be applicable to the new gas discoveries with field development plans approved after the issuance of the new policy. 

DGH will offer oil and gas blocks that have received expression of interests (EoIs) from the companies till May 15 in the fourth bidding round.

Under the OALP, the Indian government will receive EoIs for the blocks throughout the year and offer the selected blocks to investors through bidding in two windows—June 30 and Dec. 31.

The Indian government introduced the policies in the wake of little response from local investors and the absence of participation from global companies during the first round of the OALP, based on revenue sharing. Forty-one of the 51 blocks offered in OALP-I were awarded to Vedanta Ltd., while the remaining went to state-run and private companies.

The deadline for submitting bids for the OALP-II and III bidding rounds, launched early this year, have already been extended twice in hopes of luring more participation from major and local companies. The latest deadline moved to May 15.

Admitting the absence of global companies’ participation in the bidding rounds, petroleum and natural gas minister Dharmendra Pradhan said the new policy was introduced primarily to “revitalize the E&P ecosystem and establish a conducive business environment to facilitate investments and boost domestic production.”

Industry analysts say policy reforms are long overdue and will help revive investor interest in the Indian upstream sector, which is relatively less appealing compared countries in the Middle East, Africa, U.S. and Southeast Asia.

“The policy framework aims to make the fiscal and approval regimes more attractive for both FDI and domestic investments, thereby incentivizing E&P investments and higher production. The reform measures are credit positive for the sector… and make exploration more attractive,” said K. Ravichandran, vice president of ICRA Ltd., a credit rating agency.

P. Elango, managing director for Hindustan Oil Exploration Co. Ltd., echoed those thoughts, saying the new policy would encourage exploration in 19 unexplored sedimentary basins (total 27) in the country. “We need a Drill in India campaign, like Make in India, as two-thirds of India’s sedimentary basins are unexplored,” he added.