GS 3: Economy | Infrastructure: Energy, Ports, Roads, Airports, Railways, etc

Why in news?

Gross estimated revenue of Rs.45000 crore is anticipated under Discovered Small Field Bid Round-II from 25 Contract Areas; and Rs.9000 crore under Discovered Small Field Bid Round-I from 30 Contract Areas. The gross estimated revenue is based on estimates of oil and gas hydrocarbon in place reserves, assumption in terms of hydrocarbon recovery factor, hydrocarbon sale price, etc., from 25 Contract Areas considering project life of 15 years.

DSF policy:

The new DSF policy is based on the principle of ‘ease of doing businesses’. This policy is an outcome of a long consultation process between the government and the industry.

Key highlights of the DSF policy:

  • Revenue sharing with the government instead of the existing cost-recovery based production sharing
  • Freedom of marketing and pricing for both oil as well as gas
  • Permission to explore all kinds of hydrocarbons such as shale, tight rock, coalbed methane (CBM), etc
  • International competitive bidding with no mandatory national oil companies (NOC) participation
  • Prior technical experience not required for bidders
  • No restrictions on exploration activities during the contract period
  • Favourable royalty rate and waiver of oil cess
  • Customs duty on goods and services imported for petroleum operations not to be imposed
  • Royalty on crude oil is 12.5% and 10% for on land and shallow water respectively. Royalty on natural gas is 10% for both on land as well as shallow-water blocks. Royalty on crude oil and natural gas for deep water blocks is 5% for the initial seven years and thereafter the rate will be 10%.
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