Why is India producing less and less oil?
- Since 2012, India’s domestic production of Crude oil fell year after year.
- This led to an increase in imports from 81.8% in 2012 to 87.6% in 2020.
- It fell by 7.1% in May 2020 compared to May 2019 production.
- This has come in back of low demand due to Covid-19 pandemic.
Why is production falling?
- Ageing wells, that has become less productive.
- Lack of new oil discoveries in India.
- Long delays in operationalisation of production from discovered wells.
- Lack of interest from private players in exploration and production, due to long delay (5-7 years) in getting approvals.
Policy Changes Required:
- Existing Public and Private players have asked for reduced levies of oil production including oil cess, royalties especially when crude oil prices are below $45/barrel.
- The Government introduced Open Acreage Licensing Policy (OALP) in 2019 to allow companies to carve out blocks that they are interested in and with lower royalties and no oil cess.
- However, existing players are calling for a relaxation of royalties and cess on block allotted under previous policies.
- Open Acreage Licensing Policy 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.
- Under 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.
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