After the fall in oil prices, fuel demand rose due to the epidemic, upstream producers like ONGC asked the government to cut oil cess and royalty.
New Delhi (Natural Energy News): Oil Secretary Tarun Kapoor on Wednesday indicated more reforms to extend the extent of personal participation in upstream oil and gas exploration and production, but reduced industry demand to make the business attractive during lower prices Non-committal on industry demand to do. Governance. Speaking to reporters at the end of CERAWeek's India Energy Forum, he said that companies need to learn to live with low prices.
"There was a necessity from numerous upstream corporations for a rebate within the cess and supremacy. It was a demand that it is up to the government to accept or not to make a decision that would consider the overall resource requirement (of the economy) Is. "He said.
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With the fall in oil prices following a steep drop in oil prices, upstream producers such as ONGC asked the government to cut oil cess and royalties.
While low oil prices are good for consumers, they do not support the new investment that is needed to keep oil and gas flowing from wells.
ONGC wanted the government to abolish the oil development cess if the price received by producers is below $ 45 per barrel. This royalty also wanted the central government to waive the duty on oil and gas produced from offshore fields.
Currently, the government imposes an ad-valorem oil industry development (OID) cess of 20 percent on the price the producers receive.
Also, ONGC / OIL is required to pay a 20 percent royalty on the price of crude oil they extract to state governments from the onland oil block. The central government levies a royalty of 10–12.5 percent on oil produced from offshore fields.
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Kapoor said the upstream industry was no longer under great stress, with oil prices recovering from $ 20 per barrel to about $ 40. "The corporations above will now require to operate on these tariffs. In the long term, the upstream companies will have to keep pace with the market."
On the issue of private sector participation absent in the last two bid rounds for oil and gas blocks, he said that India is "very hungry" to invest in upstream oil and gas exploration and production but the epidemic played a game of plunder.
"I wish that within the next session, we'll have a credible coalition (of the private sector)," he asserted. "We are getting to rise with some further reforms."
However, he did not elaborate on the planned reform measures.
Round numbers V and V of the Open Agri Licensing Policy (OALP) bid saw the participation of state-owned ONGC and OIL, but almost no bidding from the private sector.
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Kapoor said that India would continue to add oil refining capacity as the country would see an increase in fuel demand.
He said that the government wants India to become a refining hub, which can export petroleum products to the region.
The OID cess is levied on crude oil produced as an excise duty under the Oil Industry (Development) Act 1974. Cess is levied on crude oil from nominated blocks and former NELP explorer blocks.
The OID cess was increased from Rs 2,500 per tonne to Rs 4,500 per tonne in March 2012. The price of the Indian basket of crude oil was around 110 USD per barrel at that time.
With global crude oil prices falling in mid-2014, companies called for reducing the levy and converting it to 8–10 percent ad-valorem. In March 2016, the government changed the levy of cess to 20 percent ad-valeram.
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The oil industry says that cutting the cess rate will produce 200 million barrels of oil equivalent to the production capacity at the entire industry level.
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