Cabinet ends government role in oil allocation, gives marketing freedom to ONGC, Vedanta to sell to any refiner

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New Delhi: The Union Cabinet has given the green light to domestic crude oil producers to sell their output to buyers of their choice in the country, ending the government’s role in allocating crude to refiners and bringing more investments in the sector.
Importantly, the latest decision should help major crude oil producers, such as Oil and Natural Gas Corporation (ONGC) and Oil India, as well as private sector majors like Vedanta’s Cairn Oil and Gas.
Although marketing freedom has been granted by the Cabinet, these oil majors will not be allowed to export crude oil. Previously, under Production Sharing Contracts (PSCs), companies were only allowed to sell crude oil to the government or its agent or government-owned companies.

Oil producers often feel that the Center’s allocation reduces their bargaining power relative to refiners. Sometimes, when crude is sent to remote refineries, it increases transportation costs.

According to an official statement, the Cabinet Committee on Economic Affairs (CCEA) has approved the plan to cease the allocation of crude oil and condensate from October 1.

He further stated that this decision will ensure marketing freedom for all exploration and production (E&P) operators. “The condition in the PSCs to sell crude oil to the government or its agent or government companies will therefore be lifted. All E&P companies will now be free to sell crude oil from their fields in the domestic market,” he said. Government revenues, such as royalties and taxes, will continue to be calculated on a uniform basis for all contracts.

“This will help increase government revenue. This decision will attract many national and international companies to do exploration and production in India. We are committed to investing $4 billion and contributing 50% of India’s domestic hydrocarbon production,” said Anil Agarwal, Chairman of Vedanta. Trade standard.

Over the past eight years, the government has carried out several progressive reforms in the E&P sector, such as freedom in gas pricing and marketing, gas price discovery through competitive bidding process online competition, the introduction of revenue-sharing contracts under the hydrocarbon exploration authorization policy (AIDE) and so on.

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