The Cabinet on Wednesday approved auction of 69 small and marginal oil fields of state-owned ONGC and Oil India to private and foreign firms as a precursor to a full fledged licensing round.
The Cabinet Committee on Economic Affairs (CCEA), headed by Prime Minister Narendra Modi, on Wednesday approved auctioning of the fields that state-owned firms are surrendering because they were uneconomical to develop due to government's subsidy sharing mechanism.
The fields will be bid out on the basis of revenue share or the share of oil and gas a bidder offers to the government upfront, and work programme, an official said.
Companies offering the maximum revenue share or percentage of oil and gas to the government, and committing to do more work, will win the field.
The weight for revenue share will be 80 per cent while 20 per cent would be for work programme that may include drilling of exploratory and development wells and seismic studies.
So far, 254 blocks for exploration and production of oil and gas have been auctioned in nine rounds of New Exploration Licensing Policy (NELP) since 1999.
These have been on production sharing basis where profit is shared with the government after recovery of cost. ONGC has surrendered 63 discovered oil and gas fields which it had found uneconomical to develop considering small reserve size and high economic cost as it had to pay for fuel subsidies from the hydrocarbons produced from it.
Oil India Ltd (OIL) has surrendered six such fields. ONGC and OIL have to pay a part of their revenue they earn from selling oil produced from their fields to help subsidise kerosene. Earlier, they had to foot subsidy for domestic cooking gas (LPG) and diesel as well.
Sources said in case ONGC and OIL also decide to bid and end up winning the fields in the auction, they will not have to pay fuel subsidy on them. Of the 165 small and marginal fields, with total ultimate reserves of 340 million tonnes, operations are going on in 139 and work is yet to start on 26.