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Modified policy to revive ageing oilfields expected to be out in 2025
- Business Standard |
- Economics (Macroeconomics) |
- 2024-12-27
- Oil Exploration and Production
The Indian government plans to notify a revised Enhanced Recovery (ER) and Improved Recovery (IR) policy for oil and gas by 2025, aiming to improve financial incentives and address declining production levels. The update follows recommendations from an expert committee.
Enhanced and Improved Recovery Policy for Oil and Gas
Policy Update
The government is set to notify a modified version of the Enhanced Recovery (ER) and Improved Recovery (IR) policy for oil and gas in 2025. This new policy aims to replace the existing 2018 framework, providing better financial incentives to ensure the commercial viability of projects.
- The expert committee submitted the draft Modified ER Policy, 2023, but it hasn't been adopted yet.
- The new policy is expected to address issues identified during studies and deliberations.
Existing Policy and Challenges
The 2018 policy framework was designed to promote ER and IR methods with fiscal incentives. It also included a provision for a review after five years, initiated in June 2023.
- India's recovery levels stand at 60% for oil fields and 80% for gas fields, as per the latest estimates from 2018.
- Declining oil and gas production is attributed to legacy wells with decreasing productivity.
Industry Concerns
- Both public and private sector companies call for policy updates to address productivity issues.
- Current ER/IR techniques are costly, and existing fiscal incentives are deemed insufficient.
- Administrative processes for availing incentives are cumbersome, requiring higher recovery rates and facing limitations like price ceilings.
Production and Import Dependency
- India's oil production has been on a decline since 2011-12, with FY24 production at 29.4 million tonnes, down from 38.1 million tonnes in 2011-12.
- The country remains a net importer of hydrocarbons, with import dependency rising to 87.8% in FY24 from 83.8% in 2018-19.
Significant Players
- Reliance Industries and Cairn Oil & Gas are major private sector companies engaged in upstream activities.
- National oil companies include Oil and Natural Gas Corporation (ONGC) and Oil India.
Upcoming Policy Benefits
- The new policy aims to provide better financial incentives for ER and IR projects.
- It is expected to address previous administrative and financial challenges faced by companies.