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Auction of oilfields in Assam

Sentinel Digital DeskBy : Sentinel Digital Desk

  |  24 July 2016 12:00 AM GMT

By Rupam Goswami

There has been much hullabaloo in various parts of Assam regarding the Centre's recent decision of auctioning 12 small oilfields in the State, which had been lying unused under the two major oil exploration giants of India, ONGC and OIL. This recent decision was welcomed by some organizations, whereas it is facing huge opposition by some organisations. These organisations have been an integral part of some of the major political upheavals in Assam and have contributed constructively in strengthening the State. Many such organizations have fought for decades for the rights of their people and have earned their respect. But at the same time, it puts more responsibility upon these organizations more responsible as people of Assam have inherited their faith in them.

To make a relevant comment regarding this issue, it demands for some detailed study of the current scerio, past situation and some technicalities. After going through this issue, I realized that it has more to do with economic viability and technology in hand. These oilfields have been lying unused since decades in the hands of OIL and ONGC. Though OIL and ONGC are vrat and Maharat companies of Government of India, respectively, but making profit is undoubtedly one of their primary objectives. Exploration of shallow, deep and small volume oil reserves is generally not economically feasible as global crude oil prices are presently very low. Besides, OIL and ONGC lack in such technological advancements and micro level magement which is bound to make the company face losses if they explore such oil reserves. Hence resorting to global auctioning will not only provide us with better tie ups, but might also provide us with higher revenues.

As far as the auctioning is concerned, it will be a global bid where all interested oil companies can participate including OIL and ONGC. The auctioning will be done according to NELP (tiol Exploration Licensing Policy) which was conceptualized in 1997 and passed in 1999. Till now there have been nine auctions in compliance with NELP and 254 oilfields have been signed. It was in NELP where 100% FDI in oil exploration was introduced, so it is nothing new to the people who are aware of it; rather the terms and conditions have been improved by the current Union government. There would a revenue-sharing matrix over the life cycle of the field, which would be directly proportiote to output levels and price. So unlike in the past, the oil companies will have to give away the dues right from the time of exploration itself. The government has not kept a fixed revenue share because it would not have protected the Centre's interest in case of any windfall gains. Determined fixed timelines have been set to commence production from these fields - three years for onshore, four years for shallow water and six years for deep water fields. In case any explorer fails to meet these deadlines, the fields would be taken back.

In the year 2014-15, India imported 189.432 MMT crude oil valued at Rs. 6,87,350 crores. Surprisingly in 2014-15, Assam produced 4.49 MMT crude oil whereas the oil refineries established in Assam have refining capacity of 7 MMT, so Assam is not able to generate enough crude oil to run its own refineries. The oil production in Assam is also going downhill as the oilfields are ageing - in 2008-09, Assam produced 4.674 MMT which came down to 4.49 MMT in 2014-15. In the year 2014-15 alone, Assam consumed 1.905 MMT of major petroleum products (excluding petroleum refinery waste, pipeline/production losses and other petroleum products). With ageing oil fields and rising demands, Assam will soon be facing crude oil crisis to meet its own demands.

So it is high time that we the people of Assam set aside our emotions and think for the greater interest of society. This is a development oriented proposal which will not only generate revenue from a dormant resource, but will also generate more employment opportunities. According to my view, this proposal should be accepted whole-heartedly as it is a win-win situation for the people of Assam.

(Rupam Goswami is Spokesperson, BJP, Assam Pradesh and State Chairman, Assam Chamber of Commerce)

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