In a crucial development to involve more private sector participation into Indian oil and gas sector union cabinet headed by Prime Minister Narendra Modi approved Marginal Fields Policy (MFP), for development of hydrocarbon discoveries in the country. These discoveries were actually made by Oil & Natural Gas Corporation Ltd. (ONGC) and Oil India Ltd. (OIL) but could not be monetized for many years due to reasons like isolated locations, small size of reserves, high development costs, technological constraints, fiscal regime etc. 

As per the new policy, 69 oil fields which have been held by ONGC and OIL for many years, but haven’t been exploited, will be opened for competitive bidding. Under this policy, exploration companies will be able to submit bids for exploiting these oil fields. Importantly these oil fields are usually considered marginal fields, so were of lower priority and no focus was there to develop them. “With appropriate changes in policy, it is expected that these fields can be brought into production. In keeping with the principle of `Minimum Government Maximum Governance’, significant changes have been made in the design of the proposed contracts,” government release quoted.

Government has brought significant change in the exploration policy as in the earlier contracts concept of profit sharing was there, where it became necessary for the government to scrutinize cost details of private partner, leading to various disputes. As per the new policy, concept has now been shifted to revenue sharing where government will have a share in gross revenue and it is not concerned with cost incurred. Another change has taken place in terms of license granted to the successful bidder will cover all hydrocarbons found in the field. “Earlier, the license was restricted to one item only (e.g. oil) and separate license was required if any other hydrocarbon,” release added. Importantly new policy will also allow successful bidder to sell at the prevailing market price of gas, rather than at administered price.