Ahead of the first meeting of the empowered group of ministers (EGOM), the ministry of petroleum and natural gas changed the monitoring mechanism for oil and gas blocks after the current system for approving exploration and production costs came under criticism.
Ahead of group of ministers’ meet
NEW DELHI: Ahead of the first meeting of the empowered group of ministers (EGOM) on Monday, the ministry of petroleum and natural gas changed the monitoring mechanism for oil and gas blocks after the current system for approving exploration and production costs came under criticism.
So far, the directorate general of hydrocarbons (DGH) has been following a management committee mechanism comprising two central nominees and one nominee each from the consortium members.
The ministry has now nominated a joint secretary level officer, along with the director-general of hydrocarbons as government nominees.
It, however, rejected the suggestion that there should be a separate regulator for approving the price formula for natural gas.
The change in constitution was taken after both the Committee of Secretaries (CoS) and the Prime Minister's Economic Advisory Council (EAC), looking into Reliance Industries Ltd's (RIL) gas pricing formula, criticised the constitution of the management committee.
While the ministry conceded ground on this front, it did not find favour with the EAC suggestion that RIL should invite fresh bids in a transparent and well-publicised manner.
Such a move, the ministry feels, could lead to a situation where players from non-priority sectors (other than those in power and fertiliser) could ask for higher quantities and offer higher rates.
On the EAC suggestion that profit-sharing in the form of petroleum be replaced by production-sharing, the ministry said that this could not be implemented for those contracts already signed under the New Exploration and Licensing Policy (NELP). Even though it's ready to consider the suggestion for future NELP blocks, the ministry does not see a production-sharing regime attractive.
Sources said the ministry has conveyed to the EGOM, headed by external affairs minister Pranab Mukherjee, that regulation of the upstream sector is different from that of the downstream sector, and therefore, the task could not be entrusted to the Petroleum and Natural Gas Regulatory Board (PNGRB).
It said following the group of ministers' directions, set up for constituting PNGRB in the past, the DGH has been empowered to regulate and monitor exploration and production activities.
The CoS had observed that there was a need to have an independent regulatory commission to decide pricing on the lines of the Central Electricity Regulatory Commission.
The EGOM would meet again on Tuesday.
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