The policy would apply to all fields irrespective of the time of the award of the respective production contracts.
The government is planning to offer fiscal incentives such as lower taxes and higher share in profit to companies to encourage them to boost oil and gas output from local ageing fields.
The Directorate General of Hydrocarbons (DGH), the technical arm of the oil ministry, has unveiled a draft policy framework to promote enhanced recovery methods. It says recovery from domestic fields has been below global average and most of the producing fields are ageing.
Enhanced recovery process involves injection of fluids in oil and gas fields to boost yield but are usually very expensive, technologically complex and time-taking, discouraging companies from undertaking such efforts.
The policy would apply to all fields irrespective of the time of the award of the respective production contracts. But the fields that are already producing oil or gas using enhanced recovery techniques and the fields for which development plans for enhanced recovery projects have been approved will not qualify. A committee of oil ministry officials will decide on the eligibility of such projects and monitor their progress.
Operators undertaking enhanced recovery pilot programme shall be eligible for weighted deduction available from the business income to the extent of 150% of the amount paid towards the pilot expenses, according to the draft. The weighted deduction will be applicable till March 31, 2025.
Operators will get a waiver of 50% on the applicable cess on gross production of crude oil from designated wells of an approved enhanced recovery project for 10 years, as per the draft. Where cess is not applicable, a notional cess shall be calculated, and the equivalent amount shall be reduced from the government's share of profit petroleum or revenue share, as applicable.
The waiver on cess would apply only if the average crude oil price of Indian basket during a calendar quarter is below $80/barrel or as decided by the official committee.
For gas producers, the incentive would be equal to 10% of gas wellhead price on the gross production from designated well of an approved project for a period of 10 years, according to the draft. For offshore fields, the incentive shall be in the form of waiver of applicable royalty. In cases where the royalty on gas produced is less than the total incentive amount, the difference can be obtained by the company from the government's share of profit or revenue share, as applicable, according to the draft.
For onshore fields, the incentive shall be in the form of discount on the government's share of profit petroleum or revenue share. But, as per the draft, where no profit share or revenue share is applicable, the government will make a budgetary allocation for equivalent incentive.
