Friday, November 9, 2007

Inida: Government Tightens Rules for Exploration

A recent article came across Rigzone about the "Indian Government Tightens Rules for Oil & Gas Exploration"

This is interesting, as recently in Alberta, they recently had a royalty review. Russia has been taking more control of their resources, along with Venezuela, etc.

Essentially the major changes are occuring to the PSA (Production Sharing Agreements).

The main changes are:

  • "Until such time as the availability of natural gas from all petroleum production activities in India meets the total national demand as determined by the government, each company comprising the contractor, shall sell in the domestic market in India all of the company's entitlement to natural gas from the contract area."

Cutting to the chase, the natural gas now has to be sold domestically, rather than exported, as it currently is being done.

Further the Indian government states in the release:

  • "If India attains self-sufficiency, during any year, the government shall advise the companies accordingly by a written notice. In such an event, domestic sale obligations shall be suspended for such period as may be specified by the government, and the company shall have the right to lift and export its participating interest share of natural gas during the said period, subject to any extant policy guidelines of the government, applicable from time to time."

So once, India, has enough natural gas production to become self-sufficient, any excess can be exported, subject to any policies at the time of the government in power at the time.

So is exploration going to slow down because of this?

I do not feel so, as any natural gas producers now have a natural (bad pun!) market for the gas - India.

It also encourages exploration companies to build up and explore for natural gas, as the more they find, the easier they can satisfy a domestic market and then any excess can be exported.

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