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New Auction Policy for Marginal Fields: Can it Attract Private Developers ?

News:

More than a third of the 69 small and marginal oil and gas fields that the government plans to auction to private firms are in Mumbai Offshore and the biggest of them holds about 15 million tons of oil reserves. 

Source:  ET

SNP Insight:

The proposed auction of 69 marginal fields on revenue sharing model will cut down  the number of accounting complications involved in prevalent profit sharing approach & thus it may reduce Govt. intervention considerably and bring in more productivity. The clubbing fields that are adjacent to each other & striking off oil CESS, will be profitable for the operators as it will reduce cost involved in exploration activity. However with the new revenue sharing model, developer has to share revenue with government right from the beginning of exploration activity, so it might discourage private developers to dive in to capital intensive & highly unpredictable O&G exploration activity.

Source: SNP Infra Research