Report No. 19 of 2011 – Performance Audit of Hydrocarbon Production Sharing Contracts of Union Government, Ministry of Petroleum and Natural Gas

Date on which Report Tabled:
Thu 08 Sep, 2011
Date of sending the report to Government:
Government Type:
Union Department
Sector Power & Energy


Private sector participation in hydrocarbon Exploration and Production (E&P) in India dates back to the Government of India (Gol) decision of 1991 to invite foreign and domestic private sector companies to participate in the development of oil and gas fields already discovered or partly developed by the National Oil Companies such as ONGC. This was followed by three rounds of bidding for small and medium-sized discovered or producing fields and six rounds of bidding for "pre-NELP" exploratory blacks.

The New Exploration and Licensing Policy (NELP), announced by Gol in 1997 and notified in 1999, represented a landmark in hydrocarbon E&P in India. For the first time, National Oil Companies were to compete with private sector companies for obtaining E&P licenses through a competitive bidding process, instead of getting them on nomination basis. The pre-tax I nvestment Multiple for sharing of "profit petroleum" between the Gol and private contractors was introduced. Royalty rates were standardised on ad valorem basis, and cess as well as signature, discovery and production bonuses done away with. Eight rounds of award of exploration blocks under NELP were completed, while submission of bids for the IXth round has concluded recently.

The basis for the contractual relationship between the Gol and the private contractors is the Production Sharing Contract (PSC). The PSC lays out the roles and responsibilities of all parties, stipulates the detailed procedures to be followed at different stages of exploration, development and production, and also indicates the fiscal regime (cost recovery, profit sharing etc.).

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