Lok Sabha passes Oilfield amendment bill 2024

The Bill will play a key role in India’s quest for ensuring energy availability, accessibility, affordability and security for the citizens and fulfilling the Prime Minister’s vision of Viksit Bharat by 2047.

Lok Sabha passed the Oilfield (Regulatory and Development) Amendment Bill, 2024. The Bill was earlier passed by the Rajya Sabha on 3^rd December, 2024. The Bill intends to reform the legal framework to meet the current needs and market conditions and to make the sector more attractive to investors so that exploration and production of oil and gas could be increased further. The Bill will play a key role in India’s quest for ensuring energy availability, accessibility, affordability and security for the citizens and fulfilling the Prime Minister’s vision of Viksit Bharat by 2047.

Over the last decade, the Government has brought several path breaking reforms including a landmark shift from ‘production sharing’ regime to ‘revenue sharing’ regime for awarding contracts, simplified processes and reduced regulatory burden to promote exploration and production of oil and gas in India, release of previously No Go areas for new exploration, deregulation of crude as well as marketing and pricing freedom for natural gas. A crucial outcome of these major reforms, more than 76% of the active acreage under exploration in India today have been awarded post 2014.

While introducing the historical amendment Bill, the biggest of such path breaking legal reforms, Minister of Petroleum and Natural Gas Sh. Hardeep Singh Puri stated that the present regime, focussing mainly on licensing, regulatory control and collection of royalties, needed reorientation to promote Ease of Doing Business and collaboration between the Government and the Contractors. He stated that exhaustive discussions with industry leaders, potential investors and stakeholders were held to understand the pain points in the system. Given the long gestation periods and very high project risks involved, investors need a legal framework that is simple, stable, predictable and provides access to efficient expeditious dispute resolution mechanism. The amendments proposed in the Bill are designed to meet investor expectations whilst promoting, protecting and prioritising the interests of India.

The Amendment Bill seeks to do away with the historical erroneous practice of putting mining and petroleum operations in the same bucket. It also introduces a single permit system namely, petroleum leases, which will substitute the extant system which requires the Contractors to take multiple licenses for carrying out various types of activities for different types of hydrocarbons. The Bill will facilitate development of comprehensive energy projects and adoption of new technologies like Carbon Capture utilisation and sequestration (CCUS), green hydrogen etc.

Post 2014, MoPNG has embarked on an accelerated path towards monetising discoveries. Towards this goal, the discovered small fields policy had been notified in 2015 and many small operators have been awarded fields unmonetised by previous operators. Many of these isolated fields have been suffering for want of infrastructure. This Bill seeks aid small operators by enabling sharing of resources and infrastructure between different operators to improve viability of oil blocks.

The Bill also aims to resolve one of the biggest grievances of global oil companies interested in investing in India by providing stability in operations, both in terms of tenure of the lease and conditions therein. It emphasises efficient alternate dispute resolution mechanisms which will ensure disputes can be resolved in a timely, fair and cost-effective manner.

To promote enforcement of the provisions of the Act, penalty has been increased to 25 lakh rupees and upto 10 lakh per day for continuing infraction so that they have deterrent effect. To make the system effective and expeditious, the Bill creates an adjudication authority and an appellate mechanism for levy of penalties.

Sh. Puri emphasised that the Bill intends to maintain cooperative federalism and does not impact the rights of the States in any manner. The States will continue to give Petroleum leases, necessary statutory clearances and receive royalties, as before. Minister emphasised that with the passing of the Bill, the provisions will improve the “Ease of doing business”, make India an attractive destination for production of oil and gas and play an instrumental role in unlocking hydrocarbon potential of our resource rich nation.