Basics of Energy | Economy for UPSC 2024 (Pre & Mains) PDF Download

 Page 1


ENERGY
Page 2


ENERGY
ENERGY
Hydrocarbon Exploration & Licensing Policy (HELP)
Objectives
T o enhance the production of domestic oil and gas; T o bring 
substantial investment in exploration & production sector; 
generate employment opportunities; enhance transparency; 
and reduce administrative discretion. 
Page 3


ENERGY
ENERGY
Hydrocarbon Exploration & Licensing Policy (HELP)
Objectives
T o enhance the production of domestic oil and gas; T o bring 
substantial investment in exploration & production sector; 
generate employment opportunities; enhance transparency; 
and reduce administrative discretion. 
NEW EXPLORATION LICENSING POLICY 
(NELP)
At present there are separate policies & licenses for different 
hydrocarbons such as conventional oil and gas, coal-bed methane, shale oil 
and gas and gas hydrates. 
In practice, it leads to inefficiencies in exploiting natural resources. 
For example, during the exploration of one type of hydrocarbons if a 
different one is found, then under present system a separate license will 
be needed for exploiting the newly found hydrocarbon.
Page 4


ENERGY
ENERGY
Hydrocarbon Exploration & Licensing Policy (HELP)
Objectives
T o enhance the production of domestic oil and gas; T o bring 
substantial investment in exploration & production sector; 
generate employment opportunities; enhance transparency; 
and reduce administrative discretion. 
NEW EXPLORATION LICENSING POLICY 
(NELP)
At present there are separate policies & licenses for different 
hydrocarbons such as conventional oil and gas, coal-bed methane, shale oil 
and gas and gas hydrates. 
In practice, it leads to inefficiencies in exploiting natural resources. 
For example, during the exploration of one type of hydrocarbons if a 
different one is found, then under present system a separate license will 
be needed for exploiting the newly found hydrocarbon.
PROFIT SHARING REVENUE MODEL
According to this, if a contractor discovers oil or gas, he is expected to share 
the profit as per the percentage given in his bid with the government. 
On other hand, only royalties & cesses are paid to the government if no profit is 
made. 
With this system in place, it becomes necessary for government to account the 
costs incurred by the contractor to prevent loss of government revenue. 
There are requirements for government approval at various stages of the 
process to prevent the contractor from exaggerating the cost. 
Need for approval before the commencement of any activity leads to 
unnecessary delays and disputes. 
Page 5


ENERGY
ENERGY
Hydrocarbon Exploration & Licensing Policy (HELP)
Objectives
T o enhance the production of domestic oil and gas; T o bring 
substantial investment in exploration & production sector; 
generate employment opportunities; enhance transparency; 
and reduce administrative discretion. 
NEW EXPLORATION LICENSING POLICY 
(NELP)
At present there are separate policies & licenses for different 
hydrocarbons such as conventional oil and gas, coal-bed methane, shale oil 
and gas and gas hydrates. 
In practice, it leads to inefficiencies in exploiting natural resources. 
For example, during the exploration of one type of hydrocarbons if a 
different one is found, then under present system a separate license will 
be needed for exploiting the newly found hydrocarbon.
PROFIT SHARING REVENUE MODEL
According to this, if a contractor discovers oil or gas, he is expected to share 
the profit as per the percentage given in his bid with the government. 
On other hand, only royalties & cesses are paid to the government if no profit is 
made. 
With this system in place, it becomes necessary for government to account the 
costs incurred by the contractor to prevent loss of government revenue. 
There are requirements for government approval at various stages of the 
process to prevent the contractor from exaggerating the cost. 
Need for approval before the commencement of any activity leads to 
unnecessary delays and disputes. 
SALIENT FEATURES OF HELP 
Uniform license for exploration and production of all forms of hydrocarbon: HELP has 
a uniform licensing system which covers all hydrocarbons, i.e. oil, gas, coal bed methane etc. 
under a single license and policy framework. 
Open acreage policy: A bidder may seek to explore any block which is not already covered by 
exploration by applying to government. The government after examining the proposal may call for 
competitive bids after obtaining environmental & other clearances. This will help in tapping 
unused potential blocks. 
Revenue sharing model: Easy to administer revenue sharing model will replace the profit 
sharing model used by earlier contracts. With the change, government need not be concerned 
with the cost incurred and instead will receive a share of the gross revenue from the sale of oil, 
gas etc. This change will augment the government’s policy of “Ease of Doing Business”. 
For deep water & ultra deep water areas, concessional royalty regime will be implemented. There 
will not be any royalty for the first 7 years and a concessional royalty of 5% in deep water areas 
and 2% in ultra deep water areas. Further, for shallow water areas, there will be reduction in 
royalty rates from 10% to 7.5%