Know Your Policy: The Oilfields (Regulation and Development) Amendment Bill

India’s Petroleum Minister has hinted that India is willing to keep buying more Russian oil, at further discounted prices. What is the importance of the timing and why is the current Indian Government bringing a legislation with regards to Oilfields. There are interesting developments in India’s energy sector, which have direct impact not just on Indian industries but also the lives of common citizens.

The re-election of Trump might not necessarily mean good news for India as India has been a benefactor from the war in Europe, which Trump most likely shall end, pushing for a settlement. Moreover, it might also lead to a further slide in the Rupee, as Russia currently has close to $40Bn in Rupee as reserves, which might be used to trade with other nations, after sanctions are lifted. This is the reason why India’s Petroleum Minister has smartly hinted to Russia that India is willing to keep buying more Russian oil, because they are well aware that Russia currently has an excess supply of oil and the cost of closing and restarting oil operations is more than the discount.?To alleviate sudden disruption of gas supply, India's biggest gas firm is looking to buy up to 26% stake in an LNG project in the United States. GAIL already has contracts to buy 5.8 million tonnes a year of LNG from the U.S.

Recently, External Affairs Minister Jaishankar gave a spate of interviews calling on the hypocrisy of Western nations, defending India’s import of Russian oil. Post sanctions on Russian energy, India and China have been importing Russian oil and natural gas, with India selling processed oil back to Europe. This is a way to circumvent the trade embargo. Funnily, western European leaders are well aware of this fallacy, yet politics let them play pretend. India has one of the world's largest oil refineries in the world in Jamnagar. Russian crude oil to India accounted for less than 0.2% before the Russia-Ukraine war. Currently, it has a share of 36%.        

In FY24, domestic oil and gas production rose by approximately 3%. Further, Prime Minister Narendra Modi has courted global oil and gas CEOs to invest in India's exploration and production, recently announcing a substantial $67 billion investment opportunity aimed at increasing the share of natural gas in the country's energy mix from 6.3% to 15% by 2030.?

Exploration of Oil currently suffers legal complexities as erstwhile socialist governments had treated this as a curse, imposing huge fines, unclear policies and treating it the same as mining.

Enter The Oilfields (Regulation and Development) Amendment Bill, 2024, seeks to enhance investor confidence in India’s oil and gas sector. The Bill tabled in this winter session of Parliament, aims to boost investment in India’s oil and gas sector by providing stable lease terms, enabling arbitration, and streamlining operations. It seeks to address long-standing concerns about policy stability and regulatory clarity, which are essential for attracting both domestic and foreign investments.?

Now a few “Aarey Jeevis” might oppose saying it is a ploy to let corporations destroy the environment, but they fail to read the finer details. The Bill includes provisions for sharing production and processing facilities, promoting efficient resource use, and addressing energy transition issues. The bill also aims to redefine ‘mineral oils’ to encompass cleaner energy sources like hydrogen, aligning with the Modi Government’s goal of increasing non-fossil fuel energy capacity by 2.5 times. With significant projects like ONGC’s Cluster Project in the Krishna-Godavari basin, this Bill aims to not only boost domestic production but also position Bharat as a leader in the global transition to sustainable energy, paving the way for a ViksitBharat@2047.

What are the key impact of this legislation?

1. Strategic Delink Of Petroleum Operations From Mining Operations: The current regulatory regime, which treats hydrocarbon projects as mining activities, has prompted calls for a separation to better address the unique needs of the petroleum sector. In the case of Godavarman v. Union of India, the Supreme Court held that the extraction of natural gas/oil cannot be considered as mining, hence this is in line with the judiciary.
2. The Bill paves the way for increased foreign exploration in Bharat by establishing a more stable and transparent regulatory environment. By allowing international companies to engage in petroleum operations with clear terms and a dispute resolution mechanism, the Bill aims to attract foreign investments and expertise. More than financial risk, policy and legal risk are biggest fear to big project investors, especially in a complex democracy such as India.
3. The Bill introduces the concept of “petroleum leases,” which will provide stable terms for operators and foster a more investor-friendly environment. The Bill defines “mineral oils” to include all naturally occurring hydrocarbons such as crude oil, natural gas, petroleum, condensate, coal bed methane, oil shale, shale gas, shale oil, tight gas, tight oil, and gas hydrate while excluding coal, lignite, and helium.
4. What is the impact on current mining licenses? The Bill mandates that all mining leases and licenses granted before the commencement of the Amendment Act will continue to be valid for their respective tenures, subject to the terms and conditions governing their grant. Sections 5 and 6 aimed at enhancing investor confidence, such as ensuring that the terms and conditions of a petroleum lease shall remain stable during the period of the lease. This stability is intended to attract both domestic and foreign investment, which is essential for economic growth and job creation in local communities.
5. Will it harm the environment? Section 6 of the proposed Bill empowers the Central Government to establish rules for the conservation and development of mineral oils, promoting efficient sharing of production facilities among lessees, and ensuring safety standards at oilfields. It mandates sound management practices aligned with international standards and emphasizes the reduction of carbon and greenhouse gas emissions. The Bill also stipulates the reporting of emissions related to mineral oil operations

What are key focus areas by the Government?

Under the Modi Government, Bharat’s crude oil import dependence decreased to $62,248 billion in 2020-21, contrasting sharply with the UPA Government’s era, when the dependence had increased almost two-fold to $1,42,962 billion in 2013-14 due to policy paralysis and lack of investment. The introduction of the Hydrocarbon Exploration and Licensing Policy (HELP) has simplified the regulatory framework, attracting both domestic and foreign investments into the sector. Public sector undertakings (PSUs) like ONGC and Oil India Limited have ramped up their exploration activities, leading to increased output from existing fields and the discovery of new reserves. This bill shall open a new chapter in India’s energy self-sufficiency, which is important in the current world.

India's Green Energy on Fastrack

Prime Minister Narendra Modi had gifted the world with “Panchamrit” at the COP-26 Summit in 2021. He had envisioned a set of five sustainable development and environmental goals to achieve for India. In the latest budget, there was announcement of PM-Surya Ghar Muft Bijli Yojana wherein households shall enjoy 300 units of free electricity every month. This shall be the biggest new mass scheme in the third term of government, with the government mainly focusing on implementation of its existing schemes. This shall lead to household savings of ?15-18,000 every year, per household. To facilitate the scheme, the budget has allocated ?6250 for the current fiscal.

PM-KUSUM scheme was launched to build 34.8GW solar capacity by 2026 and has benefitted over 2.46 lakh farmers until 2023. The present budget has ensured that the scheme maintains its momentum and has thus allocated ?1496 crore towards it, which is a 36% increase over the revised estimates for the scheme for FY 2023-24, which stood at ?1100 crore.?

Prime Minister had inaugurated the first assembly of the International Solar Alliance in 2018 with the slogan of “One World, One Sun and One Grid”. This alliance has facilitated the solar PV market maintaining its record-breaking streak with new capacity installations totaling ~175 GW in 2021. in the past decade, solar power capacity has increased by 26 times and wind power capacity doubled.

The Modi Government has embarked on a long-term vision of decarbonising India and achieving its net-zero carbon emission target by 2070. The National Hydrogen Mission was launched to make India a Global Hub for Green Hydrogen, while moving away from fossil fuels. Until 2023, this Mission has created over six lakh employment opportunities, resulted in cumulative reduction in fossil fuel imports over ?1 lakh crore and has abated nearly 50 MMT of annual greenhouse gas emissions.

Unlike the rhetoric laden arguments by ideologically driven "activists", the current Government has a reputation of reaching Climate goals way ahead of deadline, much like European nations. India achieved the target of having a 40% share of non-fossil fuels in the installed electricity capacity 9 years ahead of schedule.?India achieved the target of 10% ethanol blending in petrol 5 months before.