New DGH guidelines allow oil & gas companies to monetise discoveries sooner

• The new DGH guidelines will allow oil and gas companies to bring in early revenues for itself and the government without seeking the time-consuming government approvals

• This essentially means that now, oil and gas companies will be able to start production and sale from a discovery even during the exploration phase

New Delhi: A new guideline released by the DGH (Directorate General of Hydrocarbons) has now made it possible for oil and gas companies to start monetising their discoveries sooner than earlier because of a change in timelines. "There are no restrictions on monetisation of discovery at an early stage within these timelines (provided under the contracts); rather it would be in public interest that a discovery is monetised early as a step towards energy security of the country," the guidelines on early monetisation of hydrocarbon discoveries released by DGH said.

New DGH guidelines will bring in early revenues for companies

The contracts give licensees around eight years to explore. After a discovery, they undertake appraisal, development and production sequentially. The new DGH guidelines will allow oil and gas companies to bring in early revenues for themselves and the government without seeking the time-consuming government approvals. This essentially means that now, oil and gas companies will be able to start production and sale from discovery even during the exploration phase.

But there are conditions applied!

"The contractor may develop and monetise such early-stage discovery/discoveries before completion of the appraisal, declaration of commerciality (DoC) and submission of development plan (DP)/ field development plan (FDP), etc in blocks under exploration period," the DGH said. However, it will be subject to a few conditions.

The contractors will have to submit its plan to develop that specific discovery, along with estimated cost and production profile, to the DGH. It will also have to seek PML (Petroleum Mining Lease). The output from such discoveries will be treated as commercial production and the contractor will have to pay all levies as well as the share of profit or revenue according to the contract.

(PSU Watch– India's Business News centre that places the spotlight on PSUs, Bureaucracy, Defence and Public Policy is now on Telegram. Join PSU Watch Channel in your Telegram and stay updated)