The new DSF policy is based on the principle of ‘ease of doing businesses’. The DSF, launched in May 2016, is offered under the international competitive bidding (ICB) scheme and a new Hydrocarbon Exploration Licensing Policy (HELP).
The rationale behind DSF is to enable early monetisation and render investment attractive in a low crude oil environment.
Some of the key highlights of the DSF policy are as follows:
• Revenue sharing with the government instead of the existing cost-recovery based production sharing
• Freedom of marketing and pricing for both oil as well as gas
• Permission to explore all kinds of hydrocarbons such as shale, tight rock, coalbed methane (CBM), etc.
• International competitive bidding with no mandatory national oil companies (NOC) participation Prior technical experience not required for bidders
• No restrictions on exploration activities during the contract period
• Favourable royalty rate and waiver of oil cess
• Customs duty on goods and services imported for petroleum operations not to be imposed.
Who can bid
The bidder must be a company. Up to 100% participation by foreign companies is permitted. Domestic companies, including NOCs are also permitted to bid. Companies, either alone or in association with unincorporated or incorporated joint ventures, may bid for one or more contract areas. The bidder need not have any exploration and production industry experience. This has been introduced in order to promote new companies to enter the E&P (Exploration & Production) sector. The bidder is required to have an adequate net worth. The net worth of the bidder should be equal to or more than its share of the value of the biddable work programme commitment cumulated across all its bids
Note:
India’s hydrocarbons industry has been traditionally dominated by PSUs and only a very restricted number of independents participate in upstream play. The shift from NELP to HELP is an attempt to render upstream investments attractive, transparent and commercially attractive.
The most innovative feature of the DSF policy is the transition from the profit sharing contracts (PSCs) to the revenue-based scheme (RCS) and the full freedom of marketing and pricing on an equal basis. The bidder offering the highest value of revenue share to the government will be retained.
