Rajya Sabha Passes Oil and Gas Exploration Bill: Why Does It Matters?

05-12-2024

On December 4, 2024, the Rajya Sabha (the Upper House of Parliament) passed the Oilfields (Regulation and Development) Amendment Bill, 2024 to amend the Oilfields (Regulation and Development) Act, 1948.
This bill brings important changes to the rules that govern the exploration and production of oil and gas in India.
The goal is to make the industry more investor-friendly, improve energy security, and support a shift towards cleaner energy.

Why the Government Brings in Amendments to the Original Act:

Originally, oilfields, mines, and minerals were all regulated under the Mines and Minerals (Regulation and Development) Act, 1948.
In 1957, the Mines and Minerals (Development and Regulation) Act, 1957 was passed to regulate the development of mines and minerals under central government control.
The Oilfields (Regulation and Development) Act, 1948 was created by renaming the original 1948 Act and limiting its application to mineral oils only.
The 1948 Act was designed for a very different global energy context and now needs amendments to align with current energy needs related to energy access, energy security, and affordability.
There is an urgent need to boost domestic oil and gas production to meet growing energy demands and reduce the country’s reliance on imports.

Key Features of the Bill:

Introduction of 'Petroleum Lease':
1. The bill replaces the old mining lease with a petroleum lease that will cover all activities related to oil and gas, including exploration, production, and sale of oil and gas.
2. This new system will be more efficient and in line with international standards.
The bill is designed to provide stable rules for oil and gas companies. This will make India a more attractive place for both Indian and foreign investors.
A single lease and license system will simplify the process, so companies will find it easier to work in India.
The government has also promised to set up systems for international arbitration (resolving disputes between countries or companies) and easier dispute resolution.
Decriminalization of the Sector:
1. The bill removes the possibility of imprisonment for minor violations.
2. Instead, the focus will be on fines (money penalties).
3. For example, the fine for exploring or producing oil without a valid lease can go up to ₹25 lakh.
4. If the violation continues, there could be a daily fine of ₹10 lakh.
Improved Regulatory Mechanisms:
1. A new official will be appointed to handle penalties and disputes.
2. This official will be at least a Joint Secretary level.
3. If companies disagree with the penalties, they can appeal to a special Appellate Tribunal set up under the bill.
Environmental and Sustainability Focus:
1. The bill has rules to protect the environment and promote green energy projects.
2. It supports India's climate goals and includes measures to promote cleaner energy in the future.
Expanding the Definition of Mineral Oils: The bill updates the definition of mineral oils to include unconventional hydrocarbon resources such as:
1. Crude oil
2. Natural gas
3. Petroleum
4. Condensate
5. Coal bed methane
6. Oil shale
7. Shale gas
8. Shale oil
9. Tight gas
10. Tight oil
11. Gas hydrate
12. However, coal, lignite, and helium are not included in the definition of mineral oils.
13. This expansion allows the law to keep up with new technologies in energy extraction.
Reducing Dependence on Imports:
1. India imports over 85% of its crude oil and about 50% of its natural gas. The bill aims to boost domestic production of oil and gas, which would help India rely less on imports.
2. The government is hoping that with better rules and support, both capital (money) and technology will flow into the sector.

Why Is This Bill Important?

As India’s energy needs grow, the country is becoming more dependent on imported oil and gas.
This bill aims to reduce this dependency by encouraging more domestic production of oil and gas.
By offering clear and stable rules, the bill will make India a more attractive place for both domestic and foreign companies to invest in oil and gas exploration.
A single lease and license system will simplify the process and reduce bureaucratic hurdles.
The bill updates India’s regulations to match global standards, especially by replacing the mining lease with a petroleum lease.
This change will make India more competitive on the world stage.
The bill focuses on supporting new technologies in oil and gas extraction and promotes the use of cleaner fuels, helping India meet its climate goals.
The bill introduces a clearer dispute resolution process with the appointment of a government official to handle issues and an Appellate Tribunal for appeals.
This should help companies avoid long delays in resolving disputes.

Concerns from the Opposition:

While the bill has passed in the Rajya Sabha, the opposition has asked for the bill to be sent to a standing committee for further review.
However, the government believes that the bill is necessary and has already consulted stakeholders (companies and experts) to ensure it meets the needs of the industry.

Conclusion:

The passage of the Oilfields (Regulation and Development) Amendment Bill, 2024 is a big step for India’s oil and gas sector. With changes that focus on policy stability, investor confidence, sustainability, and technological advancement, this bill aims to make the industry more efficient and environmentally friendly. It is expected to boost energy security, reduce import dependency, and help India move towards a more sustainable energy future.