Publication of Notification in the Gazette of India Extra Ordinary, Part 1, Section 1, Deregulating sale of domestically produced Crude Oil.

## Report on Deregulation of Sale of Domestically Produced Crude Oil **1. Executive Summary:** This report analyzes a new policy notification issued by the Ministry of Petroleum and Natural Gas, Government of India, regarding the deregulation of the sale of domestically produced crude oil. The core purpose of this policy is to create a level playing field, promote competition, and incentivize investment in the oil and gas value chain, with a focus on ease of doing business and more freedom to operators. Key provisions include ceasing government allocation of crude oil, waiving off crude oil sale conditions in Production Sharing Contracts (PSCs), royalty and statutory levy valuation and maintaining a restriction on crude oil exports. The policy takes effect from October 1, 2022. **2. Introduction:** The purpose of this report is to provide information and analysis on the policy notification issued by the Ministry of Petroleum and Natural Gas, Government of India, regarding the deregulation of the sale of domestically produced crude oil, based solely on the text provided in the official notification. **3. Policy Overview:** * This is a *new* policy. * **Core Objective(s):** * Creating a level playing field in the crude oil market. * Promoting competition within the oil and gas sector. * Incentivizing investment across the entire oil and gas value chain. * Enhancing the ease of doing business for operators in the sector. * Providing more freedom to operators. **4. Background and Rationale:** As a new policy, the likely issue it addresses is the existing regulatory framework governing the sale of domestically produced crude oil, which the Government perceived as hindering competition and investment. The policy aims to remove these perceived barriers by deregulating the sale process, thereby incentivizing greater participation and innovation in the sector. The previous system likely involved government control over allocation and sales, which this policy seeks to eliminate. **5. Key Provisions:** The policy establishes the following key rules and actions: 1. **Cessation of Government Allocation:** The Government of India will no longer allocate crude oil and condensate, effective October 1, 2022. 2. **Waiver of Crude Oil Sale Conditions in PSCs:** Any condition in Production Sharing Contracts (PSCs) that mandates the sale of crude oil to the Government, a Government Nominee, or Government Companies will be waived. The PSC will be amended accordingly. 3. **Royalty and Statutory Levy Valuation:** Unless the contract specifies otherwise, royalty, cess, other statutory levies, and contractual payments will be valued based on the higher of: * The actual sales price of the crude oil. * The price of the Indian Basket of crude oil, as calculated monthly by a Government-nominated agency. 4. **Export Restriction:** Exports of domestically produced crude oil will continue to be prohibited. 5. **Clarification Authority:** The Ministry of Petroleum and Natural Gas retains the authority to issue clarifications and interpretations regarding the policy. **6. Target Audience and Stakeholders:** Based on the text, the primary target audience and stakeholders directly affected by this policy are: * **Oil and Gas Operators/Companies:** Particularly those involved in the domestic production of crude oil. They will have greater freedom in selling their output. * **Entities with Production Sharing Contracts (PSCs):** The policy directly amends existing PSCs with specific clauses related to crude oil sales. * **Government Nominated Agency:** The agency responsible for calculating the Indian Basket crude oil price. **7. Implementation Aspects (Inferred):** * **Responsible Agency/Bodies:** The Ministry of Petroleum and Natural Gas is responsible for overall implementation and clarification of the policy. A "Government nominated Agency" is responsible for calculating the "Indian Basket of crude oil" price monthly. * **Timelines:** The policy is effective from October 1, 2022 (cessation of government allocation). * **Procedures:** The notification implies a procedure for amending existing PSCs to align with the new policy, although the specifics of that procedure are not detailed. Royalty and statutory levy calculation methods are outlined. **8. Expected Outcomes / Impact:** The likely intended outcomes of this policy, based on the stated provisions, include: * **Increased Competition:** By allowing producers to sell crude oil freely, the policy aims to foster competition in the domestic market. * **Greater Investment:** The deregulation is expected to incentivize investment in exploration and production activities. * **Price Discovery:** Allowing sales based on the actual sales price might lead to better price discovery in the market. * **Enhanced Revenue for Producers:** The valuation of royalties and levies based on the higher of the actual sales price or the Indian Basket price potentially benefits producers when their sales price exceeds the Indian Basket price. **9. Conclusion:** The policy notification regarding the deregulation of the sale of domestically produced crude oil represents a significant shift towards a more market-driven approach. By removing government allocation and waiving restrictive clauses in PSCs, the government aims to promote competition, investment, and efficiency within the oil and gas sector. The impact of this policy will likely be felt most acutely by oil and gas operators involved in domestic crude oil production, with potential benefits accruing from greater pricing flexibility and reduced regulatory constraints.

Key Entities Referenced