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BP plc, Europe's second-largest oil company, today made a case for extending the marketing and pricing freedom given to operators of marginal and small oil and gas fields to conventional fields like KG basin D6 block.
Speaking at India-UK Business Council event, BP India head Sashi Mukundan welcomed the auction of 69 idle oil and gas fields of state-owned ONGC and Oil India to private firms on a new revenue sharing model and liberalised terms, including pricing and marketing freedom.
"So what I would say is that it is a step in the right direction. We clearly are seeing the government (is) looking into overall picture and saying it is important to also get domestic oil and gas production increased," he said.
Stating that the government has understood the holistic picture and the need to do in terms of policy initiative, he said, "You are seeing that some clarity coming around the marginal field policy that came up. (The policy) talks of marketing freedom, talks about pricing freedom.
"You are free to produce and sell it in the market and the only hook you have is the revenue share with the government. Clearly, it is a positive direction that the government is setting," he said.
The small and marginal fields are to be auctioned on the basis of maximum revenue an operator is willing to share with the government at low and high end of price and production band.
"I am hoping this is the direction they want to go in terms of the long term and this becomes the model for opening up the market, get more people to come in and participate in India," he said.
Asked about the prospects of global oil majors investing in India, he said, "Right now with the oil prices pretty low, it is difficult. You will need to be able to compete with global."
"If you take just top four oil companies, all of them together have cut $200 billion of capital for the next five years, which means your thrusthold for competing has just gone up. So, it is important that we bring in these kind of policies like the marginal field," he said.
In the marginal field policy, the government will allow companies to sell oil as well as natural gas produced from these fields at market price and with no restriction on who they sell the produce to.
While oil is priced at global benchmark currently, a complex international hub based formula determines gas price, which is roughly half of the rate at which India imports gas.
Also, gas can only be sold to customers identified by the government.
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