Rajya Sabha passes bill to boost investment in oil and gas exploration and production | Mint

New Delhi: The Rajya Sabha on Tuesday passed a landmark bill with sweeping measures aimed at making it easier to do business in the oil and gas exploration and production (E&P) sector and attracting greater investments.

The Oilfields (Regulation and Development) Amendment Bill, 2024, also proposed delinking petroleum activities from mining activities, which is expected to bring more investments in the sector.

The bill was passed by voice vote.

In a debate on the bill, Petroleum and Natural Gas Minister Hardeep Singh Puri said: “We need the oil and gas sector (for) another 20 years. We need to bring this legislation here to provide a win-win confidence not only to our own operators but also to foreign investors so that they can come and do business here with a view to benefiting everyone.”

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Describing the changes as “landmark” in a post on social media platform X, the minister said they will strengthen and boost India's energy sector.

According to the government, as the global energy scenario and hydrocarbon landscape have changed dramatically, there is a need to amend the law to reflect current realities and national priorities, promote ease of doing business, decriminalize provisions and reinvigorate India's E&P framework align with global practices.

“Since petroleum (crude oil/natural gas) is found in the pore spaces of underground rocks and is extracted by drilling, decoupling terms such as 'mine', 'mined' or 'excavated' as intended in the current law, Removing the ambiguity and Ease of doing business in the more technology driven sector,” Puri said in a series of tweets.

The original 1948 law defined petroleum and natural gas as mineral oils. This bill expands the definition to include coal seam methane, oil shale, shale gas, shale oil, tight gas, tight oil, and gas hydrate, but does not include coal, lignite, and helium that occur in the petroleum process.

“Traditionally, the term 'mineral oil' means natural gas and petroleum. As unconventional hydrocarbon resources have been discovered and developed, the definition needs to be updated to reflect the modern understanding of the term,” said Puri.

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Furthermore, the bill changes the previously used term 'mining lease' and introduces 'petroleum lease', which allows companies to explore, prospect, produce, market and dispose of mineral oils. However, existing mining leases in use remain valid.

Since small operators and new entrants often face difficulties in carrying out their operations due to the high cost of infrastructure and facilities, the bill proposes to enable the Center to make rules to facilitate sharing of production and processing facilities and other infrastructure by allowing two or more tenants.

In an effort to achieve stability and investor confidence, the bill ensures that the terms of the lease will remain stable throughout the term of the lease and will not be changed to the detriment of the investor. The amendments also propose alternative dispute resolution mechanisms for effective dispute resolution methods that meet the needs and expectations of investors.

The object statement of the bill noted that the existing law is framed in a very different global energy context and needs to be amended to meet India's needs and aspirations in energy access, security and affordability.

Noting that there is an urgent need to increase domestic production of oil and gas to meet rising demand and reduce import dependence, the bill stated: “To unlock valuable resources of mineral oil, it is necessary to invest in the sector to attract the necessary capital and technology to expedite petroleum activities in the country by creating an investor-friendly environment that promotes ease of doing business, enhances the prospects for exploration, development and production of all types hydrocarbons, ensures stability, promotes adequate risk mitigation capabilities, addresses energy transition issues including cleaner of next generation fuels and provides a robust enforcement mechanism to ensure compliance with the provisions of the said law.”

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The proposed changes are in line with the government's efforts to boost domestic production and reduce import dependence. India is a net importer of crude oil and depends on foreign sources for 85% of its energy needs.