Heading: Rajya Sabha Passes Oilfields (Regulation and Development) Amendment Bill, 2024

Rajya Sabha Passes Oilfields (Regulation and Development) Amendment Bill, 2024

In a significant development for the upstream industry in India, the Rajya Sabha passed the Oilfields (Regulation and Development) Amendment Bill, 2024 on 3rd December. The bill aims to bring about notable changes to the regulatory framework, with a focus on ensuring policy stability and promoting ease of doing business.

One of the key changes introduced by the bill is the elimination of the requirement for applying twice to the government for a license or lease. This has been achieved by adding a new definition of “petroleum lease” that will be applicable for both exploration and development activities in the sector.

Additionally, the bill includes a stabilization provision for leases, ensuring that the terms of leases will not be altered to the disadvantage of investors during their term. The definition of “mineral oil” has also been expanded to include all petroleum hydrocarbons, providing clarity on the treatment of investments in coal bed methane and shale, which are now officially under the purview of the act.

Furthermore, the government’s rule-making power has been expanded to promote arbitration, with the possibility of arbitration seats being both inside and outside India. This move is expected to be welcomed by foreign players in the sector who prefer foreign-seated arbitrations.

The bill also limits penalties for contravention to pecuniary consequences and establishes a special authority for adjudicating offenses, with appeals going to the Appellate Tribunal of Electricity.

The amendment is aimed at attracting investments in domestic production to meet India’s energy demands, as the country currently only meets 13% of its oil demand domestically. However, concerns have been raised about the potential impact on state revenues through royalties, as oil and gas blocks are spread across various Indian states.

The success of the regulatory framework will depend on how the rules under the amended act are formulated, particularly to prevent any overlap with state legislative powers. It is crucial that the rules be comprehensive and address all relevant matters to ensure clarity and certainty for investors.

Overall, the Oilfields (Regulation and Development) Amendment Bill, 2024 is a step towards promoting investments in the upstream sector and enhancing domestic production to meet India’s energy needs.