(FE)
In the initial rounds of bidding for oil/gas, including the time when the government simply gave oilfields to oilcos under “nomination”, the government’s take was typically around 50% of the revenues—this takes into account the royalty and cess that is paid as a share of revenues and the profit petroleum that is paid as a share of profits. This fell to around 40% of revenues in the case of the NELP rounds. In the case of the latest Hydrocarbon Exploration and Licensing Policy (HELP), however, the revenue shares fell even more, to around 30%.
That oilcos should bid a lower revenue-share for HELP rounds is not surprising. For one, the government had worked to lower this burden on oilcos in successive rounds of bidding. Two, till the HELP round, the government allowed oilcos to fully recover their costs and, only after that, was the profit-petroleum divided with the government. In that sense, the lower revenue shares under HELP are a clear indicator of the fact that, with cost recovery no longer allowed, oilcos felt the new round is riskier, and are therefore willing to part with less. Revenue-share-based contracts, of course, are better in that there will no longer be any controversy over ‘cost-padding’ as happened in the case of RIL’s KG Basin. As an interesting aside, ONGC offered lower revenue-shares than the private players who were clearly more bullish.
