Open Acreage Licensing Policy

Why in news?

The government has replaced the New Exploration and Licensing Policy (NELP) with the Open Acreage Licensing Policy (OALP).

What is Open Acreage Licensing?

• OALP gives an option to a company to select the exploration blocks on its own, without waiting for the formal bid round from the Government.
• Under OALP, a bidder intending to explore hydrocarbons may apply to the Government seeking exploration of any new block which was not already covered by exploration.
• The Government will examine the interest and if it is suitable for award, then the govt will call for competitive bids after obtaining necessary environmental and other clearances.
• OALP was introduced as part of the new fiscal regime in exploration sector called Hydrocarbon Exploration and Licensing Policy (HELP).
• So that, it will enable a faster survey and coverage of the available geographical area which has potential for oil and gas discovery.
• Successful implementation of OALP requires building of National Data Repository on geo-scientific data.

What are the positives of OALP over NELP?

• By placing greater discretion in the hands of explorers and operators, the OALP attempts to address a major drawback in the NELP that forced energy explorers to bid for blocks chosen by the government.
• Companies can now apply for particular areas they think is attractive to invest in, because in the past, the blocks chosen by the government often had only a small fraction of hydrocarbon reserves.
• By offering companies the freedom to choose exactly the areas they want to explore, and their size, the government has a better chance to woo serious energy investors.
• The govt also introduced National Data Repository (NDR).
• It is envisaged as a centralised database of geological and hydrocarbon information that will be available to all.
• It will allow potential investors to make informed decisions and will open up a new sector in India.
• There are a number of companies that simply explore hydrocarbon basins and sell the information they gather. Thus via NDR, the govt seeks to incentivise such prospectors.
• Companies may also submit applications through the year and not just at designated and often infrequent points, as was the case earlier.
• Also, from now on, the auctions will be held twice a year. This, will lend more flexibility to the industry.

What are the concerns with OALP?

• The policy awards an extra five points to bidders for an acreage if they have already invested in the exploration and development of that area.
• But, it is highly doubtful if this is an acceptable incentive, since the investment needed to simply explore is significant.
• Also, no such preference is given to mineral explorers while auctioning mining rights.
• Instead, a revenue-share from mining operations is their recompense for exploration efforts.
• Another concern is whether India can attract enough investment to meet the government’s objective of reducing oil imports by 10% by 2022, since there are already proven reserves in other parts of the world.

Source: The Hindu