The Central government’s Ministry of Petroleum has reduced royalty charges on the production of crude oil and natural gas from deepwater and ultra-deepwater. The Ministry notified the revised rates on 8th May. The decision is aimed at improving the condition of India’s upstream energy sector.
As per the notification issued by the Central government, royalty on onshore crude oil production has been lowered from 16.66% to 10%.
Meanwhile, royalty on offshore crude production has also been cut from 9.09% to 8%. In addition, the royalty rate on natural gas has reduced from 10% to 8% after the introduction of a new flat deduction formula.
#JustIn | Government cuts #royalty charged on production of #crudeoil & #gas pic.twitter.com/HO1BB5Bx1R
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According to the Ministry of Petroleum, royalty charges will now be calculated on the “well head price” after allowing a fixed deduction towards post-well-head costs, amounting 20% of the sale price for nomination regime blocks and 15% for all other regimes.
Pertinently, under the new rules, there will be zero royalty on crude oil and condensate production from blocks awarded under the Discovered Small Field (DSF) Policy and Hydrocarbon Exploration and Licensing Policy (HELP), for the first seven years in deepwater and ultra-deepwater areas.
The move is expected to benefit the Oil and Natural Gas Corporation (ONGC).
Furthermore, the decision will help cut costs for companies exploring difficult and capital-intensive oil and gas fields. While the West Asia crisis has given many troubles and lessons not just to India but countries across the world, India has long been trying to bring in big investments to augment domestic production and curb import dependence.
“The rationalisation of royalty under the ORD Act will be a major step toward regulatory clarity. Following the historic 2025 amendments to the ORD Act & PNG Rules, the Government has rationalised royalty rates & methodologies for Crude Oil, Natural Gas, and Casing Head Condensate. The revised Schedule removes long-standing inconsistencies across regimes to ensure a stable, predictable, and investor-aligned framework for India’s upstream sector”, Union Minister Hardeep Puri posted.
