Natural Gas Marketing Reforms 2020 | UPSC

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Natural Gas Marketing Reforms 2020 | UPSC

Natural Gas Marketing Reforms 2020 | UPSC

      HEADLINES:

Natural Gas Marketing Reforms

      WHY IN NEWS:

The Cabinet Committee on Economic Affairs chaired by the Prime Minister Shri Narendra Modi has approved ‘Natural Gas Marketing Reforms’, taking another significant step to move towards gas based economy.

SYLLABUS COVERED: GS 3: Energy

      LEARNING: 

For PRELIMS categories of the sedimentary basin and the objective of such reform is very important .

For MAINS go through OALP and the significance portion . Let us dive in !

      ISSUE: 

Cabinet Committee on Economic Affairs (CCEA) approved ‘Natural Gas Marketing Reforms’.

NATURAL GAS MARKETING REFORMS

WHY NATURAL GAS POLICY?

  • To increase exploration activities
  • Attract domestic and foreign investment in unexplored/unallocated areas of sedimentary basins

Enhance domestic production of oil and gas from existing fields

  • Promote ease of doing business by streamlining and expediting the approval processes.

CATEGORIZATION OF SEDIMENTARY BASINS

Sedimentary Basins of India are classified into the following three categories:

  1. CATEGORY-I BASINS : Basins which have proven hydrocarbon resources with established commercial production.
  2. CATEGORY-II BASINS : Basins which have contingent resources which are yet to be converted to recoverable reserves and commercial production.
  3. CATEGORY–III BASINS : Basins which have prospective resources with no hydrocarbon discovery and few exploration inputs and data.

OBJECTIVE

  • The objective of the policy is to prescribe standard procedure to discover market price of gas to be sold in the market by gas producers.
  • The policy intends to bring transparent and competitive process in natural gas market.
  • It also permit Affiliates to participate in bidding process for sale of gas .

Policy allows marketing freedom to certain Field Development Plans (FDPs) where Production Sharing Contracts already provide pricing freedom.

  • The policy aims to provide standard procedure for sale of natural gas in a transparent and competitive manner .
  • Thus the policy discovers market price by issuing guidelines for sale by contractor through e-bidding.
  • This will bring uniformity in the bidding process across the various contractual regimes and policies .
  • Also , this will avoid ambiguity and contribute towards ease of doing business.

BIDDING

  • The policy has also permitted Affiliate companies to participate in the bidding process in view of the open, transparent and electronic bidding.
  • This will facilitate and promote more competition in marketing of gas.

However, rebidding will have to be done in case only affiliates participate, and there are no other bidders.

  • The policy will also grant marketing freedom to the Field Development Plans (FDPs) of those Blocks in which Production Sharing Contracts already provide pricing freedom.
  • These reforms will build on a series of transformative reforms rolled out by the Government in last several years.

Natural Gas Marketing Reforms 2020 | UPSC

SIGNIFICANCE

These reforms in gas sector will further deepen and spur the economic activities in the following areas:

  • The whole eco-system of policies relating to production, infrastructure and marketing of natural gas has been made more transparent .
  • These reforms will prove very significant for Atmanirbhar Bharat by encouraging investments in the domestic production of natural gas and reducing import dependence.

These reforms will prove to be another milestone in moving towards a gas based economy by encouraging investments.

  • The increased gas production consumption will help in improvement of environment.
  • These reforms will also help in creating employment opportunities in the gas consuming sectors including MSMEs.
  • The domestic production will further help in increasing investment in the downstream industries such as City Gas Distribution and related industries.

STRATEGIC REFORMS

  • The Government has taken transformative reforms in the upstream sector with a view to make investment easier focusing on ease of doing business.

The Open Acreage Licensing Policy (OALP) which is investor driven acreage auction process, has increased substantial acreages in the country.

  • No blocks were allocated between 2010 and 2017 which has impacted the long term viability of the domestic production.
  • Since 2017 more than 1.6 lakh sq.km area under 105 exploration blocks have been allocated.
  • This will ensure sustainability of the domestic production in long run.

      IASbhai WINDUP: 

  • Government brought a series of reforms in Gas sector and as a result investment of more than Rs. 70,000 crore is being made in the East coast.
  • Gas production from East coast will contribute to Atmanirbhar Bharat by meeting increasing energy needs of the country.
  • In February 2019, Government implemented major reforms in upstream sector and brought paradigm shift by focusing on production maximization.

Acreages under OALP rounds are being allocated based on work programme only in Cat II and Cat III basins.

  • The domestic gas production has complete marketing and pricing freedom.
  • All discoveries and field development plans approved after 28 Feb, 2019 have complete market and pricing freedom.
     SOURCES:THE HINDU & PIB |Natural Gas Marketing Reforms 2020 | UPSC

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