Modi government set to lure investors to oil and gas rich North-East

NEW DELHI: Prime Minister Narendra Modi’s focus on northeast India has prompted the government to engage a global consultant to prepare an incentive package for investors following its decision to extend subsidy on gas supplied by private producers in the region.

The subsidy on gas was until now limited to state-run Oil and Natural Gas Corporation (ONGC) and Oil India.

“The move to allow 40% subsidy to gas producers would certainly create a level-playing field,” the CEO of an energy explorer said on condition of anonymity. “But this subsidy is at the consumer’s end and producers have no direct benefit. The northeast region has tremendous potential, investors require major incentives because the region lacks infrastructure and have inaccessible terrains.”

Besides ONGC and Oil India, companies such as Geopetrol International of France, Gail India, Hindustan Oil Exploration Company (HOEC) and Jubilant Energy are active players in the north-eastern states. Companies have already found oil and gas in Arunachal Pradesh, Assam, Nagaland, Tripura and Mizoram. The government recently decided to extend subsidy on gas produced by private firms to send a positive signal to global investors, oil ministry officials said. In 2010, the government had announced a 113% hike in the price of gas produced from fields awarded without auction to ONGC and Oil India.

In order to protect customers in the northeast region from the steep hike, the government had decided to bear 40% of the gas price. But this subsidy was not available to customers who bought gas from blocks awarded to public or private explorers through auctions. The Cabinet recently corrected this anomaly, officials said. The development of the region is the focus of NDA government, officials said.

“Myanmar and Bangladesh have proven gas reserves. The geology of the northeast is almost the same. Therefore, potential is huge and we are making every effort to attract global energy companies in the region,” an oil ministry official said.

The Directorate General of Hydrocarbons (DGH) has been directed to appoint a global consultant by January to conduct a study, which aims to have a policy that would encourage exploration and production of oil and gas in the region, the official said. The consultant will examine issues that are limiting exploration and production of oil and gas in the region and will also suggest “practical workable solutions with action plan while identifying the government agencies, which will carry forward the plan,” the official added.

“The industry has already raised two key issues that need to be resolved. Firstly, we need pipeline networks to bring the gas to the consumers located in industrially developed regions such as Maharashtra and Gujarat. The second issue is a higher gas price that would incentivise investment in this difficult region,” said an executive of the Association of Oil & Gas Operators (AOGO).

Oil ministry officials said the consultant will identify infrastructure gaps and accessibility issues that are essential for exploration in the region. It will also examine needs and means to create common hubs of service providers in the region and resolve issues related to skilled manpower.

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