Open Acreage License Policy

Open Acreage Licensing Policy (OALP) is a policy reform introduced by the Government of India (GoI) to provide relief to hydrocarbon companies. Under the OALP, the company has the option to undertake prospecting for fuels in areas which are not notified by the GoI. Prospecting refers to drilling the selected area to check availability of hydrocarbon fuels. The OALP is used by companies engaged in the business of extraction of hydrocarbon fuels to locate new areas where hydrocarbon fuels can be obtained. The OLAP gives a company the opportunity to prospect for fuels in any area where the technical feasibility study indicates the presence of hydrocarbons. The technical feasibility study is an analysis which indicates the likelihood of availability of hydrocarbons in an area. Once the feasibility study shows the presence of hydrocarbons, the company can proceed with the exploration after obtaining permission from the Directorate General of Hydrocarbons (DGH). If multiple requests for sanction are received for the same area, the DGH will make an allotment by conducting an auction. Until the OALP was introduced, exploration for hydrocarbons was allowed only in the case of areas covered by the tenders issued by the GoI. Situations can arise where hydrocarbon companies may have information concerning unapproved areas where hydrocarbons are found. The feasibility analysis undertaken by the company may reveal a possibility for extraction of hydrocarbons from such areas. Hence, the companies may like to pursue exploration in the areas covered by the study. To tackle such situations, the OALP has permitted hydrocarbon companies to undertake exploration for fuels independently of governmental support. Hence, the exploration can be made without waiting for an announcement from the GoI that an area is available for exploration. Hydrocarbon fuels predominantly include methane, ethane, propane, and butane. Hydrocarbon fuels have applications in both the automobile and industrial sectors. Traditional petroleum fuels belong to the category of depleting or non-renewable resources. Usage of petroleum fuels also causes pollution to the environment. Hence, the GoI has introduced the OLAP to encourage private investment in the hydrocarbon fuel sector. It is estimated that India has made use of only three per cent of its proven natural gas reserves. The OALP will enable a faster survey and coverage of the available geographical territory which has potential for discovery of hydrocarbon fuels.

Objectives of the OALP

To accelerate the growth of the hydrocarbon sector so that all citizens of India can purchase affordable fuel
To encourage all citizens to opt for pollution-free fuels
To ensure that every citizen has an understanding of the distinction between polluting fuels and green fuels
To promote the expansion of employment opportunities in the hydrocarbon sector

Eligibility Criteria

Companies may apply to the DGH for permission to undertake exploration in unchartered territory. The exploration is intended to discover sub-surface hydrocarbon resources. The applicants should follow the relevant conditions prescribed by the DGH. The conditions are as follows:

Legal Compliance Conditions

The applicant should be a company or a Limited Liability Partnership (LLP). The company or LLP should have obtained Certificate of Commencement of Business (CoC). The CoC should have remained valid for at least five years continuously.
The applicant should have Goods and Services Tax Identification Number (GSTIN) and Permanent Account Number (PAN).
The applicant should not have defaulted in repayment of loan taken from a public sector bank or Non-banking Finance Corporation (NBFC).
The company may be listed with a stock exchange situated in India. In such cases, there should not have been any violation of the terms of the agreement. The objective of the requirement is to ensure that agreements made with the stock exchange are honoured. The condition should be satisfied for the preceding three FYs.
When the applicant is a consortium, the companies should enter into an agreement for the project. A consortium indicates a partnership between two companies to perform a project jointly. The agreement should specify one of the partners as the prime bidder. The prime bidder will be held responsible for the implementation of the project.
The applicant should not have been blacklisted by any government authority for defaulting in the performance of contracts.
The applicant should have a valid International Organization for Standardization (ISO) certificate. The certification should be ISO 9001-2008 or higher.

Financial Conditions

The applicant must have shown an average annual turnover of at least five hundred crore rupees for the preceding three financial years (FY).
The balance sheet of the applicant should contain positive net-worth. The requirement will be relevant in case the balance sheet indicates accumulated losses. The accumulated amount of loss should not exceed the paid-up share capital of the company. Also, the applicant should not have incurred any loss during the preceding three financial years.
The applicant should have a solvency ratio of at least one. The requirement indicates that the total borrowings of the company should not be more than its annual income. The annual income is expressed before considering taxation and depreciation expenses.

Technical Conditions

The applicant should have experience in the extraction of hydrocarbons at least ten localities during the past five years. For each of the following categories, the applicant should have had at least one year experience:
- Inland extraction
- Shallow water extraction
- Deepwater extraction
- Coalbed methane extraction
The applicant should have obtained a permit from the GoI to undertake an exploration of hydrocarbon fuels. The permit should have remained valid for at least five years continuously.
The applicant should have conducted technical surveys such as Controlled-source electromagnetic survey, Gravity survey and Magnetic survey for at least a thousand kilometres. The applicant should have executed at least five functional drilling projects.

Application

The application should be made as per the prescribed format. The format is given below for reference:

Open PDF in new tab

The application should be forwarded to the DGH along with the necessary documents. The documents should be self-certified on the company’s letterhead. The documents should be signed by at least two directors of the company. The documents required are as follows:

Memorandum and Articles of Association
Certificate of Incorporation and Certificate of Commencement of Business
GSTIN and PAN Card
Audited Financial Statements for the preceding three FYs.
Certificate of Networth certified by a practising Chartered Accountant (CA)
Certificate of Solvency from any nationalised bank
Power of Attorney issued to the applicant executed on a Non-Judicial stamp paper with a value of Rs. 100
An affidavit stating that the application is correct and complete in all respects, executed on a Non-Judicial stamp paper with a value of Rs. 10 and certified by a notary public
ISO Certificate
If the applicant is treated as a consortium, the consortium agreement executed on a Non-Judicial stamp paper with a value of Rs. 200
Statement of average annual turnover for the preceding three FYs, according to the Income Tax Returns filed
Income Tax Returns filed for the preceding three years, certified by a practising CA
Details of manpower available with the company
A statement of hydrocarbon extraction projects executed during seven preceding FYs
A statement indicating the status of hydrocarbon extraction projects currently handled by the company
Permit obtained from the DGH granting permission to undertake exploration for hydrocarbon fuels

The application, together with the relevant attachments, should be forwarded to the DGH. At the time of forwarding, the applicant should submit an Earnest Money Deposit (EMD) of fifty thousand rupees. The payment should be made by demand draft (DD). The DD should be in favour of ‘Directorate General of Hydrocarbons’. In case the applicant is not selected, the application fees will be refunded within thirty days.

Back to Learn

Frequently Asked Questions

Common questions about Open Acreage Licensing Policy India: Hydrocarbon Exploration.

The Open Acreage Licensing Policy (OALP) is a policy reform introduced by the Government of India that allows hydrocarbon companies to prospect for fuels in areas not notified by the government. It enables companies to undertake exploration for hydrocarbons independently, without waiting for a government announcement.

The primary purpose of the OALP is to accelerate the growth of the hydrocarbon sector in India, allowing for faster surveying and coverage of potential areas for hydrocarbon fuel discovery. It aims to encourage private investment in the sector and promote the expansion of employment opportunities.

Companies or Limited Liability Partnerships (LLPs) that meet certain legal, financial, and technical conditions prescribed by the Directorate General of Hydrocarbons (DGH) are eligible to apply for exploration under the OALP. These conditions include having a valid Certificate of Commencement of Business, positive net worth, and experience in hydrocarbon extraction.

Interested companies must submit an application to the DGH in the prescribed format, along with various self-certified documents and an Earnest Money Deposit. The application should include details such as financial statements, proof of experience, and technical certifications.

If multiple requests are received for the same area, the DGH will conduct an auction to allocate the area. Companies can proceed with exploration after obtaining permission from the DGH and conducting a technical feasibility study that indicates the presence of hydrocarbons.

The OALP allows hydrocarbon companies to explore areas they identify as potential sources of hydrocarbons, based on their own feasibility studies. This enables them to pursue exploration opportunities without waiting for government tenders, providing greater flexibility and control over their operations.

The OALP aims to promote the use of pollution-free fuels and ensure affordable fuel access for all citizens. It also seeks to increase understanding about the distinction between polluting and green fuels and create employment opportunities in the hydrocarbon sector.

The OALP focuses on the exploration of various hydrocarbon fuels, including methane, ethane, propane, and butane. These fuels have applications in both the automobile and industrial sectors.

India has utilized only a small percentage of its proven natural gas reserves. The OALP aims to accelerate the exploration and discovery of hydrocarbon resources, contributing to the country's energy security and reducing reliance on imported fuels.

While the OALP promotes the exploration of hydrocarbon fuels, traditional petroleum fuels are considered non-renewable resources and can contribute to environmental pollution. The policy aims to strike a balance between meeting energy demands and encouraging the use of cleaner, greener fuels.