Open-Acreage-License-Policy

Open Acreage License Policy

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:Directorate General of Hydrocarbons- Application for Extraction of Hydrocarbon Fuels

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.

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Post by Athreya

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