Gujarat and Assam win crude oil royalty bonanza

Vol 5, PW 23 (16 Jan 02) People & Policy

When the oil ministry implements the Mauskar report, major oil producing states such as Gujarat and Assam are in for a windfall.

This should cheer up Gujarat, which has long been sulking over perceived low royalty payments and even threatens to cancel mining leases. NELP oil producers are unaffected by the Mauskar report.

What exactly did the Mauskar panel recommend For one, the panel wants crude oil royalty to be paid on ad valorem basis as opposed to the present system of having a fixed rate. Secondly, it wants the current multiple royalty rates to gradually converge with the NELP royalty rates.

Sources tell PETROWATCH the panel recommends the following: From 1st April 1998 to 31st March 2002, crude oil royalty from onshore and offshore (upto 400 metres water depth) is to be paid at 18% of the well head price (obtained from the market driven price) in line with calculations elsewhere in the report. Additional money owed to states will be paid, not by oil companies, but will be 'adjusted' by the government from the Oil Pool Account.

No such money is to be paid to the government for offshore production during this period From 1st April 2002 (when domestic prices are freed) royalty for onland blocks should be 18% of the well head price for 2002-03 and to slip by 1% for each year till 2006-07 and then by 1.5% for the next year to finally converge with the NELP royalty rate of 12.5% From 1st April 2002 royalty from shallow water offshore (up to 400 metres water depth) blocks to be 18% of the well head price for 2002-03 and then to dip by 1.5% each year till 2006-07 and then by 2% in the next year to finally be on par with the NELP rate of 10% by 2007-08 For crude oil from deepwater offshore blocks (beyond 400 metres water depth) royalty is to be paid at half the rates for shallow water areas for the first seven years of commercial production For heavier crude (25 API and less) royalty is to be 2.5% lower than that for normal crude from onshore and offshore blocks from 1st April 2002 Royalty calculations are to be made monthly Well head price will be calculated by deducting 7.5% for onshore crude of the import parity sale price and 10% for offshore crude There will be no payment of royalty in kind and no separate agency to determine the well head price

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