Hydrocarbon Exploration and Licensing Policy (HELP)
The Union Cabinet has approved the Hydrocarbon Exploration and Licensing Policy (HELP).The main facets of this policy are uniform license for exploration and production of all forms of hydrocarbon, an open acreage policy, easy to administer revenue sharing model, marketing and pricing freedom for the crude oil and natural gas produced. The decision is expected to enhance domestic oil & gas production, bring substantial investment in the sector and generate sizable employment. The policy is also aimed at enhancing transparency and reducing administrative discretion. The uniform licence will enable the contractor to explore conventional as well as unconventional oil and gas resources including CBM, shale gas/oil, tight gas and gas hydrates under a single license. In the lines of NELP, cess and import duty will not be applicable on blocks awarded under the new policy.

New Price Formula for Undeveloped Gas Finds cleared by Union Cabinet
March 10, 2016
Cabinet Committee on Economic Affairs (CCEA) approved a new price formula for undeveloped gas discoveries in difficult areas, which will lead to a near-doubling of rates. While domestically-produced gas is currently priced at an average of rates in gas-surplus countries like the US, Canada and Russia, for deep-sea discoveries yet to be developed, the CCEA approved a price indexed to cost of alternative fuels – naphtha and fuel oil as well as imported Liquefied Natural gas (LNG). CCEA has stated that the price will be the lowest of weighted average of fuel oil and imported LNG or weighted average of fuel oil, naphtha and imported coal.

Shortfall Gas under Gas Sales Agreement (GSA)
‘Shortfall gas’ refers to such quantity of gas which the seller has failed to deliver to the buyer at the delivery point in respect of a nominated quantity. It is the quantity of gas which equals to such quantity of gas which is properly nominated by the buyer, however which the seller fails to deliver for any reason other than a failure by the buyer to accept delivery or force majeure (which is defined in the GSA).The GSA must contain provision specifying what degree of failure on the part of Seller to deliver gas shall amount to ‘shortfall’. Lacking such understanding between the parties may at a later stage trigger dispute between the parties. From a buyer’s perspective, ‘shortfall’ shall constitute all such quantity which the seller has failed to deliver against buyer’s nomination. Buyer shall always look for an absolute and unqualified figure under the GSA. On the other hand Seller may require application of shortfall gas tolerance under GSA so that where the delivery failure is de minimis it will not constitute shortfall. However at the same time, buyer may wish to limit the application of shortfall gas tolerance by applying an annual limit and may require a corresponding take or pay tolerance application under GSA.GSA may contain provision where the shortfall may be aggregated over a series of successive nominations so that the risk of shortfall arising in respect of a single nomination may be offset[1].Seller’s liability for shortfall gas may be limited under GSA by providing circumstances where non delivery of gas by seller shall not amount to shortfall and therefore making seller not liable for any shortfall. For instance (a) gas supplied but not taken by buyer, (b) gas not delivered due to scheduled maintenance, commissioning period, force majeure (c) where an alternative remedy available to the buyer for example in case of off-specification gas (d) make-up gas (e) shortfall gas tolerance shall not be considered as a shortfall on part of seller and same shall be excluded under GSA. Seller’s liability for shortfall may attract cash compensation to buyer, buyer’s right to procure alternative fuel and be reimbursed by Seller, redemption at a discount and shortfall gas price. Shortfall gas is generally bought by buyer at a discount to the normal contract price. The buyer usually has to elect to treat gas as shortfall gas, but, if it does, it loses all its other rights in relation to the seller’s particular failure to deliver. The first gas delivered after such failure is usually classified as shortfall gas and has therefore to be paid for at the discounted price. The buyer’s right to receive shortfall gas is sometimes the buyer’s only remedy for failure to deliver by seller. The discount effectively produces the same economic result as the seller paying liquidated damages for non-delivery. Under the GSA, buyer may require seller to report at regular interval and to grant buyer right to audit, inspect and monitor shortfall at seller’s facilities to ensure proper allocation by the seller.  GSA shall also contain provision for expert determination to settle down the differences between the parties with respect to shortfall under GSA.


British Petroleum oil spill
April 04, 2016
The ‘oil spill’ which started on April 20, 2010 in the Gulf of Mexico on the British Petroleum operated Macondo Prospect is considered as one of the major and biggest marine oil spill disaster in the world. Reportedly, the marine oil spill continued for a period of approximately 87 days after the explosion and sinking of the deep water horizon oil rig.  The blast on the deep water horizon oil rig reportedly killed 11 workers and plunged the oil rig in the Gulf of Mexico. The oil spill from the well was stopped on July 15, 2010 and finally the well was declared sealed on September 19, 2010.  As per report of the Government of United States of America (US Government), the total discharge from the marine oil spill was estimated approximately 4.9 million barrels.  Post the oil spill disaster, the US Government initiated various investigations with respect to causes of the explosion and spill.  In September 2011, US Government issued a report pointing out defective cement on the well as a main cause of oil spill and explosion and further finding British Petroleum and rig operator Transocean and contractor Halliburton responsible for the explosion and spill. In November 2012, British Petroleum and the United States Department of Justice settled federal criminal charges with British Petroleum pleading guilty to 11 counts of manslaughter. British Petroleum also agreed to four years of Government monitoring of its safety practices and ethics, and the Environmental Protection Agency announced that British Petroleum would be temporarily banned from new contracts with the US Government. British Petroleum and the Department of Justice agreed to a record-setting $4.525 billion in fines and other payments. Reportedly, on February 2013, criminal and civil settlements and payments to a trust fund had cost British Petroleum $42.2 billion. In September 2014, a U.S. District Court Judge ruled that British Petroleum was primarily responsible for the oil spill because of its gross negligence and reckless conduct. In July 2015, British Petroleum agreed to pay $18.7 billion in fines. On April 04, 2016, a Federal Judge in the US state of Louisiana granted final approval to an estimated $20bn settlement over the oil spill to be paid in a period of 16 years by British Petroleum. The settlement includes $5.5bn in Civil Clean Water Act penalties and environmental damage and other claims by the five US states along the Gulf coast, including Texas, Mississippi, Alabama, Florida and Louisiana. 

Revised Policy on crude oil import for oil PSUs
April 06, 2016
The Union Cabinet has approved the replacement of the present Crude Oil Import Policy. The Government of India has vested with the Oil PSUs the power to evolve their own policies consistent with CVC Guidelines and get them approved by their respective boards. Such a move is expected to result in a more efficient, flexible and dynamic policy for crude procurement, and in due course benefit the consumers at large. The current Crude Oil Import Policy was approved by the Union Cabinet in 1979, with further amendment in 2001.  The need for change in the present Crude Oil Import Policy was felt with the change in the geo-political environment and need to bring it in tune with current needs of the consumers and market. The Union Cabinet decision was based on the principle of Minimum Government Maximum Governance. Vesting of such powers on Oil PSUs is expected to increase the operational and commercial flexibility of the Oil PSUs and enable them to adopt the most effective procurement practices for import of crude oil.

[1] Peter Roberts, Gas Sales and Gas Transportation Agreements Principles and Practice, Sweet & Maxwell, 2004, Pg.89-90


When natural gas is cooled to 260 degree Fahrenheit below zero (or -162 degree Celsius), it changes from a gas into a liquid.

Next Issue
August 2016

In-house contributors

  • Sakshi Bawa, Oil & Gas Team – Downstream
  • Neha, Oil & Gas Team – Upstream


  • Norwegian Petroleum Directorate
  • S. Energy Information Administration
  • The International Energy Agency
  • Organisation of the Petroleum Exporting Countries
  • The Oil and Gas Journal
  • Official web-sites of various oil & gas companies
  • Peter Roberts, Gas Sales and Gas Transportation Agreements Principles and Practice, Sweet & Maxwell, 2004

Alaya Legal presents its tenth issue of the Oil and Gas: Ezine to its Readers. Web-links are provided for ready access to certain reference material. The contents are presented with a view to allow comprehensive update in a systematic manner, from the legal perspective.

Reference Material

  • Categories of proven reserves of oil and natural gas across the globe may be accessed at,
  • Explanation with respect to broad categorisation in the Oil and Natural Gas Industry may be accessed at,,%20Midstream%20and%20Downstream.html


ExxonMobil Starts Banyu Urip Central Processing Facility in Indonesia
December 14, 2015
ExxonMobil announced the successful and safe startup of the onshore central processing facility at the Banyu Urip field in Indonesia, helping increase production to more than 130,000 barrels of oil per day. With the central processing facility now online, production is estimated to continue to increase in the coming months. Once full field production is reached, Banyu Urip will represent approximately 20 percent of Indonesia’s 2016 oil production target.

ONGC Limited invested INR 5,000 crore in the equity of its wholly-owned subsidiary, ONGC Videsh Limited
December 22, 2015
The Cabinet Committee on Economic Affairs (CCEA) has given its approval for investment of INR 5,000 crore by Oil and Natural Gas Company Limited (ONGC) into the equity share capital of ONGC Videsh by conversion of existing loan of equivalent amount into equity.  The approved investment will strengthen the capital base of ONGC Videsh. It will enhance the ability of ONGC to undertake overseas Exploration and Production (E&P) business, thereby improving the energy security of the country.

First gas flows from Shell’s Corrib gas field in Ireland
December 30, 2015
Royal Dutch Shell PLC (Shell) reported that natural gas has started to flow from Ireland’s Corrib gas field, marking an important milestone for the country and Shell’s upstream operations. Located 83 kilometres off Ireland’s northwest coast in water depths of almost 350 metres, the Corrib gas field lies approximately 3,000 metres below the seabed. At peak annual production, the Corrib gas field is expected to produce around 260 MMscf/d of gas, which is 45,000 barrels of oil equivalent per day. Six wells have been drilled at the Corrib field with gas transported to the Bellanaboy Bridge Gas Terminal in north-west Mayo through a 20 inch pipeline. The gas is processed at Bellanaboy before it is transferred into the Gas Networks Ireland (GNI) network, which delivers it to Irish gas consumers.

Shell exits Bab sour gas reservoirs development project
January 18, 2016
Royal Dutch Shell PLC reported that it has decided to exit the joint development of the Bab sour gas reservoirs with Abu Dhabi National Oil Company (ADNOC) in Abu Dhabi, and to stop further joint work on the project.

HPCL gets EAC nod for INR 18,400 crore Vizag Refinery expansion
January 18, 2016

HPCL has received the environmental clearance to expand its refinery at Visakhapatnam in Andhra Pradesh from 8.33 million tonne per annum to 15.0 MTPA.The Expert Appraisal Committee (EAC), under the Ministry of Environment and Forests, in its meeting in November 2015, cleared the INR 18,400 crore expansion plan which was earlier rejected in 2013, citing moratorium on industrial expansion in some parts of Visakhapatnam.

Chevron and ENN sign Gorgon LNG Agreement
January 18, 2016
Chevron Corporation announced that its Australian subsidiaries have signed a non-binding Heads of Agreement (HoA) with ENN LNG Trading Company Limited (ENN) for the delivery of liquefied natural gas (LNG) to China from the Chevron-operated Gorgon natural gas project in Australia. When the deal is finalized, ENN is expected to receive up to 0.5 million metric tons per annum (MTPA) of LNG over 10 years, with deliveries starting in 2018 or the first half of 2019.

Tesoro plans biocrude processing at its existing refineries
January 20, 2016
Tesoro Corp., San Antonio, is launching a program with several renewable energy companies to advance biomass-to-fuels technology for development of biocrude feedstock that the independent refiner-marketer plans to co-process alongside traditional crude at its US refineries.  The company said that the biocrude will enable Tesoro’s existing refining assets to produce less carbon-intensive fuels compatible with existing fuel infrastructure and current vehicle fleet warranties at lower capital and operating costs compared with competing technologies.

Nigeria shuts down two of its refineries
January 22, 2016
Nigerian National Petroleum Corp. (NNPC) has been forced to stop production at two of its three major refineries. This is due to the disruptions caused to the feedstock availability following the mid-January attacks by Nigerian militants on crude oil pipelines that supply the processing sites. The company is presently amidst repairs to restore functioning of the pipeline, so as to restart production.

Pakistan inaugurated its 3rd gas plant
January 26, 2016
Pakistani government officials have inaugurated their third natural gas processing plant at Adhi. An oil and gas field operated by Pakistan Petroleum Ltd., it is situated about 70 km south of Islamabad. The plant will support production from eight development wells planned, out of which six of the wells have been drilled. Pakistan Petroleum’s partners in the field are Oil & Gas Development Co. Ltd. and Pakistan Oilfields Ltd.

 Gas flow starts from Chuandongbei Project in southwest China
January 26, 2016
A joint venture of China Natural Petroleum Corp. and Chevron Corp. has reportedly started commercial production from Luojiazhai natural gas field. This is a part of the Chuandongbei sour-gas project in the Sichuan basin of southwestern China. Production of this project is planned to ramp up over the coming months as all the three trains come on line. The three trains have a combined design outlet capacity of 258 MMcfd of gas. The Chuandongbei project is estimated to contain potentially 3 tcf of recoverable gas resources. It is one of the largest onshore gas projects developed by a joint venture of an international oil company and a national oil company in China.

Chevron announces first gas from the Chuandongbei Project in Southwest China
January 26, 2016
Chevron Corporation announced that its fully-owned subsidiary Unocal East China Sea, Ltd. began natural gas production from the first stage of the Chuandongbei Project in southwest China.  Unocal East China Sea, Ltd. holds a 49 percent participating interest as the operator and China National Petroleum Corporation holds a 51 participating percent interest. The start-up of the first train commences stage one of the project. Production is planned to ramp up over coming months as all three trains come on line.  The three trains have a combined design outlet capacity of 258 million cubic feet of natural gas per day. The Chuandongbei Project is estimated to contain potentially recoverable natural gas resources of 3 trillion cubic feet.  

Shell plans to sell its Malaysian refinery
January 27, 2016
Royal Dutch Shell PLC has entered discussions with China’s Shandong Hengyuan Petrochemical Co. Ltd. (SHP), Shandong, regarding the possible sale of subsidiary Shell Overseas Holdings Ltd.’s (SOHL), Malaysia. While the two companies are in discussion, no final agreement has been reached.

Kenli 10-4 Oilfield commences production
January 26, 2016
CNOOC Limited announced that the Kenli 10-4 oilfield has commenced production.The Kenli 10-4 oilfield is located in the South of Bohai with an average water depth of approximately 15 meters. There are currently 6 wells on production, producing a total of approximately 6,540 barrels of crude oil per day. The oilfield is expected to reach its ODP designed peak production of approximately 9,600 barrels of crude oil per day in 2016.The Kenli 10-4 is an independent oilfield in which the company holds 100% interest and acts as the operator.

Weizhou 12-2 Oilfield Joint Development Project (Weizhou 12-2) and Weizhou 11-4 North Oilfield Phase II Project Commenced Production
February 01, 2016
CNOOC Limited announced that the Weizhou 12-2 oilfield joint development project (Weizhou 12-2) and Weizhou 11-4 North oilfield Phase II project (Weizhou 11-4 North) have recently commenced production. The Weizhou 12-2 project is located in Beibu Gulf Basin of the South China Sea with an average water depth of approximately 36 meters. This project has three oilfields in total. The main production facilities include three wellhead platforms and 18 producing wells which have all commenced production, producing a total of approximately 16,000 barrels of crude oil per day and reaching its ODP designed peak production.Weizhou 11-4 North project is located in Beibu Gulf Basin of the South China Sea with an average water depth of approximately 40 meters. The project shares the existing adjacent facilities for the development and built two wellhead platforms and 15 producing wells. There is currently one well on production, producing a total of approximately 500 barrels of crude oil per day. The project is expected to reach its ODP designed peak production of approximately 8,000 barrels per day within the year.The Weizhou 12-2 and Weizhou 11-4 North are both independent oilfields in which the company holds 100% interest and acts as the operator.

Acquisition of additional interest in the Kraken development
February 22, 2016
Cairn has announced the acquisition by its wholly owned subsidiary, Nautical Petroleum operator of the Kraken development, are both interest to 29.5%. Cairn and EnQuest PLC, the the operator of the Kraken development, are both taking up First Oil’s interest pro-rata to their holdings prior the transaction. Cairn will acquire the reserves and resources associated with the additional interest and Cairn is not reimbursing First Oil in respect of costs incurred by First Oil to date.


The information in this private circulation is not legal advice and should not be treated as such. The information is taken from public domain and is purely for private and non- commercial purposes. We do not represent that the information is correct, accurate, complete or non- misleading.

This disclaimer will be governed by and construed in accordance with laws of India, and any disputes relating to this disclaimer will be subject to the exclusive jurisdiction of the courts of the Republic of India.

Doc ID: 5O&G16

Leave a Reply

Your email address will not be published. Required fields are marked *


The Bar Council of India Rules do not permit law firms to solicit work or advertise. By clicking the ‘I Agree’ button the Reader accepts that it seeks information on its own accord. Alaya Legal shall in no way be responsible for any technical inaccuracies in the website, or for any actions taken or not taken for reasons attributable to the information contained in this website or accessed through this website. Readers are advised to seek counsel from a qualified professional while dealing with specific issues.By continuing to use this site you consent to use of cookies on your device as mentioned in this cookie policy.

Alaya Legal shall in no way be responsible for any technical inaccuracies in the website, or for any actions taken or not taken for reasons attributable to the information contained in this website or accessed through this website. Readers are advised to seek counsel from a qualified professional while dealing with specific issues.The views appearing under various heads, including ‘Trending’, are those of the author. The author may be reached at by writing to Alaya Legal at Nothing herein is or may be construed as legal advice.