Oil directorate may get more teeth

Bill aimed at making DGH upstream regulator likely

The government is planning to introduce a Bill for empowering the director-general of hydrocarbons (DGH) in order to make it the petroleum sector's upstream regulator.

Petroleum ministry officials told Business Standard today the government was studying three models for this purpose "" America's Mineral Management Service, Norway's Petroleum Directorate and the UK's DTI.

DGH, which was created through an executive order, has the mandate to collect and disseminate information on hydrocarbon reserves. While carrying out the function of identifying and inviting bids for oil and gas blocks, it has been performing the role of a regulator but has no statutory powers.

The ground work on creating an upstream regulator has started even as the downstream regulator for the oil and gas sector is awaiting the Cabinet's clearance. The government had planned to introduce a Bill in the winter session of Parliament to set up the regulator.

Officials said there were broadly two lines of thoughts within the government for the upstream sector. One, to have a single regulator for all commodities mined or explored on the lines of the US Mineral Management Service that will manage natural gas, oil and other mineral resources on the outer continental shelf.

Two, let DGH assume the responsibility of exploration and production for hydrocarbons only, while for minerals, like coal and iron ore, the present regulatory system will continue.

For this, the Norwegian model will be considered. Norway had set up NPD in 1972 for managing and administrating resources on the behalf of its ministry of petroleum and energy.

Another important issue that the government is considering is whether to empower the regulator with fiscal issues concerning the sector. The ministry of finance at present handles these matters.

Both Mineral Management Service and Norway's Petroleum Directorate are handling taxation issues on behalf of their respective finance ministries. The Mineral Management Service collects, accounts and disburses more than $5 billion a year in revenue from federal offshore mineral leases.

Makings of a watchdog

• The mandate: Regulate upstream activities. At present, DGH collects information on hydrocarbon reserves but has no statutory powers
• The Foreign cue: The government is studying three models for this purpose - US' Mineral Management Service, Norway's Petroleum Directorate and the UK's DTI