Hydrocarbons dept likely to get more teeth

The government plans to delegate all regulatory powers for the upstream oil sector to the Directorate General of Hydrocarbons (DGH) and create a separate cadre on public sector pattern to man the organisation.

DGH will be headed by a director-general of the rank of chairman and managing director of a Schedule A PSU like Oil and Natural Gas Corporation. Appointment to the post will be made in consultation with the Oil Industry Development Board.

Senior officials told Business Standard the government planned to further empower the office of the DGH by assigning to it the regulatory jobs under Section 6 of the Oil Field and Development Act.

DGH, created through a Cabinet resolution in 1993, at present monitors all oil and gas blocks in the country, but has not been actively involved in monitoring of investment by ONGC in nominated blocks awarded to the company prior to the opening up of the oil sector.

"Empowerment through Section 6 would authorise the DGH to collect requisite information from all operators, including national oil companies. The petroleum ministry wants to designate the DGH as the nodal agency for this job through constant supervision of oil and gas wells drilled by upstream companies," said an official.

The 1993 resolution does not make any distinction among nominated blocks (operated by ONGC and Oil India historically), blocks given to joint ventures like the Panna, Mukta and Tapti fields prior to the New Exploration and Licensing Policy (NELP), and blocks awarded to NELP.

"In the case of NELP and joint venture fields, DGH derives power from the production-sharing contracts; so it is more effective. This is missing in the case of nominated blocks. Besides, the DGH is not able to monitor the ONGC-OIL blocks effectively due to lack of infrastructure," said an official.

Officials said the proposals were part of a Cabinet note which was in the process of finalisation, especially since legal opinion on the DGH's current status as a regulator was now clear.

The issue, whether the DGH in its existing capacity was a regulator or not, came up after the government decided to nominate the director-general of hydrocarbons as its nominee on the ONGC board.

The candidature was later withdrawn.