Ministry of Petroleum and Natural Gas (MoPNG) Reduces Royalty Rates for Domestic Oil and Gas Production

Key facts

• The Ministry of Petroleum and Natural Gas (MoPNG) notified revised royalty rates on May 8 to incentivise domestic exploration and reduce import dependence.
• Under the revised framework, the effective royalty on onshore crude oil production is reduced to 10%, while royalty on offshore crude production is lowered to 8%.
• Natural gas production will attract an effective royalty rate of 8% based on a new flat deduction formula for calculating the well head price.
• Fixed deductions for post well-head costs are set at 20% of the sale price for nomination regime blocks and 15% for all other regimes to determine royalty payments.
• Blocks under the Discovered Small Field (DSF) Policy and Hydrocarbon Exploration and Licensing Policy (HELP) will attract zero royalty for the first seven years in deepwater and ultra-deepwater areas.