Centre Cuts Royalty Rates For Deepwater Oil Production To Boost Exploration

New Delhi: In a major policy push aimed at encouraging offshore oil and gas exploration, the Centre has announced a reduction in royalty rates on crude oil and casing head condensate production from deepwater and ultra-deepwater blocks.

Under the revised royalty framework notified by the government, companies operating in offshore deepwater areas will now pay a royalty of 5 per cent for the first seven years from the start of commercial production. From the eighth year onwards, the royalty rate will increase to 10 per cent.

For ultra-deepwater blocks, the government has provided even greater relief by exempting operators from royalty payments for the first seven years of commercial production. After this period, a royalty of 5 per cent will be levied.

The revised provisions will apply to oil and gas blocks awarded under multiple exploration regimes, including nomination-based awards to national oil companies, pre-NELP blocks, and fields allotted under the Hydrocarbon Exploration and Licensing Policy (HELP) as well as the Discovered Small Field (DSF) Policy.

While the government has lowered levies for deep offshore exploration, royalty rates for onland and shallow-water production areas will largely remain unchanged at 12.5 per cent. Some offshore categories under the new framework will continue to attract a royalty rate of 7.5 per cent.

Officials said production-sharing contracts signed under earlier policy structures would continue to follow the royalty terms mentioned in their respective agreements.

The decision comes amid rising uncertainty in global energy markets due to the ongoing tensions in West Asia. Concerns over supply disruptions and volatility in crude oil prices have prompted governments worldwide to review energy security measures.

The Centre recently assured that India has adequate stocks of petroleum products and that LPG supplies for domestic cooking remain stable.

The global situation intensified after US President Donald Trump criticised Iran’s response to a US proposal aimed at resolving the regional conflict, calling Tehran’s stand “completely unacceptable”.

Amid the evolving geopolitical situation, Prime Minister Narendra Modi had also urged citizens to avoid unnecessary gold purchases, reduce foreign travel, and conserve fuel to help manage pressure on the country’s foreign exchange reserves.