Centre Cuts Royalty On Deepwater Oil Production To Boost Energy Exploration

In a move aimed at easing costs for offshore energy producers, the Centre has announced lower royalty rates for crude oil and casing head condensate extracted from deepwater and ultra-deepwater fields.

According to the revised provisions issued under the oil and gas framework, companies operating in deepwater areas will pay 5 per cent royalty for the first seven years after commercial production begins. After that period, the levy will rise to 10 per cent.

The policy grants greater relief to ultra-deepwater projects. No royalty will be charged during the initial seven years of production, while a 5 per cent rate will apply from the eighth year onward.

The updated structure applies to multiple categories of oil and gas blocks, including those allotted to national oil companies through nomination, areas awarded before the New Exploration Licensing Policy, and blocks allocated under the Hydrocarbon Exploration and Licensing Policy and Discovered Small Field Policy.

For onshore and shallow-water operations, royalty levels remain largely unchanged at 12.5 per cent across most segments. Some offshore categories under the revised framework will continue to attract a lower 7.5 per cent royalty.

Officials also clarified that contracts signed under older production-sharing arrangements would continue under the royalty conditions mentioned in those agreements.

The revision comes during a period of uncertainty in international energy markets. Tensions in West Asia and fluctuations in crude oil prices continue to influence global energy trends.

The government stated that the country currently has adequate petroleum reserves. It also said LPG supply for domestic use remains uninterrupted.

Earlier this month, US President Donald Trump criticised Iran’s response to a US-backed proposal aimed at resolving the regional conflict. He described Iran’s position as ‘completely unacceptable’.

At the same time, Prime Minister Narendra Modi appealed to citizens to reduce fuel consumption. He also urged people to avoid unnecessary overseas travel and postpone non-essential gold purchases.

According to the Prime Minister, these measures would help conserve foreign exchange reserves.

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