India’s Government Cuts Royalty Rates on Crude Oil and Natural Gas to Boost Domestic Exploration

Shares of

C and Oil India surged today, climbing up to 6.6% and 9% respectively, following the Centre’s decision to rationalize royalty rates on crude oil, natural gas, and casing head condensate production. The move, notified by the Ministry of Petroleum and Natural Gas on May 8, aims to reduce the fiscal burden on upstream companies, encourage exploration and production (E&P) activity, and attract fresh investments amid India’s heavy reliance on imported energy (around 85% for crude). Key Changes in Royalty Structure Onshore crude oil: Effective royalty reduced to 10% (from ~16.66% previously for many nomination blocks operated by ONGC and Oil India). Offshore crude: Lowered to 8% (from 9.09%). Natural gas: Cut to 8% (from 10%), aided by a new flat deduction formula for calculating well-head price. Deepwater and ultra-deepwater blocks (under Discovered Small Field Policy and HELP) get zero royalty for the first seven years of production for crude, condensate, and natural gas. Post-seven years, rates drop to 5% (deepwater) and 2% (ultra-deepwater).