The Oilfields ( Regulation and Development) Act,1948

The Oilfields ( Regulation and Development) Act,1948

This Act regulates the procedures for licensing the exploitation of natural gas, petroleum, crude oil, refined oil, partially refined oil and any of the products of petroleum in a liquid or solid state. The Central Government may, by notification in the Official Gazette, make rules for regulating the grant of mining leases or for prohibiting the grant of such leases in respect of any mineral oil or any area. In particular, and without prejudice to the generality of the foregoing power, such rules may provide for all or any of the following matters provided under section 5, namely:

(a) the manner in which, the mineral oils or areas in respect of which and the persons by whom, applications for mining lease may be made and fees to be paid on any such applications;

(b) the authority by which, the terms on which, and the conditions subject to which, mining leases may be granted; 

(c) the maximum or minimum area and the period for which any mining lease may be granted and the terms on which leases in respect of contiguous areas may be amalgamated;

(d) the fixing of the maximum and minimum rent payable by a lessee, whether the mine is worked or not.

Mining Leases and Royalty Payments (section 6A)

• Mining lease holders before the Oilfields (Regulation and Development) Amendment Act, 1969 must pay royalty for mineral oil mined, quarried, excavated, or collected from the leased area.

• Those granted after the Act’s commencement must pay royalty at the rate specified in the Schedule.

• No royalty is payable for crude oil, casing-head condensate, or natural gas that is lost, returned to the reservoir, or used for petroleum or natural gas production.

• The Central Government can amend the Schedule to enhance or reduce royalty rates, with different rates for the same mineral oil.

• The Central Government cannot fix royalty rates exceeding 20% of the sale price of the mineral oil at the oilfields or the oil well-head.

• The Central Government can exempt mineral oil produced from off-shore areas from the whole or any part of the royalty leviable thereon.

Central Government’s Rules for Mineral Oil Conservation and Development (section 6)

The Central Government can make rules for the conservation and development of mineral oils.

• These rules may regulate the use of engines, machinery, and equipment in the development of mineral oil resources.

• Regulations may be made regarding drilling, re-drilling, deepening, shutting down, plugging, and abandoning of oil wells in an oilfield.

• Regulations may also be made regarding the methods of producing oil in any oilfield.

• New borings and shaft sinkings must be notified and preserved.

• Samples from mines and new bore-holes must be taken.

• Regulations may be made for the storage of mineral oils and their stocks.

• Royalties, fees, or taxes for mineral oils mined, quarried, excavated, or collected must be collected.

• Owners or lessees of mines must submit special or periodical returns and reports.