Quick Note - India oil & gas - Royalty on oil & gas production reduced

Research evidence excerpt

Quick Note - India oil & gas - Royalty on oil & gas production reduced

Global Markets Research

12 May 2026India oil & gas

EQUITY: OIL & GAS/CHEMICALS

Royalty on oil & gas production reduced Research Analysts

India Oil & Gas/Chemicals

Bineet Banka, CFA - NFASLQuick Note bineet.banka@nomura.com

+91(22)4037 4044AccordingtoagovernmentofIndia notification releasedon11May,royaltyonupstream

oilandgasproductionhasbeenreducedtoboostdomesticexplorationandproduction.In

ourview,thesechangesareinpursuitofattractingmoreinvestmenttoboostdomesticoil

andgasproductionandreducedependenceonimports.

Oil royalty rates: The royalty rates on oil for nomination fields have been slashed from

20% (16.67% cum rate) to 12.5% (11.1% cum rate). Also, the adjusted well-head price

was earlier calculated by adjusting a fixed per ton ad valorem deduction (see details

below) on realized price for calculating royalty to be paid. This fixed ad valorem deduction

has now been increased to 20% of realized well-head price, resulting in further decrease

in royalty to be paid for both ONGC (ONGC IN, Neutral) and Oil India (OINL IN, Neutral).

Ad valorem deductions:

• ONGC onshore nomination fields: INR3,955/ton

• ONGC offshore nomination fields: INR2,226/ton

• Oil India fields: INR2,828/ton

Royalty is calculated on cum-royalty basis according to the formula below:

Royalty amount = ((Well head price – ad valorem deduction))*royalty rate/(100 + royalty

rate)

Gas royalty rates: There has been no change in royalty rates for gas. However, there

was no deduction applicable to gas wellhead price earlier which is now 20%, further

reducing royalty burden on both companies.

GST on royalty: Given the fall in absolute royalty amount for both ONGC and Oil India,