With oil and gas reserves estimated at 600 million metric tonnes (forecast) and a projected valued at an astronomical Rs.25,20,000 crore (approx), Nagaland sits atop a gold mine that has the potential of transforming the economic scenario for decades to come.
According to official sources, Nagaland has a crucial window of 35 to 40 years to capitalise on its estimated 600 million tonnes of prognostic oil reserves, as assessed by the Oil and Natural Gas Corporation Limited (ONGC).
Oil reserves in Nagaland occur in the Patkai ranges, Changpang, Tssori (Wokha), Singphan (Mon), Geleki, Tzürangkong (Mokokchung), Chümoukedima, Niuland and Jalukie (Peren) among others.
A vast estimated crude reserve of between 60 to 70 million metric tons are in Tzurangkong under Tuli sub-division, bordering Wamaken and Amguri along the Geleki reserved forest. The quantity of crude oil in the belt is projected to be more than that of Chanpang and Tssori.
On April 21, 2023, Nagaland chief minister Neiphiu Rio disclosed that both he and Assam chief minister Dr Himanta Biswa Sarma had, in principle, decided to go for an MoU on exploration in the disputed areas so that oil can be extracted and royalties can be shared between the neighbouring states.
On March 7 at the 6th Session of the 14th NLA, Dr Neiphiu Rio reaffirmed his government’s commitment to exploration and extraction of oil in Nagaland.
While Nagaland is deprived of huge potential revenue, Oil companies in Assam are extracting huge quantity of oil from the Disputed Area Belt (DAB), in violation of the border agreement for status quo.
Also it was also disclosed that oil companies patronized by Assam, have been extracting oil by means of perpendicular drilling method from oil basins located in Nagaland along the border areas.
Since 1994 extraction of oil under “trial basis” by Oil and Natural Gas Corporation (ONGC) Ltd, was stopped by the Nagaland government, owing to pressure from Naga groups and students and also dispute over oil revenue.
ONGC had extracted over 5000 barrels of crude from Changpang and Tssori oil wells as “trial basis” but paid a pittance of Rs.33 crore as royalty. The royalty amount on crude extracted was determined arbitrarily without concurrence from Nagaland.
It may be recalled that in July 2022, then Union Minister of State for Petroleum and Natural Gas, Rameswar Teli told Parliament that the ONGC was operating 8 oil fields in the DAB between Assam and Nagaland. He gave the information in reply to a query posed by then Lok Sabha MP Tokeho Yepthomi.
Also citing data tabled in Parliament, Yepthomi had revealed that there are a total of 36 known oil fields located in between the (disputed) Assam-Nagaland boundary, out of which Assam is drawing revenue from oil extracted.
Oil revenue: Citing official records, former Lok Sabha MP Tokheho disclosed the Assam, collected over Rs 10,400 cr in oil revenue during 2011-22. Then from 2017-18 to 2021-22, the revenue was tipped at Rs 9899 cr. Based on these figures, he estimated that Nagaland is losing Rs 5 cr daily or Rs 1825 cr annually in oil royalty as a result of Assam operating oil fields in the DAB.
He cited the instances where Assam was extracting oil from Pihekhu and Nikihe under Niuland. Apart from royalty, the oil industry have given Assam huge employment avenues for local youths and also providing direct and indirect rise in economic activity including major initiatives under Corporate Social Responsibility(CSR).
As per revenue arrangement, the rate of royalty will be 20% for onland areas and 10% for shallow water areas. For inland areas the matter will be reviewed after 3 years.
The Central government has shown willingness to support Nagaland’s oil exploration efforts. In a significant move, it has decided to grant a special royalty rate of 2% above the applicable rate for onshore areas, in recognition of the special provisions under Article 371-A of the Constitution. This concession underscores the government’s commitment to addressing Nagaland’s unique challenges and ensuring equitable benefits.
Exploration: If Nagaland finally allows oil exploration in its initial phases ( meaning undertaking surveys to determine location and estimates of crude), this exercise alone promises significant employment opportunities for local youth in the fields of survey , civil construction, and logistics.
Industry estimates suggest that exploratory works in Nagaland could involve investments exceeding Rs. 2500 crore over a five-year period, providing a much-needed boost to the state’s economy.
PRODUCTION:
If oil is eventually extracted for distillation and production, then there is also potential for establishing a medium oil refineries at Changpang (Wokha) and Tuli(Mokokchung) districts.
Each refinery may have potential of providing employment to some several hundred employees.
Presently if Nagaland does not have an oil refinery, the all the oil extracted in the state4 will be transporter to either Numaligarh or Digboi oil refineries. This will mean loss of a few thousand crore rupees in excise revenue.
In this regard it may be mentioned that Assam has been the single major beneficiary of oil extraction as well as production running to the extent of 3.12 million metric tons per annum. Assam also produces 5 MMSCMD of gas and 50,000 tonnes of LPG per year.
The state had attempted to start oil operations by enacting the Nagaland Petroleum and Natural Gas (NPNG) Regulation 2012 and invite Expressions of Interest (EoI). However the UPA-II government shot down the attempt by reiterating that under Entry 53 of List I, only Parliament has power to make legislation for regulation and development of oil fields, mineral oil resources etc.
While oil revenue will be the panacea for the state’s economic woes and also build an economically transformed Nagaland, the people also need to play a direct and positive role to ensure that the proposal is not scuttled by extraneous factors.