New Delhi, Sept. 2: The government will auction 69 small and marginal oil and gas blocks - surrendered by state-owned ONGC Ltd and Oil India - to private firms on a revenue-sharing model with full marketing and pricing freedom.

"The fields hold 89 million tonnes of oil and gas resources which are worth Rs 70,000 crore at current prices. The 69 fields will be clubbed into clusters and offered for bidding within three months," oil minister Dharmendra Pradhan said after a meeting of the Cabinet Committee on Economic Affairs.

The CCEA, headed by Prime Minister Narendra Modi, approved the auction of these fields that state-owned firms claimed were uneconomical to develop because of the subsidy they had to bear for oil marketing PSUs for selling fuel below cost.

"We have made a paradigm shift from cost-recovery model to revenue-sharing. At the same time, we have decided to implement a unified licensing regime. This is a primary step towards ease of doing business," Pradhan said.

The successful bidders of these fields would have the freedom to sell crude oil or natural gas at market-determined prices without any government interference.

Moreover, under the new dispensation, companies will be given the right to sell gas to any customer and not according to a government-allocation policy as was the practice. Other than crude oil and gas, the firms will be free to commercially exploit unconventional resources such as shale oil and gas, if they find any, in these fields.

Analysts said the government's move would evoke interest from global small and medium energy exploration firms that are technologically sound. With the slump in global crude prices, rigs and other exploration services are cheaper now and the timing is apt for exploration firms to enter the fields whose potential has already been established.

"Given the current low oil price regime, a round of NELP auction might not attract a lot of investor interest. It is prudent on the part of the government to first carry out a bid process for marginal fields, which will provide an opportunity to try out the revenue-sharing model with market pricing mechanism," Debasish Mishra, senior director, Deloitte in India, said.

Pradhan, hinting at a prolific investment opportunity, cited the example of Cairn India-operated Mangala field in Barmer block of Rajasthan, saying it was also discarded by ONGC as non-prolific.

"Today, the field produces about 20-25 per cent of the country's crude output," the minister said.

In the new regime, the companies will have to indicate the revenue they will share with the government at different stages of production as well as at different rates.

The bidding will take place on two parameters - 80 per cent on revenue sharing and 20 per cent on appraisal and development wells.

For revenue-sharing, the bidders will have to quote two rates - lower revenue point and higher revenue point, which will be determined based on production and price of the hydrocarbon.

In other words, there will be a revenue-sharing matrix over the life cycle of the field, which will be directly proportionate to output levels and price. The government has not kept a fixed revenue share because it will not protect the Centre's interest in case of any windfall gain.

While no cess will be charged from these fields, for crude oil production, the royalty has been marked at 12.5 per cent for onshore, 10 per cent for shallow water and 5 per cent for the first seven years for deep and ultra-deep water fields.

For gas fields, the royalty rates are 10 per cent for onshore and shallow water and 5 per cent for deep and ultra deep water.

"This auction will also usher in the unified licensing regime which will give operators the right to produce both conventional oil and gas as well as unconventional resources such as shale oil and gas and coal-bed methane (CBM)," he said.

At present, a licensing regime governs production of oil and gas while the exploitation of unconventional resources are in a separate regime. Pradhan said a bid document will be brought out in three months after which the auction process will begin.

The contract would be for 20 years, which could be extended by another 10 years based on the life cycle of the fields. Of the 69 fields, 36 are offshore and another 33 are onshore fields. ONGC and Oil India will also be allowed to bid for these fields. The fields are located in Arunachal Pradesh, Assam, Tamil Nadu, Rajasthan and Nagaland.

The government has determined fixed timelines to commence production from these fields - three years for onland, four years for shallow water and six years for deepwater fields. If explorers fail to meet the deadlines, the fields would be taken back.