1. CASE :
OIL AND GAS POLICY FRAMEWORK
IN INDIA
Jayesh Kumar, Utsav Dalal, Deepika Wadhwa, Divya Biloo.
Chemical engineering department
MBM Engineering College, Jai narain Vyas University
Jodhpur (Rajasthan)-342011
Email : nahtajay@gmail.com
2. OILAND GAS SECTOR
OVERVIEW
PRODUCTION AND CONSUMPTION
Fast paced growth of indian
economy, increasing
population and rising income
levels has resulted in a surging
demand for energy.
Over the last two decades the
production of oil and gas has
been stagnated and it’s
consumption is increasing
rapidly.
IMPORTS
Need of imports:
• Serious energy shortage
across different fuel sectors.
• stagnating domestic
production.
3. CHALLENGES THREATENING OIL ANG
GAS SECTORS...!!!!
Access to reserves: political constraints and competition for proven
reserves.
Uncertain energy policy.
Lack of foreign investment.
Cost containment.
Worsening fiscal terms.
Health, safety and environmental risks.
Human capital deficit.
New operational challenges, including unfamiliar environments.
Price volatility.
Competition from new technologies.
Climate changes concerns.
4. How to fight with these
challenges..?
Set of principles and long-term goals that form the basis of
making rules and guidelines, and to give overall direction
to planning and development of the organization.
POLICY
FRAMEWORK
POLICY OBJECTIVES
ENERGY
ACCESS
Nearly one-quarter of the population of india lacks
access to energy.
Majority of energy demand still remains unmet.
Economic development is being hindered as a
consequence of energy poverty.
“Thus, providing energy access to its entire population
has been a top priority of Indian policy makers for a long
time, making it equally or even more
important than energy security. India’s major rural
electrification scheme is an example of the
government’s determination to expand access to electricity in
India’s rural villages”
ENERGY
SECURITY
“we are energy secure when
we can supply lifeline energy
to all our citizens irrespective
of their ability to pay for it as
well as meet their effective
demand for safe and
convenient energy
to satisfy their various needs
at competitive prices, at all
times and with a prescribed
confidence
level considering shocks and
disruptions that can be
reasonably expected”
CLIMATIC CHANGE
•India’s per-capita emissions are only one-third of the
world average and 14% of per-capita emissions of OECD member countries. India
took a leading role in the G77 during the COP 15 in 2009, denouncing any attempt
by industrialised countries to
impose carbon reduction targets on developing countries.
• Its main aim is reducing carbon emissions and alleviating environmental
degradation.
•India announced its National Action Plan on Climate Change in 2008, and during
COP15 in Copenhagen in 2009, India’s environment minister reconfirmed India’s
goal to reduce carbon emissions per unit of GDP by 20% to 25% below 2005 levels by
2020. Frequent flooding and droughts, deforestation and desertification as well as
possible glacial melting in the Himalayas have focused on climate change and
provide strong impetus towards India’s transition to a low-carbon economy.
POLICY
CONCEPT
5. POLICY CONCEPT
SELF SUFFICIENCY
•Self-sufficiency or energy independence is the
energy policy dialogue in India.
• This is a useful concept to understand India’s
approach to energy security.
• India adopted strategies of supply or fuel
diversification to enhance energy security.
•It focuses on maximum utilisation of domestic
sources, including hydrocarbon, thorium and
renewables.
•In 2007, an ambitious plan to realise energy
independence based on hydro, nuclear and
renewable energy was announced, stating “we need
to graduate from energy security to energy
independence”
6. POLICIES ADOPTED BY INDIA
Government of India formulated a policy
called New Exploration Licensing Policy in
1997. The main objective was to attract
significant risk capital from Indian and
Foreign companies, state of part
technologies, new geological concepts and
best management practices to explore oil
and gas resources in the country to meet
rising demands of oil and gas. This policy,
NELP was approved in 1997 and it became
effective in February, 1999 Since then
licenses for exploration are being awarded
only through a competitive bidding system
and National Oil Companies (NOCs) are
required to compete on an equal footing
with Indian and foreign companies to
secure Petroleum Exploration Licenses
(PELs). Nine rounds of bids have so far
been concluded under NELP, in which
production sharing contracts for 254
exploration blocks have been signed.
Introduced in 2001, IHV 2025 laid out the
long-term vision for the oil and gas sector
with objectives of enhancing energy security
and promoting a free market and
competition within the
sector .
Salient featuresof IHV :
•Increasing operational flexibility and
autonomy of PSUs
•Developing the sector to a globally
competitive level .
•Better utilisation of domestic hydrocarbon
resources.
•The IHV 2025 confirmed the importance of
foreign investment, but also emphasised the
critical role of Indian PSUs.
SALIENT FEATURES OF NELP
i) 100% FDI is allowed under NELP
ii) No mandatory state participation through ONGC/OIL or any carried interest of the
Government.
iii) Blocks to be awarded through open international competitive bidding.
iv) ONGC and OIL to compete for obtaining the petroleum exploration licenses on a
competitive basis instead of the existing system of granting them PELs on nomination
basis.
v) ONGC and OIL to get the same fiscal and contract terms as private companies.
vi) Freedom to the contractors for marketing of crude oil and gas in the domestic
market.
vii) Royalty at the rate of 12.5% for the onland areas and 10% for offshore areas.
viii) Royalty to be charged at half the prevailing rate for deep water areas beyond 400
m bathymetry for the first 7 years after commencement of commercial production.
ix) Cess to be exempted for production from blocks offered under NELP.
x) Companies to be exempted from payments of import duty on goods imported for
petroleum operations.
xi) No signature, discovery or production bonuses.
xii) A Model Production Sharing Contract (MPSC) which is reviewed for every NELP
round.
xiii) Contracts to be governed in accordance with applicable Indian Laws
7. ROUNDS OF
NELP
NELP
I
NELP
II
NELP
III
NELP
IV
NELP
V
NELP
VI
NELP
VII
NELP
VIII
NELP
IX
Bids were invited by the Government of India on 8
January 1999 for 48 blocks for exploration of oil and
natural gas.
Of these, 12 blocks were deepwater 26 shallow
offshore and 10 were onshore blocks.
The PSC’s were signed for 24 exploration blocks
and 13 blocks have been relinquished.
Bids were invited by the Government of India
15 December 2000 for 25 blocks for exploration
of oil and natural gas.
Of these, 8 blocks were deepwater , 8 shallow
offshore and 9 were onland blocks.
The PSC’s were signed for 23 exploration and
19 blocks have been relinquished
bids were invited by the Government of India on
27 March 2002 for 27 blocks for exploration of oil
and natural gas.
Of theBids were invited by the Government of
India on 27 March 2002 for 27 blocks se, 9 blocks
were deepwater 7 shallow offshore and 11 were
onland blocks.
The PSC’s were signed for 23 exploration
blocks and 4 blocks had been relinquished.
Bids were invited by the Government of India
on 8 May 2003 for 24 blocks for exploration of
oil and natural gas.
Of these, 12 blocks were deepwater 1shallow
offshore and 11 were onland blocks.
The PSC’s were signed for 20 exploration
blocks. At present 19 exploration blocks are
operating ..
Bids were invited by the Government of India
for 20 blocks for exploration of oil and natural
gas.
Of these, 6 blocks were deepwater 2 shallow
offshore and 12 were onland blocks
The PSC’s were signed for all 20 exploration
blocks.
A total of fifty five blocks (55) were offered
during the NELP VI round for exploration of oil
and natural gas .
Of these , 16 prospective sedimentary basins
consists of 25 Onland, 6 Shallow Water and 24
Deep Water blocks.
The PSC’s were signed for 52 exploration
blocks comprising 21 deepwater, 6 shallow water
and 25 onland.
A total of fifty Seven blocks (57) were offered
during the NELP VII round for exploration of oil
and natural gas .
Of these, 18 prospective sedimentary basins
consists of 29 Onland, 9 Shallow Water and 19
Deep Water blocks. On 22 December 2008
Contracts were signed for 41 blocks
Government has offered 31 production
sharing contracts on 30 June 2010.
There are 8 deepwater blocks, 11 shallow
water blocks and 12 onland.
A total of 33 exploration blocks were offered
during the bidding process. State-owned Oil and
Natural Gas Corp (ONGC) bagged 10 of the 33
oil and gas exploration blocks, Oil India Ltd
(OIL) bid for as many as 29 blocks and managed
to get 10.
8. WAS
NELP
REALLY HELPFUL….??
RESULTS OF NELP
OIL and GAS exploration has been
increased.
India’s dependence on hydrocarbon imports
has been reduced
Two major discoveries have been occurred:
1. Production by Reliance Industries' (RIL)
basin
2. Crude oil production in Barmer by CAIRN
INDIA
CONCERNS BLOCKING
THE SUCCESS RATE OF
NELP
1. Production Sharing Contracts
There should be different kind of
production sharing contract for different
kinds of block . Each block has different
requirements, issues, risks which cannot
be addressed by one model production
sharing contracts. Hence the Investors
often find it difficult to cope under such
circumstances
2. Tax concerns:
The government has also failed to adopt a
clear-cut policy on extending the tax
holiday for the oil and gas sector. There is
merit in these demands of the oil sector
given that contractors have to write off all
expenditure incurred in exploration if they
fail to make a discovery. Costs are
recoverable only when contractors make a
commercial discovery
4. Perception of poor India's
geology
Indian geology does not have
promising structures with large
hydrocarbon reserves. The state-
owned oil companies have relied on the
weakness of GoI's capacity to frustrate
the government's main reform
initiative in this area.
3. Governmental regulations
Oil and gas companies may also be
worried by the government's attempts to
dictate marketing terms, and on occasion,
prices for oil and gas from major
Projects. .
The government's actions have
undermined the marketing freedom
promised under original NELP terms.
9. HOW TO
IMPROVISE
......?????
RECOMMENDATIONS
There is lot of perceptions about the poor geology of India. Although
steps are taken by the Ministry to spread the success of NELP but they
are not enough besides road shows conferences should be held in other
countries. The successes should be highlighted.
Tax position should be made clear, it is duty of the government to clear
all confusions regarding taxing matters, and this is the major reason. The
investors should be consulted, conferences should be held taking their
views. The tax holiday period should be increased from 7 years.
Natural gas should also be given 7 years tax holiday to encourage
natural gas discoveries.
The government should not dictate marketing terms, the government
has to weigh the interest of the public and the investors interest and
accordingly formulate a plan to allow investors to have market
independence.
Open acreage system should be encouraged; it would encourage foreign
participation and utilization of reserves.
REFERENCES OF
RECOMMENDATION
POLICIES ADOPTED BY OTHER COUNTRIES
UGANDA
The National Oil and Gas Policy
supersedes the Energy Policy
published in 2002 in matters of
exploration, development, production and
utilization of the country’s oil and gas
resources.
The policy seeks to put in place a
framework that will create a conducive
environment for efficient management of:
Continued promotion and exploration of
the country’s oil and gas potential;
Evaluation of the discovered oil and gas
reserves;
Exploitation and utilization of these
reserves, and
Revenues accruing from the country’s
oil and gas resources
UNITED STATES
Shale gas is natural gas produced from
shale, a type of sedimentary rock. It is
commonly said that the exploration and
production of shale gas in the United
States has been a game changer, making
the country self-sufficient in natural gas
over the last few years. This has created
considerable excitement globally,
particularly in Europe. Similarly, India has
been looking at exploring shale gas
domestically to fill in the supply–demand
gap. In the United States, RIL has made
big investments (US$ 3.5 billion) in the
Marcellus and Eagle Ford shales through
joint ventures with Chevron, Carrizo, and
Pioneer.
10. *Government would have to redeploy $90 trillion they are
estimated to spend on infrastructure over the next 15 years towards
low carbon technologies.
*Mass public transport will connect compactly built cities, saving
$3trillion in investment cost by 2030.
*Restoring 12% of degraded lands can feed 200 million people,
raise farmers income by $40 billion annually and cut emissions from
deforestation.
* Phasing out the $600 billion current subsidy on fossil fuels and
raising the $100 billion support to renewables . The result would be
energy efficiency and poverty reduction.
*Indian government should set a 2030 target on greenhouse gas
emission and a global annual target of zero or less by the latter half
of the century. If implemented, we can achieve 90% reduction in
emission by 2030, enough to prevent catastrophic climate changes.
ROAD
MAP
FOR
2030
FOR
INDIA
Conclusion
A serious energy shortage and growing pressure on imports have been seen in the Indian
energy sector. In the middle of 2012, India’s power shortage led to massive rolling power
cuts across the nation. Industries and businesses shut down and public protests followed,
demanding better power supply.
India is now standing at the crossroads with a need for the next phase of energy sector
reform. Strong political leadership is vital to address energy challenges.
Energy supply cannot be taken for granted, and it requires sufficient resources to be
delivered to consumers. India’s policy objective of inclusive development and affordable
energy should be maintained. This perception is the foundation of a functioning energy
market and the sustainable, green growth economy that India pursues.
India relies on significant amounts of energy from foreign sources and, as such, India is a
price taker, not a price setter. India can reduce its vulnerability to energy price fluctuation
through a flexible and competent energy market, but it cannot isolate itself from price
volatility. At the same time, to expand its energy supply capacity to meet the rapidly
growing energy demand of its people, India needs more investment. A significant portion of
the required investment must come from foreign investors, for whom it competes with other
countries. This implies the necessity of integrating India’s energy institutions and policies
with global practices
A reliable and adequate supply of modern and clean energy is the prerequisite for India’s
continued economic development. Nothing would be more costly than the disruption of the
national economy, which has so much potential to prosper, as well as the disruption of daily
activities of the Indian citizens, who are ready to participate in another economic miracle.
CONCLUSION
“NO POWER IS AS
EXPENSIVE AS NO
POWER.”
THANK-YOU
REFERENCES:-
1. www.iea.org
2. www.ibef.org
3. www.petroleum.nic.in
4. Indian Petroleum & Natural Gas 2011-12.
5. The Hindu Newspaper.
6. :’
