Oil & Gas in India – Facilitating Exploration and Production Activities

15th Energy Summit, Indian Oil & Gas Sector – To meet future energy needs

ASSOCHAM Seminar on Oil & Gas in India

“Production Sharing Contract”

04 January 2013

Dr. Sunil Bharati

Head (Corporate Affairs & Communications)

2 Oil & Gas in India – Facilitating Exploration and Production Activities

Why PSC?

o PSC regime has a fair balance between financial risks and

rewards to the government and the contractor

o Several countries at India’s stage of hydrocarbon development

have adopted the PSC regime to attract risk capital; mature

markets prefer concessionary regime

o Countries like China, Indonesia and Brazil pre-salt (deepwater),

Mozambique, Nigeria and Angola are key examples

o PSC is a robust, transparent and an efficient contract

3 Oil & Gas in India – Facilitating Exploration and Production Activities

PSC – A rigorous contractual model

o In India, PSC is a Contract between Government of India (GOI)

and the Contractor (oil companies) to conduct Petroleum

Operations comprising of Exploration, Development and

Production of hydrocarbons

o GoI has so far awarded a total of 282 (28 Pre-NELP and 254

NELP) exploration blocks under the PSC regime

Source: PIB, 7th December 2012

4 Oil & Gas in India – Facilitating Exploration and Production Activities

Exploration Landscape

15 17 18

50

22 22

44

12

0

10

20

30

40

50

60

Moderate to Well Explored

Poorly Explored Exploration Initiated

Unexplored

Pe

r ce

nt

1995-96 2011-12

Source: Hydrocarbon Exploration &

Production Activities, 2011-12, DGH

26

45

9

1

0.54 18

PEL Distribution (per cent)

Western Offshore Eastern Offshore Andaman-Nicobar

Ganga Valley Deccan Synclise Others

o Of the total 3.14 million sq.km sedimentary area, only 0.93 million

sq.km is held under PEL

o Key regions still to be explored

o Ganga Valley and Deccan Synclise potentially prospective

5 Oil & Gas in India – Facilitating Exploration and Production Activities

Countries have proven that it can

be done

o Norway, Brazil and India were at

similar hydrocarbon position few

decades back

o Conducive policy framework has

been a game-changer for their

hydrocarbon landscape

o These countries has proven that

intensive exploration can reduce

import dependence significantly

148 175

6

858

2193

2039

0

500

1000

1500

2000

2500

3000

3500

4000

India Brazil Norway

1971 1981 1991 2001 2011

Production in thousands barrels per day

Source: BP Statistical Review of World Energy, 2012

6 Oil & Gas in India – Facilitating Exploration and Production Activities

NELP Regime: Paradigm Shift

o Post liberalisation GOI encouraged participation from foreign

and private Indian companies in E&D activities

o In the pre-NELP 1991-2000 period, GOI invited bids on a

regular basis

o GoI awarded 47.3% of sedimentary basin area for exploration

through NELP, as compared to only 11% in pre-NELP era

Source: Economic Survey 2010-11

7 Oil & Gas in India – Facilitating Exploration and Production Activities

Role of private sector has increased o Investments in the Indian oil

& gas exploration and

development sector has

increased significantly

o Investment made by Indian

and foreign companies was

of the order of US $15.88

billion:

US $8.5 bn on exploration &

US $7.37 bn on development

Source: Economic Survey 2011-12, Infraline

Graph figures in US$ million

0

1000

2000

3000

4000

5000

6000

7000

8000

NELP I NELP II NELP III

NELP IV

NELP V

NELP VI

NELP VII

NELP VIII

Exploration Development

NA

8 Oil & Gas in India – Facilitating Exploration and Production Activities

PSC Administration

31 76

Status of 107* Hydrocarbon Discoveries

under NELP

Discoveries declared commercial

Remaining Discoveries

o The industry, however,

increasingly sees PSC

administration as a challenge

o Sanctity of contracts is

imperative to continue

attracting investments

o Commercial production

commenced from 6 NELP

discoveries

Source: 15th Report of the Standing Committee on

Petroleum & Natural Gas

*A total of 111 discoveries (40 oil and 71 gas) have

been made in 38 NELP blocks. Segmented data

available only for 107 discoveries

9 Oil & Gas in India – Facilitating Exploration and Production Activities

Reforms being initiated

o GoI constituted Rangarajan Committee to look into the PSC’s

mechanism and efficacy

o PSC’s fiscal model - cost recovery and sharing of profit petroleum

– likely to see reforms

o To overcome difficulties in managing existing models, the

committee recommends a new contractual system and fiscal

regime based on a royalty payment and production based

revenue sharing for future blocks ………………

o ………….… there are 228 active PSCs …

10 Oil & Gas in India – Facilitating Exploration and Production Activities

… PSC Administration

o Disciplined & timely conduct of the MC and its administration is

critical. Focus should be to ensure optimisation of JV / work

programme performance

o MC could function like board of a company. The Chairman of the

MC should have increased accountability

o MC meeting calendar for the forthcoming year could be drawn;

much like a board meeting calendar

11 Oil & Gas in India – Facilitating Exploration and Production Activities

PSC Administration

o PSC administration could be in line with the overall stated

objective and spirit of the PSC and the NELP policy

o International best practices emphasize that irrespective of the

contracting regime, contract administration and right incentives

enable increase production in numerous countries

o Focus, therefore, could be to improve the efficacy of contract

administration

Oil & Gas in India – Facilitating Exploration and Production Activities

15th Energy Summit, Indian Oil & Gas Sector – To meet future energy needs

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