Effect of Political Environment on Oil and Gas

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Effect of Political Environmenton Oil and Gas Sector

Submitted By:-Anuj Gosai (2)Bhargav Jambukiya (15)Nikita Patel (34)Shivang Thacker (53)

Submitted To:-Mrs. Roopa R Rao

PGDBM: - 2010-12


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V ariables Observed

y Overview of Oil & Gas sectory Demand and supply of crude Oil and Natural gasy Details about Companies and market Share in Indiay Brief about changing governmentsy V arious conflicts between the government and

companies


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Contd..

y Changing crude price and government policiesy Overall effect on the companies


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Overview of Oil &Gas sector

y India has total reserves of 775 million metric tonnes(MMT) of crude oil and 1074 BCM of natural gas

y Petroleum exports during 2008-09 were US $ 26.2 billion


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y During April 10 crude oil production went upto 5.82MMT, a 5.5 % increase

y During April10 the natural gas production was 9.1

BCM, an increase of 43.5 % over 09y As per the ministry of petroleum, demand for oil and

gas is likely to increase from 186.54 million tonnes of oil equivalent(mmtoe) in 09-10 to 233.58 mmtoe in11-12


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Policies and Government Intervention

y The government has been taking many measures tocreate a conducive policy for attracting investments

y FDI (foreign direct investment) upto 100%

under the automatic route is permitted inexploration activities of oil and gas fields,infrastructure related to marketing of petroleumproducts


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y FDI upto 49 % is permitted under the governmentroute in petroleum refining by the public sectorundertakings

y In 2009 the government announced 7 yr tax holiday for commercial production of gas in respect of contract under NELP V III with a view to boostexplorations


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y Government has decided that the pricing of petroland diesel both at the refinery gate and the retaillevel will be market determined

y A number of private investors have entered thissegment, attracted by the governments policies forupstream exploration and production.

y NELP has helped to a large extent


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NELP-New Exploration Licensing Policy

y India is heavily dependent on imports to meet the rapidly growing demand for petroleum products.

y It is also evident that vast amount of capital investments

are necessary if exploration efforts are to be substantially augmented.y Therefore there is a need to attract both the National Oil

Companies as well as private sector oil companies toinvest in this critical area.

y With this background, NELP was formulated by government in 1997-98 to provide a level playing field in which all parties could compete on equal terms.


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Contd

y The latest NELP IX introduced by the governmentoffered 34 oil and gas blocks while previous eightrounds of NELP have fetched 235 blocks.


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R eliance Industries v/s R NR L and Governmentstand

y Gas found by R eliance Industries in KG Basin in2002

y MoU signed between the two brothers.y Major Pricing issuey Intervention of governmenty Objections regarding MoUy

Supreme Court Judgementy Impact


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R eliance, Essar, Shell close down petrol pumps

y Increase in petrol and diesel price due to high crudeoil price

y Major loses to oil companiesy Govt did not provide the same compensation to

private retailers like R eliance and Essar as it gave tostate owned companies

y This led to heavy loses to this private companies which led to closure of its petrol pumps


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Losses by State-owned retailers as Governmentnot providing Subsidy

y Government gives subsidy to the oil companiesy As the crude prices have been increasing the state

owned companies have incurred the lossesy State-owned Indian Oil Corp (IOC), Bharat

Petroleum (BPCL) and Hindustan Petroleum(HPCL) are collectively losing R s265 crore per day

y Due to Elections the Price could not be hiked by thegovernment


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Cairn- V edanta Deal and the Government

y The London-based V edanta R esources proposedto acquire a majority stake in energy explorer CairnIndia for up to $9.6 billion.

y

The Cairn India has the blocks in sharing with theONGCy R oyalty issues with the Government and ONGCy Government not able to clear the deal currently and

the delay is been caused has its effect on Cairn India.y R ecent Meetings with the Oil Minister and Cairn CEO -

Bill Gammell might have some positive results.


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Petrol Prices Deregulation

y Government of India deregulated the prices of petroleumproductsR easons

y To reduce the losses of oil marketing companiesI mpact of Deregulation

y Increase in Pricesy Inflationy Interest ratey Public Financey Private players will re-emergey Improve V aluation of OMCy Due to increase in fuel price the profit of Oil marketing

companies will improve will result in result in higher Earningsper share


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Conclusion

y After studying various government policies from time to time by which the different political parties were at the power.

y The political influence does play a major influential role on the oiland gas sector. As the cases presented the MoU been the two brothers was not been accepted by the government and by which

now again they are re-negotiating for the price.y The government did not provide discounts to the privatecompanies on petrol and diesel which led to closure of petrolpump. After the deregulation policy the private companies whereable to open up the petrol pumps again.

y The cairn V edanta deal is been currently blocked for the

government approval and for clearing it major political influence will take place.

Th us, we strongly conclude t h at Political influence h as a majoreffect on Oil and Gas Sector.


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Questions ???


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THANK YOU

Effect of Political Environment on Oil and Gas

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