Production Sharing Contracts - Indian Exploration Landscape
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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)
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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
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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
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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
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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
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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
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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
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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
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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 …
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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
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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
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Oil & Gas in India – Facilitating Exploration and Production Activities
15th Energy Summit, Indian Oil & Gas Sector – To meet future energy needs
THANK YOU