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Production Sharing Contracts  - Indian Exploration Landscape
 

Production Sharing Contracts - Indian Exploration Landscape

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Production Sharing Contracts are robust, transparent and efficient contracts which have a fair balance between financial risks and rewards to the government and the contractor. In India, PSC is a ...

Production Sharing Contracts are robust, transparent and efficient contracts which have a fair balance between financial risks and rewards to the government and the contractor. 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. The Government of India constituted the Rangarajan Committee to look into the PSC’s mechanism and efficacy.The PSC’s fiscal model - cost recovery and sharing of profit petroleum – is likely to see reforms.

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    Production Sharing Contracts  - Indian Exploration Landscape Production Sharing Contracts - Indian Exploration Landscape Presentation Transcript

    • 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” Dr. Sunil Bharati 04 January 2013 Head (Corporate Affairs & Communications)
    • Oil & Gas in India – Facilitating Exploration and Production Activities 2 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
    • Oil & Gas in India – Facilitating Exploration and Production Activities 3 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
    • Oil & Gas in India – Facilitating Exploration and Production Activities 4 Exploration Landscape 60 PEL Distribution (per cent) 50 50 44 0.54 40 1 18 26 Per cent 30 9 22 22 17 18 20 15 12 45 10 0 Moderate to Well Poorly Explored Exploration Unexplored Explored Initiated Western Offshore Eastern Offshore Andaman-Nicobar 1995-96 2011-12 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 Source: Hydrocarbon Exploration & Production Activities, 2011-12, DGH
    • Oil & Gas in India – Facilitating Exploration and Production Activities 5 Countries have proven that it can be done 4000 3500 o Norway, Brazil and India were at similar hydrocarbon position few 3000 decades back 2500 2193 2039 2000 o Conducive policy framework has 1500 been a game-changer for their 1000 hydrocarbon landscape 858 500 148 175 6 o These countries has proven that 0 India Brazil Norway intensive exploration can reduce 1971 1981 1991 2001 2011 import dependence significantly Production in thousands barrels per day Source: BP Statistical Review of World Energy, 2012
    • Oil & Gas in India – Facilitating Exploration and Production Activities 6 NELP Regime: Paradigm Shifto Post liberalisation GOI encouraged participation from foreign and private Indian companies in E&D activitieso In the pre-NELP 1991-2000 period, GOI invited bids on a regular basiso 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
    • Oil & Gas in India – Facilitating Exploration and Production Activities 7Role of private sector has increased o Investments in the Indian oil 8000 & gas exploration and 7000 development sector has increased significantly 6000 5000 o Investment made by Indian 4000 and foreign companies was 3000 of the order of US $15.88 2000 billion: 1000 NA 0 US $8.5 bn on exploration & NELP I NELP II NELP NELP NELP NELP NELP NELP III IV V VI VII VIII US $7.37 bn on development Exploration Development Source: Economic Survey 2011-12, Infraline Graph figures in US$ million
    • Oil & Gas in India – Facilitating Exploration and Production Activities 8 PSC Administration o The industry, however, Status of 107* increasingly sees PSC Hydrocarbon Discoveries administration as a challenge under NELP o Sanctity of contracts is 31 imperative to continue 76 attracting investments o Commercial production commenced from 6 NELP discoveries Discoveries declared commercial Remaining Discoveries *A total of 111 discoveries (40 oil and 71 gas) have Source:15th Report of the Standing Committee on been made in 38 NELP blocks. Segmented data Petroleum & Natural Gas available only for 107 discoveries
    • Oil & Gas in India – Facilitating Exploration and Production Activities 9 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 …
    • Oil & Gas in India – Facilitating Exploration and Production Activities 10 … 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
    • Oil & Gas in India – Facilitating Exploration and Production Activities 11 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 THANK YOU