India’s exploration policy has to be in sync with the perception that India’s geological Prospectivity is poor to moderate. Geology of the country cannot be changed but Government Policy and its implementation can ensure extensive appraisal and exploration. Focus of the Government should be on providing appropriate policy and an enabling operating environment to make the sector attractive for investors

1. 1
DOMICILE -----------DOMESTIC ----------------------------------------------------- -----------FOREIGN ------------------------
Ownership GOV PVT
E&P SIZE
*
*
LARGE
MEDIUM *
SMALL
We are ………

2. 2 2
The Past …. an era characterized by ..
 Governance philosophy:
− Moved away from the main objective of NELP of “maximize Exploration , Production & Energy
Security to a “notional government revenue maximization” .
− Policies are designed with a huge trust deficit without recognizing the “convergence” of
interests in the PSC regime
− PSC administration being misused to settle extraneous disputes or suspected frauds
 Contract sanctity:
− Contract terms interpreted to suit the needs of the day
− Fiscal stability violated
 Contract Administration
− Contract Administration, Facilitation, Regulation & Policy making hybridized
− Bias to micro-manage
− Flexibility – the hallmark of working contract interpreted to discourage work
− No sanctity to timelines in decision making
RESULTED IN ….

3. 3
0
20,000
40,000
60,000
80,000
2008-09 2012-13
Line
kms
Offshore 2D seismic
-95%
India loosing sheen as an upstream destination
India’s attractiveness on various parameters
NELP participation trend
Private risk capital has dried up - Exploration activity has nosedived over last 5 years
0
3,000
6,000
9,000
2008-09 2012-13
Line
kms
Onshore 2D seismic
-91%
0
2,000
4,000
6,000
2008-09 2012-13
Sq kms
Onshore 3D seismic
-31%
0
30
60
90
2008-09 2012-13
No. of
wells
Exploration wells drilled
-22%
WHAT WENT WRONG ?
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
2008-09 2012-13
Sq kms
Offshore 3D seismic
-54%

4. 4 4
7 major reasons..
Quick Significant Discoveries Made Us lose Perspective1
Government struggled in its role as contract administrator2
MOPNG was unable to resolve policy conflicts in a timely
manner
3
India ignored marginal Oil4
Hybridization of functions and responsibilities created
ambiguity on issues and solutions.
5
6
Contract sanctity lost due to arbitrary changes in policies
Lack of recognition that Indian upstream derives its strength
from the enthusiasm of the existing players
7

5. 5
Quick Significant Discoveries Made Us lose Perspective
Nearly 30 years after Mumbai-High, India
made four quick & significant
discoveries(KG-D5, KG-D6, Rajasthan,
DeenDayal) in a short period of 2002-05
 Indian Geology Challenging
 Challenges and risks in finding new
resources overlooked
 Shift of focus away from E&P towards
the likely impact decision on
Government revenues
 additional controls even when PSC
provided only reviews resulted in
delays, disputes and suboptimal
work.
 Tepid response to NELP ignored
India must
 Realistically assess its Geology
 Focus on collecting and making
available geological information
 Manage the “Reward to Risk”
ratio to make it attractive for
investors
 Minimise/remove unnecessary
controls that do not add value
1
Problem… Solution…

6. 6
Government struggled in its role as contract administrator
E&P decisions are made in situations with
high uncertainty and no guarantee of
success
Officials became more concerned with
guessing how its decisions would be
viewed in a post-facto review by the CAG/
CVC, etc.
 Procrastination, escalating the
decisions upwards , biasing everything
towards Govt revenue
-Exploration slowed down /stopped.
 Routine automatic decisions became
discretionary
 Entire industry held captive to issues
with a single Block
 Even 2013 attempts to address issues,
not closed for want of CCEA decisions
 Clarity on Government objectives for
exploration and production, will benefit
both Government and Investor. These need
to be in writing , widely circulated and form
touchstone of decision making
 Develop quicker / independent dispute
resolution mechanisms
 PSC should not be the instrument to deal
with Fraud/Collusion
 Government role and methodology for
financial oversight of Operators needs
clarity & transparency.
 Develop robust PSC based economic model
with help of experts for understanding of
overall economics by key decision makers
2
Problem… Solution…

7. 7
MOPNG was unable to resolve inter ministry policy
conflicts in a timely manner
Inability to address important issues
such as
Environment clearances,
mineral oil definition,
Defence clearances, etc.
has Impacted activities in a number of
Blocks
Energy issues have not received its due.
Energy security taken out of
consideration, in many policies /
decisions that affect domestic
production and exploration activity
Consequences of increased exploration
costs in India ignored.
 CCI was a step in the right direction to
resolve policy disputes – however
conflicts need to be settled by
establishing parameters established
for Indian economy - rather that
finding ad-hoc half way solutions that
do not work for the hydrocarbons
industry (and hydrocarbon importing
country)
 Greater formal support required at
highest levels of the Government for
petroleum exploration and
production and time bound up
gradation of disputes to this body.
3
Problem… Solution…

8. 8
India ignored marginal Oil
Marginal Oil Exploration/Extraction can
be more expensive and can reduce
“anticipated short-term Government
Revenue”. With emphasis on
Government Revenue , the policies
discourage this avenue.
 The current decision making basis
does not permit marginal
Hydrocarbons to be produced due to
short term impact on Govt revenue
 USA despite being Energy Rich
produces 1 mmbod from such wells.
 Inadequate focus on IOR/EOR
 Internationally ,there are companies
that specialise is last drop recovery
 Exploration in mining lease a normal global
activity and within PSC to be allowed to
progress without ring fencing,
 Extension of PSC/PML without additional
Govt. take, till operator perceives
commercial value is in country’s interest
and should be encouraged.
 New policy to be developed for marginal,
stranded areas as well as shut down wells,
that offers attractive terms for specialist
companies to bid.
 Revenue generation should be only tertiary
objective where additional hydrocarbon
production is possible
 Invite or develop marginal field specialists.
 Increase investment in EOR/IOR including
through innovative contractual scheme
 Encourage all Hydrocarbon production
4
Problem… Solution…

9. 9
Hybridization of functions and responsibilities created
ambiguity on issues and solutions
The Government nominee role, swings
between regulator, facilitator, contact
administrator and shareholder.
Since all nominees concurrently play all
roles, the objectives evaluation of
issues, separately from different
perspectives is lost.
 Since everyone wears all hats, the
processes as envisaged in contract get
stymied by considerations alien to the
function at hand
 It robs the process of due resolution
incase of a conflict, and often results
in legal disputes.
 The three functions have a conflict of
interest, resulting in non-optimal
solutions.
 As an immediate measure segregate
and isolate these three functions
within MoPNG, with distinct
reporting.
 Design terms to ensure capable
independent personnel deployment
in DGH
 Consider independent regulator
5
Problem… Solution…

10. 10
Contract sanctity lost due to arbitrary changes in policy
 IT benefit on Gas was provided at the
time of signing , but later removed by
a sleight of hand
 Additional Taxes e.g., Service tax
levied, though contract provides for
Fiscal Stability
 Utilization policy was re-interpreted as
allocation policy destroying free
market prices as committed in
contract
 Allocation and Free Market cannot co-
exist
 Contract should not be tinkered , as it
destroys credibility of system and
scares future participants in Indian
industry
 Restore Status quo Ante as soon as
possible
 Work out an early plan to reach the
final gas-on-gas competition
 Implement RR recommended and
Cabinet approved and notified new
gas price formula without further
delay as a first step
 If required, provide subsidy direct to
final consumer
 Service Tax re-imbursement for failed
explorations should be considered
6
PSC provides for Fiscal stability. On
ground realities have been different.
While PSC provides market price for both
Oil & Gas, gas being treated differently.
Problem… Solution…

11. 11
Lack of recognition that Indian upstream derives its strength
from the enthusiasm of existing players
For last many years now, the news from
Indian Upstream has been negative
 Disputes -- Government vs. Operators
 Litigations
 Lack of timeliness in approvals
 Arm twisting
 Majority of bids come from Existing
players.
 New players give weight to
recommendations of existing players
It is unlikely that existing players shall
be good brand ambassadors if the
existing contracts are mired in
disputes, make tardy progress, or
unreasonable conditions are imposed.
 We should set the house in order, by
clearing backlog and causes of
disputes, issue necessary
notifications that encourage E&P ,
and show Government resolve to
give Upstream a rightful place.
 NELP X should happen only after the
above has stabalised for some time ,
so that we have good “Brand India”
ambassadors.
7
Problem… Solution…

12. 12
BUT …..
ALL IS NOT WRONG

13. 13
There are strengths to be acknowledged and positive
actions to be enhanced
1. Acknowledged & Respected
Transparent allocation System
2. Recently introduced open
stakeholder brain storming and
solution hunting
3. Acceptance that our objectives are
convergent
4. Unknown Geology can also be
hugely productive
 Need to continue building upon these
strengths
 Setting objectives in stone and make
these touchstone is a missing key.
 A superior body to resolve inter-policy
conflicts on timeline basis shall make a
huge difference.
 Build trust amongst investors and
Government to jointly work to address
India’s energy problem.

14. 14
We submit that .....
 India’s exploration policy has to be in sync with the perception that India’s
geological Prospectivity is poor to moderate
 Geology of the country cannot be changed but Government Policy and its
implementation can ensure extensive appraisal and exploration
 Focus of the Government should be on providing appropriate policy and an
enabling operating environment to make the sector attractive for investors
 Issues which hinder the growth of Indian E&P sector are not insurmountable, it is a
question of change in mindset and effort to take sector forward
 Resolution of policy issues, operating environment and their stabilization are pre-
requisites for a successful NELP X bidding round
AOGO IS SEPARATELY SUBMITTING TO MOPNG
A NOTE ON ACTIONS THAT ARE REQUIRED IMMEDIATELY, IN SHORT &
MEDIUM TERM.