REGULATORY FRAMEWORK ON OIL & GAS SECTOR

byB.S. NEGI Member

Petroleum and Natural Gas Regulatory Board, India

1

• Oil & Gas Sector Overview Up stream Infrastructure Regulatory regime Key Imperative and Suggestions Mid stream and Down stream Infrastructure Regulatory regime Issues

• Key Imperatives for India

2

• India’s Sedimentary Basins- 26

• Total Area- 3.14 million Square km.(msqkm)

• On land- 44%

• Shallow water- 14%

• Deep water- 42%

3

Area under License

Yet to License

Area (msk) (%)

2.15(68%)

0.99 (32%)

On land 46% 40%

Shallow water 14% 10%

Deep water 40% 50%

4

• Gas Resources- 400 tcf ( in 15 basins)

• CBM resources- 50 tcf (in 26 blocks)

• Total Natural Gas Resources- 450 tcf

• Gas resources Established From HC E&P- 114 tcf From CBM- 6 tcf Total Reserves- 120 tcf

5

6

Process of Award

Nos. of Blocks Remarks

Pre NELP 28 11, relinquished

Up to NELP-VI 206 Total awarded

NELP-VII 44 Awarded, Dec’08

NELP-VIII 100 On bid, expectedMarch, 2009

7

Accretion per Annum of Reserves

2014-15

2017-18

2020-21

2023-24

2026-27

1%*mmscmd

12* 76 145 191 214

2% 24 152 290 382 428

5% 58 378 728 956 1072

8

NELP - Fiscal benefitsNELP VII onwards no tax holiday for gas blocks, mineral oil definition limited to oilGas Hydrates – from limited participation of GAIL, OIL, ONGC, OIDB, NGRI – a more wider participation of interested parties with equity infusion as per the plan needs to be developed. Funds inflow could also be sought from international agenciesOpen acreage for exploration as a part of NELP where parties spend money for searching the reserves. Allocation policy of such blocks to be decided by the regulatorTechnical Standard – To follow the public consultation process

• Refining capacity – 148 MMTPA

• Pipeline infrastructureNatural Gas – 8000 km (including regional Network)Petroleum Product pipelines – 10000 kms

• CGD networks – 21 cities having gas supply, 10 Cities in Project stage 0.85 million house hold connected 0.60 million vehicle on CNG

Total infrastructure inadequate to meet the country’s requirements except oil

10

Regulatory Scenario

Petroleum & Natural Gas Regulatory Board Act

Policy for marketing of transport fuels

Policy on NG Pipelines and CGD networks

Product Pipeline Policy

Policy on Refining

Enforce retail & marketting service

obligation

Monitor prices & prevent restrictive

trade practices

Register & Authorise entities

Declare pipeline as common / contract

carrier

Perform other functions entrusted

by Central Government

Protect consumer interest by fostering

fair trade & competition

Regulate access & transportation rate

on common / contract carrier /

CGD network

Ensure adequate availability, and

equitable distribution

Functions of the Board

Lay down technical standards ,

specifications including safety

standards

Maintain databank of information

12

13

S No. Regulation Notified on

1 Levy of Fee and Other Charges 26-11-2007

2 Meetings of the Board 26-11-2007

3 Appointment of Consultants 30-11-2007

4 Conduct of Business, receiving and investigation of complaints

30-11-2007

5 Authorizing entities to Lay, Build, Operate or Expand City or Local Natural Gas Distribution networks

19-03-2008

6 Determination of Network Tariff for City or Local Natural Gas Distribution Network and Compression Charges for CNG

19-03-2008

7 Exclusivity for City or Local Natural Gas Distribution Networks

19-03-2008

14

S No.

Regulation Notified on

8 Authorizing entities to Lay, Build, Operate or Expand Natural Gas Pipelines

06-05-2008

9 Affiliate Code of Conduct for Entities Engaged in Marketing of Natural Gas and Laying, Building, Operating or Expanding Natural Gas Pipeline

17-07-2008

10 Access Code for Common Carrier or Contract Carrier Natural Gas Pipelines

17-07-2008

11 Technical Standards and Specifications including Safety Standards for City or Local Natural Gas Distribution Network

27-08-2008

13 Determination of Natural Gas Pipeline Tariff

20-11-2008

15

S No.

Regulation Notified on

1 Technical Standards and Specifications including Safety Standards for Natural Gas Pipelines

Public Consultation completed.

2 Emergency Response and Disaster Management

Public Consultation completed.

3 Declaring pipeline as Common Carrier or Contract Carrier

Public Consultation completed.

4 Procedure for Standards Development Public Consultation completed.

5 Authorizing entities to Lay, Build, Operate or Expand Petroleum Product Pipelines

Web hosted for public comments

16

S No.

Regulation Notified on

6 Methodology for determination of capacity for pipeline and CGD Networks

Under preparation

7 Access Code for Petroleum Product pipelines

Under Preparation

8 Quality of Service for CGD Networks Under Preparation

9 Determination of Tariff for Petroleum Product pipelines

Under Preparation

Infrastructure Development

Enviro

nmen

t

So

cial

Dev

elo

pm

ent

Enviro

nmen

t

Energy Security

En

erg

y E

ffic

ien

cy

Govt. Controlled

Liberalized

Mature

Nascent

OIL

GAS

MARKET

MARKET OPENING

Companies for Mkt Competition

1 2 3 4 5 6

HHI* 10000 10000 5000 3324 2500 2000 1653

Ensuring Energy security through

Extensive exploitation of sedimentary basins

CBM to have high priority

Underground coal gasification

National Gas Hydrates programme prioritization

Non Conventional energy resources

Infrastructure development for mid and down stream – NGG and

CGD

Infrastructure status for CGD networks apart from NGG

Priority allocation of gas for CGD networks

Cutting Edge Technologies and Innovation

Health, Safety and Environmental aspects

Regulations - Level playing field with predefined rules brings

competition conducive to

Private sector investment complimenting public sector

investment

Reduce vulnerability to prices and supply shocks

Bring in efficiency

Enhance infrastructure in energy sector transport

Emergence of retail gas user

Process of bringing competition is a single factor changing the

market scenario

HHI is the indicator of competition in the market