Oil Exploration in India

Prior to 1999, the major oil and natural gas explorations were being carried out by the public sector
companies such as ONGC. In 1999, Ministry of Petroleum and Natural Gas (MoPNG) introduced the
New Exploration Licensing Policy (NELP) as a part of its Hydrocarbon Vision 2025, a landmark 25-year
planning document. NELP permitted foreign companies to invest in 100% equity of oil and natural
gas projects. NELP was able to provide a level playing field to both the Public and the Private sector,
through allocating acreages on the basis of open competitive bidding as opposed to the nomination
basis as earlier. Currently seven rounds of NELP have been undertaken, auctioning off more than 200
exploration blocks to domestic and foreign private companies.

To meet with the growing gulf between the supply and demand of oil [Exhibit 1], India heavily relied
on oil exports majorly from Middle East. After the huge spike in the crude oil prices in 2007, MoPNG
has been promoting various exploration projects in an effort to boost domestic oil production.

MoPNG is now considering a new licensing regime for oil exploration known as Open Acreage
Licensing Policy (OALP). Under OALP the oil exploration companies will be provided with freedom to
choose their own oil blocks. Under the NELP, MoPNG used to bring only some specific blocks for
bidding. When a firm approaches government for a specific block, that particular block will be put on
for bidding and the best bidder with receive the rights to explore within the block.

Iran – Pakistan – India (IPI) Natural Gas Pipeline

Issue:

In 1995, Pakistan and Iran settled upon an agreement for construction of a natural gas pipeline
linking the Iranian South Pars natural gas field in the Persian Gulf with Karachi. Furthermore, Iran
proposed to extend the pipeline to India as Iran is one of the major exporters of crude oil to India.
Indian government was reluctant to enter into any agreements with their neighbours due to strained
relationship between the two. India later signed an agreement with Iran in 1999. In 2009, India
backed out of the deal citing security and pricing issues.

Negotiations:

Iran is the second largest exporter of Oil and natural gas to India [Exhibit 2]. The proposed pipeline
originates in Asaluyeh, travels to Pakistan through Khuzdar, on to Multan, finally ending up at Delhi.

The current stands are that the Indian government wants to pay only for the gas it will actually
receive from the Pakistani border. The Iranian government wants to charge India for the amount of
gas that will leave its border for India and do not want to take into account any discrepancies that
might occur during transit through Pakistan.

The latest round of tri-party negotiations are set to be undertaken in August 2010.
 Exhibit 1

Exhibit 2

References:

http://www.eia.doe.gov/emeu/cabs/India/Oil.html

http://www1.american.edu/TED/iranpipeline.htm
http://www.livemint.com/2010/07/11181639/India-Iran-to-hold-gas-pipeli.html?atype=tp

http://www.upi.com/Science_News/Resource-Wars/2010/03/19/New-Delhi-calls-for-IPI-talks/UPI-
15881269006235/