Unlocking Potential:

Discovered Small Field Policy in India

Group#6

Siva Kesava Babu T

Lakshmunaidu Karri
Manish Kumar Singh
Thabir Kumar Meher
Siddharth N A
K K Singh Tomar
Prashant Kumar
Saurabh Raj
Mohit Sharma
 CO NT E NT
• Introduction • Comparative analysis
• Key features of DSF Bids rounds
• Bidding Procedure • Impact of DSF on
Domestic Production
• Revenue Sharing
Model • Challenges
• Bid Evaluation • Conclusion
• Marketing DSF policy.
• DSF Round 1
• DSF Round 2
• DSF Round 3
 INTRODUCTION
• Socio-Economic development of a country is heavily
dependent on its ENERGY SECURITY.
• India imports close to 86% (FY 2023) of its oil
requirements.
• The domestic production of petroleum has largely
remained constant ( at times declining) at 25 MMT
per year*, while demand consistently soared to 223
MMT (FY 2023)*.
• Petroleum imports constitute close to 25% of import
Basket of INDIA and is leading contributor to INDIAs
TRADE DEFICIT also making the country's economy
vulnerable to External shocks.

* Data from PPAC reports

INTRODUCTION
• An additional barrel of OIL / cum of GAS produced
within INDIA , is very important to the country.
• The policy environment in India evolved keeping these
facts ,
o ORDA Act / PNG Rules 1959
o NELP / streamlining PRE NELP contracts
o Policy for Unconventional Hydrocarbons
o HELP / DSF
o Bio-fuel Policy (Ethanol Blending)
• Discovered Small Field policy a step in Right direction
* Data from PPAC reports
 WHAT ARE DSF FIELDS ???....
• Discovered long Back by National oil companies ( But couldn’t Exploit).
• Have Disadvantages such as
• Isolated locations of OIL FIELD
• Small size of Reserve
• High Development cost of field
• Constraint in technology (Then)
• These fields are though profitable for small players / New players.
• An Investor could own an OIL Field without Having to Invest in Discovery.
• Could Bring these Fields to Production at the Earliest.
• NOCs could clear their Balance sheets and Focus on New Exploration projects.
 Open to all : To incentivize new investors, Technical capability
criteria removed as a pre-qualification criteria.

Revenue Sharing Contract (RSC) as applicable in HELP.

Single license for Conventional & Nonconventional hydrocarbon

( i.e including CBM, Shale gas/oil etc.)
KEY Oil Cess is not applicable on crude oil production, But Royalty is
applicable.
FEATURES For Bidding, up to 100% participation by foreign companies /
FDI, Joint ventures are allowed.

Customs duty exemptions for specified goods and services.

No restriction on exploration activity during entire contract

period.
 Management Committee (MC) will be constituted with
representatives from Government/DGH and contractor for
effective Operational autonomy.

Less disputes between the government and the operator

leading to faster approvals.

KEY Contractor will be free to sell the crude oil Natural Gas in
Domestics market at arm’s length.

FEATURES No carried interest by NOCs ( ONGC, OIL etc)

Cost recovery is not applicable as per HELP.

Ease of Doing Business

 DSF – BIDDING PROCEDURE

1 2 3 4
Bids will be invited For economical The contractor Fiscal parameter /
for the Marginal violability, to cluster shall be required to Revenue share - 80%
Fields on a Revenue fields / discoveries, as pay biddable of weighting and
Sharing Contract may be required at Government share of work programme -
(RSC) Model. the time of Notice revenue (net of 20% of weighting in
Inviting Offer (NIO). royalty or post- bid evaluation.
royalty).
Why the new Revenue sharing mechanism
was needed ?
• India has long struggled with designing a fiscal system which is easy to
administer, yet minimizes room for ‘gaming’ by potential bidders

• The CAG has previously stated that PSCs encouraged businesses to

increase costs in order to defer giving the government a larger portion
of revenues.

• The earlier contracts were based on the concept of profit sharing where
profits are shared between Government and the contractor after
recovery of cost. Under the profit-sharing methodology, it became
necessary for the Government to scrutinize cost details of private
participants, and this led to many delays and disputes.
Revenue Sharing contract
• Government share of revenue shall be payable only after onset of
production based on Biddable revenue based linear scale.

• Reduced Royalty The Contractor (Lessee) shall be required to pay

royalty to the Government (Lessor) for offshore areas (shallow water)
at the rate of 7.5% of the Value of Crude Oil, Condensates and Natural
Gas produced and saved in the Contract Area.
• Nil Royalty for 7 years of commercial production In case of offshore areas
(deep water), and after that at the rate of 5%. In case of an onshore area,
Contractor shall be required to pay to the State Government(s) (Lessor) at the
rate of 12.5%

• Customs duty is exempted on import of goods and services for

Petroleum operations
• No Oil Cess will be applicable on crude oil production
Bid Evaluation
1. Work programme 20 %
The bidder with the highest total number of development or appraisal wells
will be assigned 20 points and the other bidders will be assigned points on a pro-
rata basis.
2. Revenue share 80%
Bidders will bid the percentage share of the revenue offered to the
government at the two revenue points namely, lower revenue point (LRP) which is
less than or equal to 0.0100 million USD per day and the higher revenue point
(HRP) equal to or more than 1 million USD per day.
The bidder with the highest net present value (NPV) of revenue share offered to
the government will get 80 points. For calculating the NPV price, production
scenarios have been provided in the notice inviting offers .
Government share

• Z = X + [(Y-X) x (R-0.01) / 0.99]

Advantages
In line with the vision of “ease of doing business” a
simple and easy way to administer contractual model of
revenue sharing is introduced wherein the government’s
take is based on bid revenue share. Following are the
advantages of RSC:
• Maximum autonomy to contractor with minimum
Government oversight - reduced micromanagement
by the Government.
• Government of India need to audit only production
and revenue of the contractor.
• Less disputes between the government and the
operator leading to faster approvals.
• With revenue being shared with government from the
first day of production, the operator would focus on
reducing its cost.
Is it perfect? Not yet
• The revenue-sharing mechanism, although it removes the
administrative and regulatory burden of monitoring costs, is arguably
susceptible to the same weaknesses – which remove the incentives for
a company to move up higher through the ‘revenue-sharing’ scale.
• There is a clear disconnect between the fiscal and work programme
criteria – while companies could accordingly bid revenue shares which
yield a relatively high Net Present Value of government revenues (as the
fiscal criterion is given a higher weighting in the overall bid evaluation),
there is no clear incentive (apart from the liquidated damages and the
relinquishment requirement) for companies to scale up production to
the higher revenue point.
• The new system shows lack of faith in investors.
• Government share of revenue is independent of sunk cost incurred pre-
production phase financial institutions may have reservation in
furnishing loan to avoid NPA
 RELAXED E&P REGULATION

Single license for

Reduced Government will audit
Operational autonomy conventional & Non-
micromanagement by only production &
to developers Conventional
Government Revenue
hydrocarbon

Up to 100%
Customs duty exempted
participation by foreign No Oil Cess will be No restriction on
on import of goods and
company, JV allowed & applicable on crude oil exploration activity
services for Petroleum
No mandatory state production during contract period
operations.
participation
 Marketing
Contractor is free to sell the crude oil
& Natural Gas exclusively in domestic

MARKETING market

& PRICING
Pricing
FREEDOM Contractor will have freedom
for pricing of gas produced
 Discovered Small Field: Bid
Round-I (2016)

• Liberalized & Investor friendly regime

• Interactive meet-cum road shows:

• Held by DGH & MoPNG for 5 months at
O&G centers and investment destinations
in India & across the world
• Overwhelming response and surging
interest among bidders were clearly
evident

DGH – Directorate General of Hydrocarbons

MoPNG – Ministry of Petroleum and Natural Gas Source: Press release dt: 15.02.2017
 Discovered Small Field: Bid Round-I (2016)
• POSITIVE OUTCOMES:
• Cumulative peak production:15,000 BOPD of DETAILS OF CONTRACT AWARDED
oil, 2 MMSCMD of gas Onland 23
• Estimated total revenue: Rs. 46,400 Cr Offshore 08
• Estimated gross royalty collection: Rs. 5000 Cr. Total 31 (62 MMT of oil)
• Employment for:37,500 persons
• Timeline
• 20.05.2016 – Bid round launched
• Offered 46 Contract areas consisting of 67 fields spread across 9 sedimentary basins
• 27.03.2017 – award of 31 contract areas
• 134 e-bids
• 31 Contract areas Total approved PSUs Private PSU + Private Foreign
• 15 companies were new entrants contract areas companies company

BOPD – Barrels of Oil Per Day

31 10 19 1 1
MMSCMD - Million Metric Standard Cubic Meters per Day Source: Press release dt: 15.02.2017
Discovered Small Field: Bid Round-I
Exploration & Production
sectors – critical sector for
India’s Make in India
initiative
Energy security goals

Reduction in energy
TARGET import dependency
by 10% in 2022

Successful completion of this bid round in a period of

crude oil price volatility underlines the fact that investors
were looking positively at the policy driven approach.

Source: Press release dt: 15.02.2017

 Discovered Small Field: Bid Round-II
Objectives
• The DSF round has been explicitly linked to a wider energy policy
goal: that of reducing India’s ‘energy import dependency’ by 10 per
cent by the year 2022
• Aimed at monetizing hydrocarbon resources locked-in for years in a
time bound manner to boost domestic production of Oil and Gas
Key Points
• Following the success of DSF Bid Round I-2016 and the fact that there
were still many more unexploited discoveries
• Government has extended the DSF policy and launched DSF Bid
Round II On 7th February, 2018
• Contract Areas have been awarded under International Competitive
Bidding
• A total of 59 discovered small fields are being offered with an
estimate of 189.61 million metric tonnes of oil equivalent (MM toe)
• Of the 59 fields offered , 23 are in onshore environment and rest 36
in offshore areas
 Discoveries on Offer for DSF Round - II
Round Offerings
BASIN LOCATION NO. OF FIELDS IN - PLACE O+OEG (MMT) Breakup of PSU & Private – Companies
Assam & Assam - awarded
Assam & Tripura 7+1 7.1
Arakan
Cambay Gujarat 5 10.1 PSUs
Indian Oil Corporation Ltd.
KG Onshore Andhra Pradesh 8 1.1 Oil India Limited
Rajasthan Rajasthan 2 1.9 Oil and Natural Gas Corporation Limited
Onshore Total 23 20.2 Private
Hindustan Exploration Company Oil Limited
Cambay Offshore Gujarat Offshore 1 5
Vedanta Limited
Gem Petro E&P Private Limited
Mahanadi Offshore Odisha Offshore 6 16.5
Shanti G.D. Ispat and Power Pvt. Ltd. (New)
Mumbai Offshore Mumbai Offshore 21 97.6 Bagadiya Brothers Private Limited (New)
Shanno Business India Private Limited (New)
Kutch Offshore Gujarat Offshore 1 0.1
Arsh Corporate Services Private Limited (New)
Andhra Pradesh Ganges Geo Resources Private Limited (New)
KG Offshore 7 50.21
Offshore Keerthi Industries Limited (New)
Offshore Total 36 169.41 Invenire Energy Private Limited (New)
Total 59 189.61 Arch Softwares Private Limited (New)

O+OEG : Oil and Oil gas Equivalent,

Source : Directorate General of Hydrocarbons
 Discovered Small Field Bid Round-III
• Objective: Develop India's small and
marginal oil and gas fields for increased
domestic production.
• Timeline:
• Launched June 10, 2021.
• Bid submission window: April 20,
2022.
• Closed with bid evaluation
ongoing.
• Offered Fields:
o 75 fields in 32 contract areas across 9 sedimentary
basins.
o Included ONGC nominations and relinquished/
unmonetized discoveries.
o 9 sedimentary basins covering more than 13,000
square kilometres with Inplace Hydrocarbon
estimated to be around 230 MMT.
o Accounts for 54% of Estimated Hydrocarbon In-place
 D S F, B I D RO UND - I I I : O F F ERED F I E L DS

DGH : efaidnbmnnnibpcajpcglclefindmkaj/https://dghindia.gov.in/assets/downloads/62723c628d61f04TechnicalPPTADGEMN.pdf
 CO MPARI S ON O F D S F - I , I I & I I I RO UNDS
Aspect DSF-1 (2016) DSF-2 (2018) DSF-3 (2021)
Number of Fields Offered 67 59 75
Number of Basins Covered 9 8 9
Total Bid Amount Received INR 10,000 crores INR 15,000 crores Under evaluation
Average Field Size 1,000 sq. km. 1,200 sq. km. 1,500 sq. km.
Contract Model Revenue-sharing Revenue-sharing Revenue-sharing
Minimum Work Program Yes No No
Upfront Signature Bonus No No No
Attractive terms like no minimum
Focus on onshore fields, Increased offshore fields,
Key Bidding Features work program, low regulatory
relaxed eligibility criteria lower upfront costs
burden
Awarded Contracts 31 40 Under evaluation
ONGC, Cairn India, ONGC, Reliance Industries,
Key Winners/Partnerships To be announced
Vedanta Vedanta
Increased domestic oil Enhanced energy security, Increased oil production, job
Potential Economic Benefits
production, job creation higher revenue generation creation, improved energy security
Need for further streamlining bid
Limited participation from
Challenges/Lessons Learned logistical hurdles process, better outreach to foreign
some international players
players
Impact on Domestic Production
• The Discovered Small Field (DSF) policy implemented in India
in 2016 aimed to encourage the development of previously
discovered but unexploited hydrocarbon reserves in small
fields. While the policy has achieved some successes, it also
faces several challenges that hinder its optimal impact on
domestic production.
 Challenges

1. Lack of investor interest

2. Complex regulatory framework
3. Inadequate data availability
4. Limited infrastructure and technical
expertise
5. Environmental concerns
 Conclusion
• Resource potential: The remaining unmonetized
discoveries might hold smaller reserves or pose
geological complications, making them less attractive.
• Competition from renewables: The energy landscape
is shifting towards renewables, potentially impacting
fossil fuel investments.
• Global energy fluctuations: Fluctuations in global oil
and gas prices might affect policy viability and investor
interest.
 Conclusion
• Environmental concerns: Environmental regulations
and public pressure against new fossil fuel projects
could pose hurdles.
• The success of DSF could inspire similar policies in
other countries with marginal field reserves.
• Exploring synergies between DSF and other energy
initiatives, like carbon capture and storage, could
increase its sustainability.
• Ongoing monitoring and evaluation are important to
adapt the policy to changing circumstances and
maximize its benefits.
Round-by-Round Highlights

• Achievements of each bid round:

• Round 1 (2016): 30 contracts signed for 43 fields, expected
production increase of 40 MMT oil and 22 BCM gas.
• Round 2 (2018): 23 contracts signed for 57
fields, estimated 189.61 MMT oil and oil equivalent gas
reserves.
• Round 3 (2021): 32 contract areas offered, covering 75
fields in nine sedimentary basins.
Recommendations for Policymakers
•Specific, actionable recommendations addressing the identified
challenges:
• Implement a single-window clearance system for faster approvals.
• Offer customized fiscal packages based on field complexities.
• Invest in infrastructure development in key DSF regions.
•Strategies to attract wider participation:
• Organize investor outreach programs and roadshows.
• Provide technical assistance and data sharing for field evaluation.
• Promote collaboration between experienced operators and new
entrants.