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Oil and Gas

Industry
Submitted to:Dr. A.K. Sharma

Submitted By:Divye Garg (10810023)
Rahul Agarwal (10810047)
Rishi Arora (10810051)
Sudeep Dakua (10810061)
Udit Gupta (10810065)
Varun Thirani (10810070)

Contents










Why we chose Oil and Gas Industry?
Profile of Oil and Gas Industry
Age of Oil and Gas Industry
Growth of Oil and Gas Industry
Companies and their Market Share
Current Import and Export Scenario
Level of Competition
Flow of Foreign Investments
Government Policies and Regulation
Legal Aspects
Taxation

WHY WE CHOSE OIL AND
GAS INDUSTRY?

Why Oil and Gas Industry?
• The Indian oil and gas sector is one
of the six core industries in India.
• The Indian oil and gas sector is of
strategic importance and plays a
predominantly pivotal role in
influencing decisions in all other
spheres of the economy.

PROFILE OF OIL AND GAS
INDUSTRY

• The total number of exploratory and development wells and metreage drilled in onshore and offshore areas during 2009-10 was 428 and 1019 thousand metres respectively. .About Oil and Gas Industry • India has total reserves (proved & indicated) of 1201 million metric tonnes of crude oil and1437 billion cubic metres of natural gas as on 1.4.2010.

• Gross Production of Natural Gas in the country at 47.4. • The refining capacity in the country increased to 184.386 million tonnes per annum (MTPA) as on 1.About Oil and Gas Industry • Crude oil production during 2009-10 at 33.69 million metric tonnes is 0.968 MTPA as on 1.85 billion cubic metres during 2008-09.51 billion cubic metres during 2009-10 is 44.51 million metric tonnes produced during 2008-09.63% higher than the production of 32.2010 from 177.2009. .55% higher than 33.4.

14 Million Sq. Km (four per cent of the world’s sedimentary area) Sedimentary Basins 26 ( Exploration initiated in 15 ) Prognosticated Resources (O+OEG) 205 Billion Barrels (For 15 Basins only.India’s Oil and Gas Reserves Sedimentary Area 3.2008) . needs up-gradation) Established reserves 65 Billion Barrels (as of April 1.

AGE OF THE OIL AND GAS INDUSTRY .

petroleum to be core sector • 1955 – ONGC set up • 1958 .First Gas & Oil pool discovered in Jwalamukhi (Punjab) and Cambay. Oil India Limited (OIL) was set up • Discovery of giant Bombay High field in 1974 – Western offshore highest producer .000 tonnes per annum • 1954 IPR .History of Oil & Gas Industry in India • Oil struck at Makum near Margherita in Assam in 1867 • First commercial oil discovery in Digboi in 1889 • Systematic E&P in 1899 after Assam Oil Company formed • 1947 India’s domestic oil production just 250.

6th. 5th. 7th and 8th Rounds of exploration bidding • 1999 .History of Oil & Gas Industry in India • 1991 – Liberalized petroleum exploitation and exploration policy • 1991-1994 – 4th.New Exploration Licensing Policy (NELP) • 2000 – NELP II • 2002 – NELP III • 2003 – NELP IV • 2004 – NELP V • 2006 – NELP VI • 2007 – NELP VII .

GROWTH OF OIL AND GAS INDUSTRY .

Growth of Oil and Gas Industry in India Total Oil production has been increasing over the last 30 years. .

Growth of Oil and Gas Industry in India (Contd.) Total Oil Consumption has also been increasing linearly over the last 30 .

In last few years there has been a quantum jump. .Growth of Oil and Gas Industry in India (Contd.) Total Natural Gas production has been increasing over the last 30 years.

Growth of Oil and Gas Industry in India (Contd.) Total Natural gas consumption has also been increasing over the last .

COMPANIES IN OIL AND GAS INDUSTRY AND THEIR MARKET SHARE .

Structure of Oil and Gas Industry .

Market Share of Oil and Gas Companies .

CURRENT IMPORT AND EXPORT SCENARIO .

144037 crores marking an increase of 15.9 per cent in value terms compared to 2008-09. This marked an increase of 20. . 375378 crores.97 MMT valued at Rs.25 MMT valued at Rs. • During the financial year 2009-10. exports of petroleum products in quantity terms is 50.27 MMT valued at Rs. imports of crude oil were 159. • Imports of petroleum products and crude oil are more than the exports and there is trade imbalance.39 per cent during 2009-10 in quantity terms and 7. 348288 crores.07 per cent in value terms.Import and Export of Crude Oil and Petroleum Products • During the FY 2009-10. Imports of crude oil during 2008-09 was 132.

India imports crude oil. Majorly.Imports of Oil and Gas for last 5 years • Imports of Petroleum Products have been rising over the years. .

Exports of Oil and Gas for last 5 years • Exports of Petroleum Products have been rising over the years. India does not export crude oil and natural gas .

LEVEL OF COMPETITION IN OIL AND GAS INDUSTRY .

. growth. namely initiation. • Out of four stages. Indian Oil and natural Gas Industry is in its growing phase. maturity and stagnation.Level of Competition • Level of competition generally refers to the life cycle of the Indian Petroleum and Gas Industry.

) .Level of Competition (Contd.

FLOW OF FOREIGN INVESTMENTS .

without involving any divestment or dilution of domestic equity in existing public sector undertakings through Foreign Investment Promotion Board (FIPB) and FDI up to 100% is permitted in case of Private companies under Automatic route subject to sectoral policy. FDI up to 49% in case of Public Sector Undertakings. investment/financing.FDI Policy • The present policy on FDI in the Petroleum & Natural Gas sector vide Press Note No 5 (2008) permits FDI up to 100% under the automatic route in all activities other than refining and including market study and formulation. • In Refining. . setting up infrastructure for marketing in Petroleum and Natural Gas Sector subject to sectoral policy.

etc) • Under seven rounds of NELP. investments in India: Cairn Energy Plc – over US$ one billion. Essar. 212 blocks were awarded. PetroNet. and Chevron . British Gas .Private & Foreign Investments are on the rise • Many Indian private sector players (RIL. of which 56 blocks went to private companies & JVs • International players and approx. Exxon Mobil.US$ 444 million • Other global players with India operations Total.over US$ 800 million. BP .US$ 650 million. Shell . Gaz De France.

Private & Foreign Investments are on the rise (Contd.) .

GOVERNMENT POLICIES AND REGULATIONS .

. marketing. refining. 1959 provided regulatory framework for domestic exploration and production of Oil & Gas. Issues such as E&P. tariff and pricing. Hydrocarbon Vision • The Hydrocarbons Vision 2025 lays down the framework which would guide the policies relating to the hydrocarbons sector for the next 25 years. oil security. storage. • Further. transport. external policy. 1948 and the Petroleum and Natural Gas Rules. production. the Oil Fields (Regulation and Development) Act. refining and blending of petroleum was already in place since 1934. and restructuring and disinvestment are addressed.POLICIES AND REGULATIONS • The Petroleum Act to control issues relating to import.

ONGC and OIL were the only public sector companies involved in exploration and production till 1997 while IOCL was the primary entity concerned with refining and processing oil after extraction. Two major discoveries as production by Reliance Industries' (RIL) KG-D6 basin and crude oil production in Barmer (Rajasthan) by Cairn India are the result of NELP . income tax holiday for seven years from the start of commercial production . the Oil fields (Regulation and Development) Act.Freedom to the contractor for marketing of oil and gas in the domestic market of commercial production. Main features include – .Discovery or production bonus by the bidder.No customs duty on imports . 1948 • • • • and Petroleum and Natural gas Rules. Eight rounds of NELP have been completed till now and the Ninth Round has recently started in 2010.NELP (New Exploration Licensing Policy) • Prior to the NELP. 1958 regulated the issue of license and PSU's.

both at the refinery gate and the retail level. namely PDS Kerosene and Domestic LPG. • It has also been decided that in case of a high rise and volatility in international oil prices. Government will intervene in the pricing of petrol and diesel.Policy for Change in Price of Petroleum Products • In line with the recommendations of a High Level Expert Group headed by Dr. the Government has decided that the subsidies on these products will be continued. Kirit Parikh the Government has decided that the pricing of petrol and diesel. • In view of the importance of the household fuels. . will be market-determined.

• Directorate General of Hydrocarbon The DGH was established under the administrative control of Ministry of Petroleum & Natural Gas by Government of India Resolution in 1993 to promote sound management of the Indian petroleum and natural gas resources having balanced regard to the environment.03. it has decided to increase the retail price of PDS Kerosene by Rs.• The PDS Kerosene and Domestic LPG Subsidy Scheme 2002 and the Freight Subsidy scheme. However. safety. in order to reduce under recoveries. technological and economic aspects of the petroleum activity and to review the exploration programmes of companies and advise the Government on the adequacy of these programmes .35/cylinder. 2002 have been extended till 31.2014.3/litre and of domestic LPG by Rs.

distribution.Regulatory Bodies Petroleum and Natural Gas Regulatory Board • The Petroleum and Natural Gas Regulatory Board Act. 2006. Consequently. 2006 was enacted in April. petroleum products and natural gas. marketing and sale of petroleum. 2006 states the functions and powers . storage. the Petroleum and Natural Gas Regulatory Board (PNGRB) to regulate the refining. processing. excluding production of crude oil and natural gas . • Section 11 and 12 of the PNGRB Act. transportation. Government has set up in October. 2007.

promote competition among entities. and secure the consumer interest in terms of gas availability and reasonable tariff for natural gas pipelines and city or local natural gas distribution networks. to facilitate open access for all players to the pipeline. . With increased exploration efforts under NELP.Policy for Development of Natural Gas Pipelines • The natural gas sector is at the threshold of rapid growth. • The objective of the policy is to promote investment from public as well as private sector in natural gas pipelines. large scale discoveries of gas in the East Coast there is an imminent need to provide a policy framework for the growth of the pipeline infrastructure with a view to facilitate the evolvement of a nation-wide gas grid and the growth of city or local gas distribution networks.

LEGAL ASPECTS OF OIL AND GAS INDUSTRY .

Legal Aspects Of Oil And Gas Industry Oil and Gas sector is divided into 3 parts • Upstream • Midstream • Downstream • Upstream Sector The upstream sector is also known as the Exploration and Production of Oil and Gas. petroleum and petroleum products” CoI: Entry 25 of List II "Gas and Gas Works”. . Constitution of India Jurisdiction to regulate oilfields vested with Central Government CoI: Entry 53 of List I "Regulation and development of oilfields and mineral oil resources. following are the laws which are directly related to the upstream sector.

Legal Aspects Of Oil And Gas Industry Midstream The midstream industry processes. retail outlets and natural gas distribution companies. markets and transports commodities such as crude oil. petrochemical plants. stores. natural gas. . Downstream • The downstream sector includes oil refineries. mainly ethane. natural gas liquids (LNGs.03 million metric tonnes is 0. • The total refinery crude throughput during 2009-10 at 160. petroleum product distribution.43% in 2008-09. propane and butane) and sulphur.46% lower than 160. Generally midstream is clubbed with downstream industry.92% as compared to 107.77 million metric tonnes crude processed in 200809 and the prorate capacity utilization in 2009-10 was 89.

5] • Also empowers central government to make rules for the development of mineral oil . Covers mineral oils which are defined as including natural gas and petroleum [S.3(c)]. 1948 • Basic enabling statute for licensing and leasing of petroleum and gas blocks by the appropriate government. Mining lease is defined exhaustively to cover all forms of exploring and exploiting mineral oils and all purposes connected thereto [S.Legal Aspects Of Oil And Gas Industry Oilfields (Regulation and Development) Act.3(d)] • Empowers central government to make rules with regard to mining leases [S.

1959 Rules provide framework for grant of exploration licenses and mining leases Salient features of the Rules : Prohibition on prospecting and mining except under a license or lease granted under the rules [Rule 4] Central Government has the power to grant licenses or leases in respect of any land vested with it or minerals underlying the ocean within the territorial waters or the continental shelf [Rule 5(i)] State government has power to grant license or lease over lands vested with it [Rule 5(ii)] Person obtaining exploration license obtains the exclusive right to a lease for producing (i.e.Legal Aspects Of Oil And Gas Industry • • • • • • Petroleum and Natural Gas Rules. extracting) oil/gas over any part of area covered in license .

1962 . transport. 1894 • • The law deals with the acquisition of land for Public purpose. The Act is one of the oldest acts in the oil and gas sector. storage.Legal Aspects Of Oil And Gas Industry Land acquisition Act. refining. production. Earlier to this act the rules regarding the above specified activities were separate for separate States. and blending of petroleum. The only requirement is that the land can only be acquired for public purpose as per Section 3(f) of the Act. 1934 • • The act deals with import. The Petroleum Act. The Act is a general Act which deals with the procedure and the conditions under which a land can be acquired. The Petroleum Minerals Pipelines (Acquisition of Right of users in Land) Act.

TAXATION .

Petroleum Product Pricing Taxation comparisons In April 2002 India abolished the Administrative Pricing Mechanism (APM) controlling the domestic price of petroleum products in India. Under the APM. product prices were directly administered by India’s Central Government based on an opaque and complex cost of operating capital plus formula. .

.Effect of Taxation and Subsidies: A Comparison The effect of lower product prices than input prices . Under-Recoveries represent the difference between the tradeparity cost of Refined product paid by OMCs and their realised change frequently depending on a number of factors.a large effective subsidy has been the increasing accumulation of under-recoveries by OMCs.

87 16.45 633.73 705.93 783.77 71.55 NA Royalty from Gas 8.56 68.57 717.75 14.44 71.Taxes paid by Oil and Gas Industry over the years (Rs.96 71.86 65.637 10.24 NA Oil Development Cess 51.67 58.99 . Billion) Royalty from Crude Oil 2006 2007 2008 2009 2010 50.49 564.49 649.67 Sales Tax 459.43 718.57 65.34 539.59 Excise and Customs Duties 631.

• Although there are few loopholes which should be taken care of as soon as possible. The decisions of the DGH are merely advisory in nature and the Government is not to follow them. . The Steps are also taken to increase the Indigenous oil and gas reserves.Conclusion • The Indian oil and gas sector is one of the six core industries in India and has very significant forward linkages with the entire economy. one major drawback in the E&P sector is that the Regulatory Body (DGH) does not have any statutory value. Government has taken many steps to regulate it.

. • Ministry of Trade and Commerce Website. • Ministry of External Affairs Website. • Wikipedia. • India Brand Equity Forum (IBEF) Website.References • Ministry of Petroleum and Natural Gas Website.

THANK YOU .