Natural Gas - Whose Resource

Natural Gas ± Whose Resource?

Mangala Mishra (427) Sanish Nair (428) Ranjit Raichurkar (435) Sujan Salian (440) Darshit Sanghvi (442) Rohan Tamanekar (454)

Sub:EEB Prof : V. Date Div : D ± Group 10

The Energy Snapshot
Fuel of the 21st Century Efficient and Cost Effective India Produces - 87 mmscmd Major Players : ONGC ± OIL PSC : Private Players NELP : Mkt Gas @ Mkt Price

87 MMSCMD ?? What next?
Internal Consumption Extraction of LPG 74 mmscmd Sell Consumers

Primary Energy Resource

Net Import

NELP (1999)

Intensive Exploration To bring in state of art technology


Fiscal Stability No customs Duty on imports No Mandatory State participation Equality to all the companies participating Transparent bidding system Freedom to the contractor No cess on crude oil production Exemption of Tax for 7yrs

NELP Comparison

MoU and GSMA:

Signed between : Ambani Brothers Quantity and Price Fixed Gas not for commercial trade

Signed between : RIL vs Subsidaries(RNRL later)  Quantity Fixed but Price not fixed 

Pricing and Foreign Players
Ministry of Petroleum and Natural gas Directorate General of Hydrocarbons (DGH) New Exploration Licensing Policy (NELP) Production Sharing Contract (PSC) Cairn India,Exxon Mobil,Royal Dutch Shell etc

Money Game
EGoM : -Authority to decide pricing policy -Gas prices depends on crude oil prices -Price Natural gas between $2.4 & $4.2 per mBtu Expected Production KG D6 block- 80 mmscmd
Price Per mBtu Sales $bn Capital Exp. $bn Operating Exp. $bn Net Cash Flow $bn Govt $bn RIL $bn Income Tax $bn


21.35 38.36

9.41 9.41

1.59 1.59

10.35 27.3

3.84 8.44

7.81 16.28

1.3 4.25


Expected Loss of Government if RIL sales gas at $2.34 per mBtu is $8.4 bn ~ INR 40,000 crores

Govt¶s Say
Ambani brothers are fighting over something that does not belong to them Article 297: petroleum as a resource :India authority RIL can¶t sell it unilaterally Price of $4.20 was approved by EGoM Govt. can¶t approve of the price lower than $ 2.34 Has objections regarding the MoU

Various Scenarios
Scenario 1 : Mukesh should compensate the govt. for loss of revenue from the supply of gas to Anil at $ 2.34/mmbtu. Downside : Power companies currently buying gas at $ 4.20 could object over this. Scenario 2 : RNRL gives up its demand for $ 2.34 but continues to have claim on 28 mmscmd gas share from KG Basin as well as 40% share in future discoveries by RIL. Downside : Government of India has objections over Anil¶s claim on future discoveries.

Various Scenarios
Scenario 3: Allow complete freedom to RIL to price gas thereby repealing the govt. approved gas pricing formula. Downside : RIL could supply gas to certain buyers at a price more than $ 4.2. Scenario 4 : The Supreme court could annul the provisions of the MoU. It could ask RIL to compensate RNRL for non-supply of gas at $ 2.34/mmbtu. Downside : ADA group¶s new gas based plants are going to face delays.

Global investment inflow Foreign Players Concerned new investors Govt decision to be done for the Profit of the Nation

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