oilandgasindustry-110501055010-phpapp02.ppt

7/27/2019 oilandgasindustry-110501055010-phpapp02.ppt

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Oil and Gas IndustrySubmitted 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)


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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


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WHY WE CHOSE OIL AND GAS

INDUSTRY?


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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.


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PROFILE OF OIL AND GAS

INDUSTRY


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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.

The total number of exploratory and

development wells and metreage drilled in

onshore and offshore areas during 2009-10 was428 and 1019 thousand metres respectively.


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About Oil and Gas Industry

Crude oil production during 2009-10 at 33.69 millionmetric tonnes is 0.55% higher than 33.51 million metrictonnes produced during 2008-09.

Gross Production of Natural Gas in the country at 47.51billion cubic metres during 2009-10 is 44.63% higherthan the production of 32.85 billion cubic metresduring 2008-09.

The refining capacity in the country increased to184.386 million tonnes per annum (MTPA) as on1.4.2010 from 177.968 MTPA as on 1.4.2009.


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Indias Oil and Gas Reserves

Sedimentary Area

3.14 Million Sq. Km (four per cent of the worlds

sedimentary area)

Sedimentary Basins

26 ( Exploration initiated in 15 )

Prognosticated Resources (O+OEG)

205 Billion Barrels (For 15 Basins only; needs

up-gradation)

Established reserves65 Billion Barrels (as of April 1,2008)


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AGE OF THE OIL AND GAS

INDUSTRY


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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 Indias domestic oil production just 250,000 tonnes per

annum 1954 IPR - 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


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History of Oil & Gas Industry in India

1991 Liberalized petroleum exploitation and exploration

policy

1991-1994 4th, 5th, 6th, 7th and 8th Rounds of exploration

bidding

1999 - New Exploration Licensing Policy (NELP)

2000 NELP II

2002 NELP III

2003 NELP IV 2004 NELP V

2006 NELP VI

2007 NELP VII


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GROWTH OF OIL AND GAS

INDUSTRY


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Growth of Oil and Gas Industry in India

Total Oil production has been increasing over

the last 30 years.


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Growth of Oil and Gas Industry in

India (Contd.)

Total Oil Consumption has also been

increasing linearly over the last 30 years.


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India (Contd.)

Total Natural Gas production has been increasing over

the last 30 years. In last few years there has been a

quantum jump.


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India (Contd.)

Total Natural gas consumption has also been

increasing over the last 30 years.


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COMPANIES IN OIL AND GAS

INDUSTRY AND THEIR MARKET SHARE


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Structure of Oil and Gas Industry


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Market Share of Oil and Gas

Companies

28%

22%20%

18%

11%

1%

Market Share of Oil and Gas Companies

IOCL

ONGC

Reliance

HPCL

BPCLOthers (GAIL, OIL)


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CURRENT IMPORT AND EXPORT

SCENARIO


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Import and Export of Crude Oil and

Petroleum Products

During the FY 2009-10, imports of crude oil were 159.25MMT valued at Rs. 375378 crores. Imports of crude oilduring 2008-09 was 132.27 MMT valued at Rs. 348288crores. This marked an increase of 20.39 per cent during

2009-10 in quantity terms and 7.07 per cent in value terms.

During the financial year 2009-10, exports of petroleumproducts in quantity terms is 50.97 MMT valued at Rs.144037 crores marking an increase of 15.9 per cent in value

terms compared to 2008-09.

Imports of petroleum products and crude oil are more thanthe exports and there is trade imbalance.


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Imports of Oil and Gas for last 5 years

0

50000

100000

150000

200000

250000

300000

350000

400000

2006 2007 2008 2009 2010

Growth of Imports of Oil and Gas

(Rs. Crores)

Crude Oil

Petroleum products

Natural Gas

Imports of Petroleum Products have been rising

over the years. Majorly, India imports crude oil.


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Exports of Oil and Gas for last 5 years

Exports of Petroleum Products have been rising overthe years. India does not export crude oil and naturalgas

0

20000

40000

60000

80000

100000

120000

140000

160000

2006 2007 2008 2009 2010

Growth of Exports of Oil and Gas

(Rs. Crores)

Crude Oil

Petroleum products

Natural Gas


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LEVEL OF COMPETITION IN OIL

AND GAS INDUSTRY


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Level of Competition

Level of competition generally refers to the life

cycle of the Indian Petroleum and Gas

Industry.

Out of four stages, namely initiation, growth,

maturity and stagnation, Indian Oil and

natural Gas Industry is in its growing phase.


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Level of Competition (Contd.)


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FLOW OF FOREIGN INVESTMENTS


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FDI Policy

The present policy on FDI in the Petroleum & Natural Gassector vide Press Note No 5 (2008) permits FDI up to 100%under the automatic route in all activities other thanrefining and including market study and formulation,investment/financing, setting up infrastructure formarketing in Petroleum and Natural Gas Sector subject tosectoral policy.

In Refining, FDI up to 49% in case of Public SectorUndertakings, without involving any divestment or dilution

of domestic equity in existing public sector undertakingsthrough Foreign Investment Promotion Board (FIPB) andFDI up to 100% is permitted in case of Private companiesunder Automatic route subject to sectoral policy.


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Private & Foreign Investments are on

the rise

Many Indian private sector players (RIL, PetroNet,Essar, etc)

Under seven rounds of NELP, 212 blocks were

awarded, of which 56 blocks went to privatecompanies & JVs

International players and approx. investments inIndia: Cairn Energy Plc over US$ one billion,

British Gas - over US$ 800 million, Shell - US$ 650million, BP - US$ 444 million

Other global players with India operations - Total,Exxon Mobil, Gaz De France, and Chevron


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Private & Foreign Investments are on

the rise (Contd.)


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GOVERNMENT POLICIES AND

REGULATIONS


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POLICIES AND REGULATIONS

The Petroleum Act to control issues relating to import, transport,storage, production, refining and blending of petroleum wasalready in place since 1934.

Further, the Oil Fields (Regulation and Development) Act, 1948 andthe Petroleum and Natural Gas Rules, 1959 provided regulatory

framework for domestic exploration and production of Oil & Gas.

Hydrocarbon Vision

The Hydrocarbons Vision 2025 lays down the framework which

would guide the policies relating to the hydrocarbons sector for thenext 25 years. Issues such as E&P, refining, marketing, externalpolicy, oil security, tariff and pricing, and restructuring anddisinvestment are addressed.


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NELP

(New Exploration Licensing Policy) Prior to the NELP, the Oil fields (Regulation and Development) Act, 1948 and

Petroleum and Natural gas Rules, 1958 regulated the issue of license and PSU's.

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.

Main features include- Discovery or production bonus by the bidder; income tax holiday for seven years

from the start of commercial production

- No customs duty on imports

- Freedom to the contractor for marketing of oil and gas in the domestic market

of commercial production. Eight rounds of NELP have been completed till now and the Ninth Round has

recently started in 2010.

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


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Policy for Change in Price of

Petroleum Products In line with the recommendations of a High Level Expert

Group headed by Dr. Kirit Parikh the Government hasdecided that the pricing of petrol and diesel, both at therefinery gate and the retail level, will be market-determined.

It has also been decided that in case of a high rise andvolatility in international oil prices, Government willintervene in the pricing of petrol and diesel.

In view of the importance of the household fuels, namelyPDS Kerosene and Domestic LPG, the Government hasdecided that the subsidies on these products will becontinued.


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The PDS Kerosene and Domestic LPG Subsidy Scheme 2002

and the Freight Subsidy scheme, 2002 have been extended till

31.03.2014. However, in order to reduce under recoveries, ithas decided to increase the retail price of PDS Kerosene by

Rs.3/litre and of domestic LPG by Rs.35/cylinder.

Directorate General of HydrocarbonThe 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, safety, 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


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Regulatory Bodies

Petroleum and Natural Gas Regulatory Board

The Petroleum and Natural Gas Regulatory Board Act, 2006

was enacted in April, 2006. Consequently, Government has

set up in October, 2007, the Petroleum and Natural Gas

Regulatory Board (PNGRB) to regulate the refining,processing, storage, transportation, distribution, marketing

and sale of petroleum, petroleum products and natural gas,

excluding production of crude oil and natural gas.

Section 11 and 12 of the PNGRB Act, 2006 states the functions

and powers


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Policy for Development of Natural

Gas Pipelines The natural gas sector is at the threshold of rapid growth.

With increased exploration efforts under NELP, large scalediscoveries of gas in the East Coast there is an imminentneed to provide a policy framework for the growth of thepipeline infrastructure with a view to facilitate the

evolvement of a nation-wide gas grid and the growth of cityor local gas distribution networks.

The objective of the policy is to promote investment frompublic as well as private sector in natural gas pipelines, tofacilitate open access for all players to the pipeline,promote competition among entities, and secure theconsumer interest in terms of gas availability andreasonable tariff for natural gas pipelines and city or localnatural gas distribution networks.


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LEGAL ASPECTS OF OIL AND GAS

INDUSTRY


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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 andProduction of Oil and Gas. following are the laws which are directlyrelated to the upstream sector.

Constitution of India Jurisdiction to regulate oilfields vested withCentral Government CoI: Entry 53 of List I "Regulation anddevelopment of oilfields and mineral oil resources; petroleum andpetroleum products CoI: Entry 25 of List II "Gas and Gas Works.


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MidstreamThe midstream industry processes, stores, markets and transportscommodities such as crude oil, natural gas, natural gas liquids(LNGs, mainly ethane, propane and butane) and sulphur. Generallymidstream is clubbed with downstream industry.

Downstream

The downstream sector includes oil refineries, petrochemicalplants, petroleum product distribution, retail outlets and naturalgas distribution companies.

The total refinery crude throughput during 2009-10 at 160.03million metric tonnes is 0.46% lower than 160.77 million metrictonnes crude processed in 2008-09 and the prorate capacityutilization in 2009-10 was 89.92% as compared to 107.43% in 2008-09.



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Oilfields (Regulation and Development) Act, 1948 Basic enabling statute for licensing and leasing of petroleum

and gas blocks by the appropriate government. Covers

mineral oils which are defined as including natural gas and

petroleum [S.3(c)]. Mining lease is defined exhaustively tocover all forms of exploring and exploiting mineral oils and all

purposes connected thereto [S.3(d)]

Empowers central government to make rules with regard to

mining leases [S.5] Also empowers central government to make rules for the

development of mineral oil



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Petroleum and Natural Gas Rules, 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 landsvested with it [Rule 5(ii)]

Person obtaining exploration license obtains the exclusive right to a

lease for producing (i.e. extracting) oil/gas over any part of area

covered in license



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Land acquisition Act, 1894 The law deals with the acquisition of land for Public purpose. The Act is a

general Act which deals with the procedure and the conditions under

which a land can be acquired.

The only requirement is that the land can only be acquired for public

purpose as per Section 3(f) of the Act.

The Petroleum Act, 1934

The act deals with import, transport, storage, production, refining, and

blending of petroleum. The Act is one of the oldest acts in the oil and gassector. Earlier to this act the rules regarding the above specified activities

were separate for separate States.

The Petroleum Minerals Pipelines (Acquisition of Right of users in Land)

Act, 1962



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TAXATION


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Petroleum Product Pricing Taxation

comparisonsIn April 2002 India abolished the

Administrative Pricing Mechanism (APM)

controlling the domestic price of petroleumproducts in India. Under the APM, product

prices were directly administered by Indias

Central Government based on an opaque and

complex cost of operating capital plus formula.


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Effect of Taxation and Subsidies: A

Comparison

The effect of lower product prices than inputprices - a large effective subsidy has been theincreasing accumulation of under-recoveriesby OMCs. Under-Recoveries represent thedifference between the trade-parity cost ofRefined product paid by OMCs and their

realised change frequently depending on anumber of factors.


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Taxes paid by Oil and Gas Industry over

the years(Rs. Billion) 2006 2007 2008 2009 2010

Royalty from Crude Oil 50.67 58.57 65.44 71.55 NA

Royalty from Gas 8.637 10.75 14.87 16.24 NA

Oil Development Cess 51.96 71.77 71.56 68.86 65.59

Excise and Customs

Duties631.43 718.93 783.73 705.57 717.67

Sales Tax 459.34 539.49 564.45 633.49 649.99


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The Indian oil and gas sector is one of the six coreindustries in India and has very significant forwardlinkages with the entire economy. Government hastaken many steps to regulate it. The Steps are alsotaken to increase the Indigenous oil and gas reserves.

Although there are few loopholes which should betaken care of as soon as possible, one majordrawback in the E&P sector is that the Regulatory

Body (DGH) does not have any statutory value. Thedecisions of the DGH are merely advisory in natureand the Government is not to follow them.

Conclusion


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References

Ministry of Petroleum and Natural Gas

Website.

Ministry of Trade and Commerce Website.

Ministry of External Affairs Website.

India Brand Equity Forum (IBEF) Website.

Wikipedia.


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THANK YOU

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oilandgasindustry-110501055010-phpapp02.ppt