Organisers: under the aegis of: Petrotech 2012, October 2012 Ministry of Petroleum p2 p4 p5 and Natural Gas, Country profile /The energy mix /Regulatory structure /Performance of the Government of India upstream sector p8/Performance of the downstream sectorp13/ India’s global foray p16/ Key players in the petroleum sector p18/ Opportunities in the Indian hydrocarbon sector p19/ Key contacts p22 Exploring India! www.pwc.com/india India Country profile India is a part of the south Asia and shares border with seven countries including Pakistan and Afghanistan in the west, China and Nepal in the north and Bangladesh, Bhutan and Myanmar in the east. Its neighbouring countries also include Maldives and Sri Lanka in the south. The country has the second-largest population (1.24 billion, decadal growth rate of 1.5% per annum) in the world next only to China (1.34 billion, decadal growth rate of 0.6% per annum). The country enjoys a demographic advantage vis-à-vis other countries due to its significantly large young population (below the age of 25). More than 50% of its population is below the age of 25 and more than 65% is below the age of 35. It is estimated that by 2030, the country will have 0.95 billion young people in its workforce.1 It is the third-largest economy in the purchasing power parity (PPP) index, next to USA and China and the second-largest growing economy based on real GDP. GDP (PPP) in trillion USD (2011) The services sector contributes about 56% to the country’s GDP, followed by industry at 26% and agriculture at 17%. The services sector provides employment to 23% of the workforce and is growing quickly. 1 Speech by the Union Minister of State for Human Resource Development Daggubati Purandeswari 2 PwC Official name: The Republic of India Capital: New Delhi Official language: Hindi and English Religions: Hindu (80.5%), Muslim (13.4%), Christian (2.3%), Sikh (1.9%), Buddhist (0.8%), others Nominal GDP (2011): 1,848 billion Growth rate: USD 8.24% (2009), 9.55% (2010), 6.86% (2011) Exchange rates: 1 USD = 53.57 INR; 1 Euro = 68.93 INR; 1GBP = 86.58 INR (as on 26 September 2012)* Head of State: President, Shri Pranab Mukherjee Head of Government: Prime Minister, Dr. Manmohan Singh Minister of Petroleum and Natural Gas: Shri Jaipal Reddy * Source: fx-rate.net The energy mix Over the last two decades (1990-2011), As per the World Energy Outlook 2011, results for the country and with optimum India’s primary energy mix has not IEA has projected India’s energy demand policy stimulus it is expected that India changed much. The country continues to in 2035 at 1,464 MMtoe2. The respective would substantially increase its domestic depend, for most of its energy needs, on shares of coal, oil and natural gas are gas production. coal (>50%) and oil (~30%). However, 42%, 24% and 11%, respectively. As can be seen in the below graph, the natural gas is emerging as one of the Nuclear, hydro and renewable sources country will continue to depend on fastest-growing fuels, registering an put together would account for just 7%. biomass and waste annual growth rate of 8%. Currently, it Therefore, fossil fuels are expected to consumed in rural and semi-urban areas, accounts for 10% of the total primary continue fuelling country’s economic where access to energy remains a energy consumption. growth. challenge. This is a significant portion of On the other hand, other renewable Given the increased awareness amongst the total energy mix and indicates the segments (solar, geothermal, wind countries to reduce the carbon footprint potential for substitution by other energy, etc.) and nuclear energy of the energy industry, oil and gas are primary energy fuels. consumption have also registered an expected to play significant role. Natural impressive annual growth as compared gas, with its inherent advantages over to the last decade—25% and 6%, other alternatives, is expected to emerge respectively. as the preferred fuel. Recent gas discoveries have provided encouraging Energy demand projections for India (in MMtoe) Source: World Energy Outlook 2011 by IEA 2 Under the New Policies Scenario 4 PwC Regulatory structure The following indicates the segment-wise regulatory structure of India: Upstream Midstream Downstream Governing The Ministry of Petroleum and Natural Gas (MoPNG) ministry Legal • The Oilfields Regulation and The Petroleum and Natural Gas Regulatory Board (PNGRB) framework Development Act, 1948 • The Petroleum and Natural Gas Rules, 1959 Regulator The Directorate General of The Petroleum and Natural Gas Regulatory Board (PNGRB) Hydrocarbons (DGH) Policies and • The New Exploration Licensing Policy • Authorisation • Authorisation regulations (NELP) • Tariff • Tariff determination • The Coal Bed Methane (CBM) Policy • Access code • Exclusivity for CGD networks • Affiliate Code of Conduct • Technical standards Foreign direct 100% under automatic route 100% under automatic route Refining: 49% in case of Public sector investment units (PSU) via FIPB route and 100% in (FDI) policy case of private companies Other than refining: 100% under automatic route The regulatory agencies are supported • The Ministry of Law (MoL): It addition, it also engages in opening by some of the following key central advises on legal issues related to up of new unexplored areas for government ministries and policy various policies and regimes relating future exploration and development formulating bodies: to the hydrocarbon sector. of non-conventional hydrocarbon • The Empowered Group of • The Directorate General of energy sources such as coal bed Ministers (EGoM): It takes decisions Hydrocarbons (DGH): It was methane (CBM) and futuristic on industry issues that have a strong established in 1993 under the hydrocarbon energy resources such impact on the country’s economy and administrative control of the as gas hydrates and oil shale. investment climate. Ministry of Petroleum and Natural • The Petroleum and Natural Gas • The Planning Commission: It is the Gas. Its objectives are to promote Regulatory Board (PNGRB): It nodal agency responsible for building sound management of the oil and regulates midstream and a long-term strategic vision for India natural gas resources with a downstream activities, which include and deciding its priorities. It works balanced consideration for the refining, processing, storage, out sector-specific targets and environment, safety, technological transportation, distribution, provides promotional stimulus to the and economic aspects of the marketing and sale of petroleum, economy to grow in the desired petroleum activity. petroleum products and natural gas. direction. For the hydrocarbon It has been entrusted with several It protects the interest of consumers sector, the Planning Commission has responsibilities such as and entities engaged in the specified formulated policies such as the implementation of the New activities and ensures the Integrated Energy Policy, Working Exploration Licensing Policy (NELP), uninterrupted and adequate supply Group plans for the sector, etc. dealing with production sharing of petroleum, petroleum products and natural gas in all parts of the • The Ministry of Finance (MoF): It contracts (PSCs) for discovered fields and exploration blocks, promotion of country to promote competitive decides on tax and fiscal matters markets. relating to the country’s hydrocarbon investment in the E&P sector and sector. monitoring of E&P activities including review of reservoir performance of producing fields. In Exploring India! 5 • The New Exploration Licensing • The Coal Bed Methane (CBM) Policy (NELP), 1999: It provides a Policy, 1997: The policy was Recent framework (auction mechanism) to formulated by the Ministry of award licences to companies for Petroleum and Natural Gas in undertaking E&P activities in India consultation with the Ministry of Coal policies under the PSCs. It lays down the bid to offer coal rich blocks for and block award procedures, bid exploitation of coal bed methane. evaluation criteria, fiscal system, etc. Under the policy, exploration licences The NELP was introduced to increase are granted to companies under investments in India’s domestic E&P international competitive bidding. Its sector, especially the private sector key features include the following: investments. A total of nine rounds of - No participating interest of the acreage awards have since been government completed in the last 12 years in which - No upfront payment over 260 blocks were licensed out to companies. - Production-linked-payments to the government Its key features include the following: From its commencement in 2007, four - 100% foreign direct investment rounds of bidding under the CBM - No carried interest of any national policy have been concluded by the oil company (NOC) government and a total of 30 blocks - 100% cost recovery have been awarded. - Biddable production share, annual • The Draft Shale Gas Policy, 2012: cost recovery limit and work The Indian government is keen to programme explore and tap the potential of unconventional hydrocarbons in the - No signature, discovery or country. The government has issued a production bonus draft of the policy, which is currently - Fiscal stability provision in the undergoing a stakeholder consultation contract, etc. process. 6 PwC NELP rounds (I-IX) and participation of international players Foreign Entrants • Cairn • Hardy • GeoGlobal • No new • ENI • BG (Non-op) • BHP • No new • East West • Niko Resources foreign • Canoro • Santos • Bengal foreign Petroleum • Mosbacher entrant • Geopetrol • Newbury Energy entrant Corp • Gazprom • Birkbeck Inv. • Petrogas • BP Ltd. • Suntera • Noble • Naftogaz • Mittal • Hallworthy • Quest • Silverware Petroleum Source: DGH, PwC Analysis Exploring India! 7 Performance of the upstream sector India has an estimated sedimentary area Status of exploration of India’s of 3.14 million km2, comprising 26 sedimentary basins, India’s sedimentary basins. As per the statistics FY 2010-11 of the Directorate General of Poorly explored Hydrocarbons (DGH), at the end of FY 22% sedimentary 2010-11 about 34% of the total Unexplored sedimentary area was either unexplored 12% or poorly explored.