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Oil & Gas B-17, Qutab Institutional Area

New Delhi: 110016
Tel: 91-11-4103 4600 / 4601
Fax: 91-11-2653 1196
News E-mail:
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August 30, 2010 – September 5, 2010
Policy
 The Ministry of Power has favoured the allocation of natural gas output from fields like those
of Reliance Industries Limited (RIL) to Reliance Power Limited's 2,400-MW Samalkot
expansion unit in Andhra Pradesh. Earlier, it recommended allocation of eight million metric
standard cubic metre per day (mmscmd) of natural gas to the plant on the grounds that the
project had environmental clearance along with clearances required on land, water and all other
infrastructure facilities. Samalkot, along with nine other plants, is expected to be commissioned by
March 31, 2012.
 As per the Directorate General of Hydrocarbon (DGH), shale gas exploration acreages will be
available in India from 2011. At present, the Ministry of Petroleum and Natural Gas (MoPNG) is
working on developing a shale gas regime that is most suitable for the country. Areas such as
Cambay basin, Krishna-Godavari basin and Assam-Arakan basin are considered the most
prospective areas for shale gas exploration. The government has also signed a memorandum of
understanding (MoU) with the US on shale gas, wherein the US Geological Survey is likely to do a
resource assessment of certain shale basins in India. Meanwhile, Oil India Limited (OIL) is planning
to invest around Rs 3-5 billion for shale gas exploration over the next three to four years in India.
The company is looking at the Assam-Arakan region and Cambay basin.

Upstream
 RIL has made a fourth gas discovery near Krishna-Godavari (KG-D6) basin, in the well (KGV-
D3-W1) drilled in deep sea block KG-DWN- 2003/1(D3) at 3,501 metres below the sea bed. RIL
has 90 per cent interest in the block while the rest is held by Britain based Hardy Oil and Gas plc.
The block was awarded to the consortium in National Exploration Licensing Policy V (NELP V). The
discovery has been named Dhirubhai-52 and has been notified to the DGH. The D3 license is
located in the KG basin on the East Coast of India and covers an area of approximately 3,288 sq
km.
 As per Cairn India Limited, crude oil production from the Mangala oilfield in Rajasthan has
crossed the 125,000 barrels of oil per day (bopd) mark and is expected to further increase to
175,000 bopd by early 2011. Discovered in the year 2004, Mangala oilfield, which has biggest
onland crude reserves in India, is a joint venture between Cairn India and Oil and Natural Gas
Corporation (ONGC). Cairn India has 70-per cent stake in the project with ONGC holding the
remaining 30 per cent. Production from Mangala will add about 25 per cent to domestic crude output
which is currently at 700,000 bopd and it will help in reducing country's crude imports which is about
25 million bopd.

Downstream
 Hindustan Petroleum Corporation Limited (HPCL) is planning to set up a refinery with the
capacity of nine million metric tonne per annum (mmtpa) and investment of about Rs 150
billion on the west coast. The project is likely to get funded with a debt-equity ratio of 2:1 or 2.5:1.
The refinery may get built in Raigad district of Maharashtra. The company has already faced a
space crunch in its 6.5 mmtpa per year Mumbai refinery and hence has asked the state government
for 2,500-3,000 acre of land for the project. The government of Maharashtra has shown three pieces
of land to the company located between Ratnagiri and Raigad districts. Initially, the company wants
to build a nine mmtpa unit and then wants to double it at a later date. It will also appoint a consultant
for a detailed feasibility report (DFR).

LNG
 The Adani Group owned Mundra Port and SEZ Limited (MPSEZ) is seeking a new partner to
commission an LNG terminal in Mundra as Gujarat State Petroleum Corporation (GSPC) has
 Oil & Gas August 30, 2010 – September 5, 2010

News
not yet given a clear response about its participation in the project. Both the companies were in
discussions for the past two years regarding the project. Initially, the Essar Group was also keen to
participate but it opted out in the initial stages. As per reports, it is believed that GSPC wants a
majority stake in the project as it has undertaken investments on the technical and feasibility
studies. This is discouraging private players with the Adani Group opting for its own terminal,

Finance
 ONGC can decide about exercising its right of first refusal, on the sale of a majority stake in
Cairn India, till October 2010, i.e., before the Extraordinary General Meeting called by Cairn
Energy Plc. The company has between 22.5 to 40 per cent interest in Cairn India Limited's
Rajasthan block, Ravva oil and gas field and CB/OS-2 in the Cambay basin. It is also a partner in
five of the seven exploration blocks which Cairn India holds, including the gas discovery block of
KG-DWN-98/2 nearby RIL’s KG-D6 basin. Although as per the production sharing contracts, no
prior consent from ONGC is required in case of asset sale by Cairn India, the exploration blocks
which were awarded in NELP rounds require consent from ONGC in case of change of control.
 The Rajasthan government will take 26 per cent stake in the Barmer refinery which is
proposed to be set up in the state by ONGC. The state government has been pushing for a nine-12
mmtpa refinery in the region after Cairn India’s discovery of 6.5 billion barrels of reserves that
can produce 175,000 bopd (8.75 mmt per year) of oil at plateau. While ONGC is consulting with the
government on the feasibility of a commercially viable refinery in the region, the government is in
talks with Indian Oil Corporation (IOC) and Bharat Petroleum Corporation Limited (BPCL) regarding
a marketing tie-up for sale of products produced at the refinery. Meanwhille, ONGC has asked the
state government to defer local sales tax, extend an interest-free loan of Rs 13 billion per year for 16
years, give free land and water and exempt crude oil from entry tax/cess/octroi and central sales tax
for 16 years.
 The Central government has accepted ONGC’s plea to restrict its share of royalty outgo to
the Rajasthan government to 30 per cent on the revenues earned from the oil blocks owned by
Cairn India. This is going to remove a major obstacle to the Vedanta-Cairn deal and will save $350
million for ONGC. The central government is likely to compensate the Rajasthan government for the
remaining amount although the modalities of the compensation have not yet been finalised. Earlier,
the company has also expressed its desire to give up its interest in the blocks as it is making just $2
per barrel from them due to high royalty payment estimated to be $2 billion over the life of the asset.
 The Supreme Court of India has rejected the plea of a minority shareholder of Cairn India to
restrain the Vedanta Group’s bid to acquire Cairn India by an open offer of $3 billion through its
subsidiary Sesa Goa Limited. As per the plea, the open offer to purchase 20 per cent in Cairn India
has to be made by the Vedanta group and not by Sesa Goa as the acquisition of even Sesa Goa by
Vedanta is still a sub-judice matter.

Overseas
 ONGC's foreign arm ONGC Videsh Limited is likely to acquire shale gas assets in the United
States (US). The company will look for partnerships with local players rather than going for
complete buyouts. After RIL’s foray into the shale gas assets in early 2010, public sector firms like
IOC, BPCL and OIL are also looking after acquisition of shale gas assets in US and Australia.

Note: Rs 1 crore = Rs 0.01 billion; Rs 1 lakh = Rs 0.1 million; Rs 1,000 million = Rs 1 billion