UNIVERSITY OF PETROLEUM & ENERGY STUDIES

SCHOOL OF LAW

B.A.,LL.B.(Hons.) Specialization in Energy Laws

SEMESTER - IV

ACADEMIC YEAR: 2018-19          SESSION: JANUARY –

MAY

PROJECT

TOPIC- LIBERALIZATION IN TERMS OF OFFER FOR EXPLORATION BLOCKS

PRE-INDEPENDENCE AND POST-INDEPENDENCE

FOR

Economics of Oil and Gas Sector

Under the Supervision of: Ms. Sonal Gupta

Rishab Kumar: R450217095; 500060365

Waqas Tanvir : R450217136; 500060593

Pinto Ram : R450217075; 500060941

Vishwaas Mehta: R450217134; 5000

LIBERALIZATION IN TERMS OF
OFFER FOR EXPLORATION
BLOCKS PRE-INDEPENDENCE
AND POST-INDEPENDENCE
 INTRODUCTION

India has become one of the fastest developing economies in the world. Indian oil

and gas or the petroleum industry pays an important role in the national income

and economy of our country. The petroleum sector embraces the global processes

of investigation, removal refining, transporting and marketing of petroleum

commodities. Following is the present scenario of oil and gas industry in India.

The oil and gas industry rank amongst India’s six core industry. India was the third

biggest purchaser of oil in the world in 2015. Oil and gas sector supplies to 34.4%

to major energy utilization in India. State possesses Oil and Natural Gas

Corporation (ONGC) controls the upstream divisions generating around 22.37MT

of crude oil which is roughly 60.5% of the country’s output. (gas, 2016) And

Before independence The research of oil in India began in1866 when Mr Good

enough of Mchillop Stwart Co. bored a well near Jaypore Assam and discovered

oil. The company botched to establish suitable production. After Independence In

the Industrial Policy 1949, petroleum industry was given priority. In 1957

exploratory wells were drilled in foothills of Himachal and in Cambay Basin. In

1959 in order promote the progress of petroleum industry ONGC was rehabilitated

into a legislative body by the act of Indian Parliament. New Exploration Licensing

Policy (NELP), Government of India formulated policy of NELP in 1997.The main

objective was to accelerate the pace of exploration effort in the country. This

policy attracts significance risk capital from Indian and foreign companies and best

management practices to explore oil and gas resources in the country to meet the

rising demands of oil and gas. The licenses for exploration are being awarded only

through competition bidding system. National oil companies are required to

compete on equal footing companies to secure Petroleum exploration licences.

Nine rounds of bids have so far been concluded under NELP in which production

sharing contract for 254 exploration blocks have been signed. India’s oil sector is

dominated by state-owned enterprises, although the government has taken steps in

recent years to deregulate the hydrocarbons industry and encourage greater foreign

involvement. The most important steps in that regard has been the initiation of

NELP (New Exploration License Policy) in ’97 under the purview of DGH

(Directorate General of Hydrocarbons) to attract significant private investment by

offering them level playing field as well as growth opportunity. Another way of

securing energy resources have been identifying and acquiring important reserves

overseas. This has been mainly achieved by ONGC (overseas investment arm

OVL). There remain some grey areas in the regulatory section in spite of Govt
offering a liberal FDI policy and other assistance. They are mainly related to

Production sharing contract and significant Govt subsidy in downstream sector. As

the overall economy is gearing up for a sustainable and healthy GDP growth in

near future – it has become crucial for Govt to ensure steady and increasing supply

of crude oil and gas along with some alternative sources of energy. So in near

future lots of activities and investment are expected from both state owned and

private organizations in Indian E & P (Exploration and Production) sector.

Indian Petroleum Industry started its journey during the fiscal year 1890 in the

north-eastern provinces of India especially in the place called Digboi. The

production of petroleum along with the exploration of new sites was primarily

restricted to north-eastern India up to the 1970s. But the scenario changed

drastically with the discovery of Bombay High. Indian Petroleum Industry was

entirely state sponsored and was under the management control of all the industries

involved in it were entirely with the government. After the inception of the

Liberalization-Privation-Globalization (L-P-G) policy in the month of July, 1991,

the government had started allowing the Indian Petroleum Industry to go into

private as well as government-private joint ventures. The deregulation process in

the Indian Petroleum Industry got a boost in the year 1997 when it was decided

that the process of liberalization and deregulation would be accelerated in this

industry and all the regulations would go away from the month of April in the year
2002. Actually from 1979 onwards, the ministry of Petroleum began to invite

international bids for exploration and development from time to time. Nine rounds

of bidding were held till 1997; 32 blocks were awarded for exploration and 30 for

development. In 1997 they produced 3 mtpa of crude and 7 mcmd of gas. But since

refining and distribution were government monopolies, the licensees had to sell

their oil and gas to the government. Negotiations with the government were

protracted and time consuming. So the rounds attracted little international interest.

In the meanwhile, the government monopolies could not increase production and

refining capacity to keep up with demand. But after the serious balance of

payments crisis in 1991, the socialist approach of govt was changed significantly

and a new government elected in 1991 overhauled many of the policies. Govt

appointed two committees in order to examine replacement of administered by

market-determined prices and restructuring the organization of the industry. As a

result NELP (New Exploration Licensing Policy) was announced in 1997. Under

the New Exploration Licensing Policy, six rounds were held and 162 production-

sharing licences (PSC) were given till 1 April 2007, against 28 before the

introduction of NELP. Of the licenses, 77 per cent were offshore, and 53 per cent

were to government companies. In the next round (7th round) of NELP – a six

multinational companies (Chevron and Conoco-Philips of the US, Britain's BG

(British Gas) and BP (British Petroleum), Canada's Niko and Anglo-Dutch Shell)
wrote to the government to say that they would not bid if the regulatory framework

remained uncertain and the government did not adhere to contractual arrangements

as some such instances had already taken place. But the government did not

respond to the six companies’ concerns; consequently, they did not take part in the

bids. In the event, of the 57 blocks on offer, 12 received no bids, and 19 received

only one bid. Of the 45 winning bids, one was rejected by Cabinet Committee on

Economic Affairs, resulting in 44 production sharing contracts. ONGC and its

associates got 20 concessions. Thus, the round confirmed a decline in interest

amongst international companies, especially experienced ones. The eighth round of

NELP received 76 bids for 36 of the 70 blocks on offer. State-owned Oil and

Natural Gas Corp. Ltd (ONGC), as part of a consortium, bid for 25 blocks and won

17. Single bids were received for 20 blocks. The government is likely to offer

about 34 blocks under NELP-IX for which Last date for bidding will be March 18,

2011. In the eight rounds of NELP since 1999, 235 blocks have been awarded till

date. This has resulted in enhancement of exploration coverage from 11 per cent to

about 58 per cent of Indian sedimentary basin between 2000 and 2010.
 LITRATUTRE REVIEW-

The energy and resource institute governace of the petroleum and natural gas

sector

Legal and regulatory frame work of the energy

Annual report of ministry of natural gas and oil

India Energy Book 2012

Business Today (2012). ‘Cabinet defers decision on National Investment Board’,

12 December. Retrieved 15 January 2013, from Business Today:

http://businesstoday.intoday.in/story/cabinetdefers-decision-on-national-

investment-board/1/190468.html

Cabinet Secretariat (2011). Report of the Committee on Allocation of Nautral

Resources. Government of India.

CAG (2011). Performance Audit of Hydrocarbon Production Sharing Contracts

(Ministry of Petroleum and Natural Gas) . Comptroller and Auditor General.

 RESEARCH OBJECTIVES-

The objective of the sectorial report is to study the topic of Liberalization of offer

in Exploration Blocks in Pre and Post Independence.

 India’s gas and oil field are now a day’s being auctioned and given to the

highest bidder. Pre 1997 the gas and oil fields were only given to the government

owned companies like ONGC and Oil India but post 1997 privatization of

exploration blocks were done and the fields were now given to the private and the

state owned companies.

 RESEARCH METHADOLOGY-

The research methodology used is doctrinal in nature various literature and

websites are been taken as a resources for report and analysis

 Data Analysis

Oil consumption is increasing throughout the world but the significant growth rate

is noticed in emerging economics especially in China and India because of the

prominent sizes of these economics along with their impressive GDP growth rates.

India currently stands as 4th largest petroleum product consumer in the world. The

consumption of petroleum products during 2009-10 were 138.196 million metric

tons (including sales through private imports) which is 3.60% higher than the sales

of 133.400 million metric tons during 2008-09. Main petroleum products and their

key consumption sectors are as follows: Products Major End Use LPG Domestic

fuel. Also for Industrial application where technically essential. Now permitted as

auto fuel. NAPTHA / NGL Feedstock/ fuel for Fertilizer Units feedstock for

petrochemical sector and fuel for Power Plants. MS (Petrol) Fuel for passenger

cars, taxies two & three wheelers ATF Fuel for aircrafts. SKO (Kerosene) Fuel

for cooking & lighting. HSD (Diesel) Fuel for transport sector (Railways/Road),

Agriculture (tractors, pump sets, threshers etc.) and Captive power Generation.

LDO Fuel for agricultural pump sets, small industrial units, start up fuel for
power generation FO/LSHS Secondary fuel for Thermal Power Plants,

Fuel/feedstock for fertilizer plants, industrial units. BITUMEN Surfacing of roads.

LUBES Lubrication for automotive and industrial applications Minor Products

(Benzene, Paraffin Wax) Feedstock for value added products.

India’s energy consumption potential is steadily increasing which is causing

widening gap between demand and supply. So steady growth in Exploration and

Production (E & P) activities in Oil and Natural Gas sector has become urgently

required. The primary energy segment is still now dominatedER by coal but oil

usage is steadily increasing. Market share As already discussed the Indian oil E &

P sector is dominated by PSUs but with introduction of NELP in 1997 private

players have started showing interest. Still as of now the lion’s share of Indian

production as well as resources are allocated to PSUs only.

 MAJOR PLAYERS IN OIL AND GAS MARKET

ONGC:

This is the largest state owned Oil and Gas Company in India. It is a Fortune

Global 500 company ranked 413, and contributes 77% of India's crude oil

production and 81% of India's natural gas production. It is the second highest profit

making corporation in India. It was set up as a commission on 14 August 1956.

Indian government holds 74.14% equity stake in this company. ONGC is Asia's
largest and most active company involved in exploration and production of oil.

Since 1960 It has made its presence noted in most parts of India and in overseas

territories. ONGC found new resources in Assam and established the new oil

province in Cambay basin (Gujarat). In 1970 with the discovery of Bombay High

(now known as Mumbai High), ONGC went offshore. With this discovery and

subsequent discovery of huge oil fields in the Western offshore, a total of 5 billion

tonnes of hydrocarbon present in the country was discovered.

In the post liberalization scenario also it has maintained its leading position.

ONGC has made 134 discoveries since 2002 and 58 of them has been prepared to

production. Some others are on the development board. In NELP VIII round it has

been awarded 17 of the 31 awardees blocks. Apart from the significant domestic

operations ONGC also has an international arm for bidding and operating foreign

assets: ONGC Videsh Ltd (OVL) which currently has around 40 projects in 15

countries. Its production for the FY’10 was 8.87 MTOE. ONGC has made major

investments in Vietnam, Sakhalin (Russia), Brazil and Sudan. Beyond core E&P

activities, ONGC is also ramping up for alternative sources of energy. It has started

production of CBM (Coal Bed Methane) in Jharia in 2010 and planning for an

substantial investment in a JV with SCHLUMBERGER in Damodar valley for

production of Shale gas. Oil India Ltd:

2- Oil India (OIL)

It is a large state-owned oil and gas company in India under the administrative

control of the Ministry of Petroleum and Natural Gas of the Government of India

OIL is the pioneer in exploration and production of hydrocarbons in India, and

traces its roots back to Oil India Private Ltd. formed in 1959 with The Burmah Oil

Company Ltd. holding two-thirds of equity and Government of India holding one-

third. Oil India Private evolved into Oil India Ltd., which was an equal partnership

between Burmah Oil and Government of India. In 1983 the company became a

public sector undertaking of the Government of India.

Apart from ONGC it is second biggest player in the E&P industry in India.

The Company presently produces over 3.6 MMTPA (million tons per annum) of

crude oil, over 2400 MMSCUM of Natural Gas and over 50,000 Tones of LPG

annually. Most of this emanates from its traditionally rich oil and gas fields

concentrated in the Northeastern part of India and contribute to over 65% of total

Oil &Gas produced in the region. The search for newer avenues has seen OIL

spreading out its operations in onshore / offshore Orissa and Andaman, deserts of

Rajasthan, plains of Uttar Pradesh, riverbeds of Brahmaputra and offshore

Saurashtra. In Rajasthan, OIL discovered gas in 1988, heavy oil / bitumen in 1991

and started production of gas in 1996. The company has accumulated over a

hundred years of experience in the field of oil and gas production, since the

discovery of Digboi oilfield in 1889. It is possibly the only company to do so.

From well completion to wellbore servicing, installation, operation and

maintenance of modern surface handling facilities, the company has the skill and

expertise to manage the entire range of operations required for onshore oil and gas

production. The company has over 100,000 square kilometres of license areas for

oil and gas exploration. It has emerged as a consistently profitable international

company with exploration blocks as far as Libya and sub-Saharan Africa.

3. GAIL (Gas Authority of India Ltd):

The production of crude oil in the Cambay On land Block in Gujarat is in progress,

where the company holds 50% participating interest. At present, GAIL has

participating interest in 27 E&P blocks of which 3 are overseas (2 in Myanmar and

1 in Oman). GAIL is the Operator in one block in Cauvery Basin awarded during

NELP-VII bidding round and the Joint Operator in one on land block in Rajasthan

Basin awarded during NELP-VI bidding round. Hydrocarbon discoveries have

been made in 9 E&P blocks including 3 overseas blocks. Out of these 9 blocks,

commercial production is in progress from one block, Cambay On land –

Ahmedabad, Development activities are in progress in blocks A-1 and A-3 in

Myanmar and appraisal activities are in progress in other 6 blocks. GAIL is also
participating in 3 Coal Bed Methane blocks. Core hole sample analysis is in

progress in these blocks. Test wells are planned to be drilled in one block.

Private Organization:

1. Reliance Industries Ltd:

Reliance Industries Ltd (largest firm in India according to Market cap valuation) is

the most important player among the private sector players.

The key field of RIL establishment is Krishna Godavari (KG) basin blocks which

were also the world's largest gas discovery of 2002.

a. KG basin:

It is spread across more than 50,000 square kilometers in the Krishna River and

Godavari River basins in Andhra Pradesh.

1. KG-D6: Current Gas production from KG-D6 is 60 MMSCMD from 16 wells.

The design capacity of the KG-D6 deepwater gas production facilities were

assessed and achieved a flow rate of 80 MMSCM. During FY 2009-10, total

gas production was 14,397 MMSCM.

2. D26: Six wells from the D26 oil field in the block are under production. During

the FY 2009-10, total oil production from this field was 4.04 million barrels.

RIL has made four discoveries during the year 09-10 and submitted commerciality

for some other blocks also.

b. Panna-Mukta and Tapti Fields:

Panna field comprises 430 sq. kms of area, located 50 km east of the giant Bombay

High field and is 95 km NW of the Mumbai city. Panna-Mukta fields produced 1.8

million tonnes of crude oil and 1,965 MMSCM of natural gas in FY 2009-10,

registering a growth of 9% and 18% respectively over the previous year.

Tapti field covering an area of 1471 sq.kms lies 160 km north-north west of the

Mumbai city. It lies approximately in a water depth of 20 M on the northeast flank

of Surat depression, of Bombay Offshore Basin. The block comprises of two fields

South Tapti and Mid Tapti, which occur in two large structural culminations.

Tapti fields produced 187,000 tonnes of condensate and 3,102 MMSCM of natural

gas for FY 200910, a decrease of 31% and 26% respectively as compared to the

previous year. The decrease in production was due to a natural decline in the

reserves.

2. Essar Oil Ltd:

The main operating fields under Essar Oil Ltd are: Ratna and R-series fields near

the Mumbai High field in the Mumbai offshore basin 50 percent interest in one

shallow water offshore exploration block MB-OSN2005/3, near the Mumbai High

field in the Mumbai offshore basin o 70 percent operating interest in Mehsana oil

and gas block that has started crude production

3. Cairn India Ltd (Indian subsidiary of Cairn Energy Ltd, Europe):

Cairn India is the operator of the Rajasthan block with a 70% participating interest

and its joint venture (JV) partner ONGC has a 30% participating interest.

Main fields of Rajasthan blocks are:

I Mangala, Aishwariya, Raageshwari and Saraswati (MARS) fields;

ii Bhagyam and Shakti fields; and

iii. Kaameshwari West fields.

Cairn India’s operations in this area are centered on the Rawa oil and gas field in

the KrishnaGodavari Basin. Developed in partnership with ONGC, Videocon and

Rawa Oil, Cairn became the operator of the block in 1996, working under a

Production Sharing Contract (PSC) that runs until 2019. As part of the initial
development program, alongside its JV partners, Cairn operates eight unmanned

offshore platforms and additional sub-sea pipelines.

Originally estimated to produce 101 million barrels of crude oil, Ravwa has now

produced around 225 million barrels.

4. British Gas:

BG Group has held a 30% interest in the Mid and South Tapti gas fields and the

Panna/Mukta oil and gas fields since 2002. In 2009, the combined fields produced

13.7 mmboe (net to BG Group). BG Group’s aim is to optimize recovery from the

PMT fields through ongoing existing field development (including well

intervention and infill drilling) as well as new projects. Panna has had a program of

46 infill wells drilled in the last six years.

Panna K started production in 2009 and the Panna L installation is scheduled to be

completed by the end of 2010, with first production in early 2011. Future

developments will focus on the next phase of the Mukta reservoir (Mukta B) as

well as a final decision on the viability of water injection.

The total gas from the mid and south Tapti complex peaked at 450 mmscfd along

with 7 000 bbls of condensate. Current production is around 300 mmscfd of gas

and around 4 100 bbls of condensate. During 2010, three development wells have
been completed in Mid and South Tapti. Further infill drilling opportunities across

Mid and South Tapti are possible in 2011.

Under India’s New Exploration Licensing Policy (NELP) 6 licensing round, BG

Group acquired a 45% interest in exploration block KG-OSN-2004/1 in the

Krishna Godavari (KG) Basin, in 2006. The shallow water block, which covers an

area of approximately 1 131 square kilometers, is located off the east coast of

India. Oil and Natural Gas Corporation Limited (ONGC) holds the remaining 55%

and is operator. Following a successful bid in the NELP-8 licensing round, a

consortium led by BG Group (30% and operator), was awarded an exploration

block (KG-DWN-2009/1) in deep water in the KG basin in June 2010.

BG Group has also been making efforts to expand its position in India via farm-ins.

In 2008, BG Group entered a farm-in agreement with ONGC to acquire a 25%

interest in exploration block MN-DWN2002/2 in the Mahanadi Basin on the east

coast of India.

5. Niko:

Since 1997 the government has implemented the New Exploration Licensing

Policy (NELP) that has provided a framework for companies to invest in India’s oil

and gas potential. Niko Resources Ltd. has participated in most of the NELP

rounds and has acquired working interests in 6 exploration blocks. Three of these
blocks are producing and comprise the majority of the Company's production.

Exploration and evaluation work continue on the other three blocks and one of the

producing blocks.

British Gas:

BG Group has held a 30% interest in the Mid and South Tapti gas fields and the

Panna/Mukta oil and gas fields since 2002. In 2009, the combined fields produced

13.7 mmboe (net to BG Group). BG Group’s aim is to optimize recovery from the

PMT fields through ongoing existing field development (including well

intervention and infill drilling) as well as new projects. Panna has had a program of

46 infill wells drilled in the last six years.

Panna K started production in 2009 and the Panna L installation is scheduled to be

completed by the end of 2010, with first production in early 2011. Future

developments will focus on the next phase of the Mukta reservoir (Mukta B) as

well as a final decision on the viability of water injection.

The total gas from the mid and south Tapti complex peaked at 450 mmscfd along

with 7 000 bbls of condensate. Current production is around 300 mmscfd of gas

and around 4 100 bbls of condensate. During 2010, three development wells have

been completed in Mid and South Tapti. Further infill drilling opportunities across

Mid and South Tapti are possible in 2011.

Under India’s New Exploration Licensing Policy (NELP) 6 licensing round, BG

Group acquired a 45% interest in exploration block KG-OSN-2004/1 in the

Krishna Godavari (KG) Basin, in 2006. The shallow water block, which covers an

area of approximately 1 131 square kilometers, is located off the east coast of

India. Oil and Natural Gas Corporation Limited (ONGC) holds the remaining 55%

and is operator. Following a successful bid in the NELP-8 licensing round, a

consortium led by BG Group (30% and operator), was awarded an exploration

block (KG-DWN-2009/1) in deep water in the KG basin in June 2010.

BG Group has also been making efforts to expand its position in India via farm-ins.

In 2008, BG Group entered a farm-in agreement with ONGC to acquire a 25%

interest in exploration block MN-DWN2002/2 in the Mahanadi Basin on the east

coast of India.

5. Niko:

Since 1997 the government has implemented the New Exploration Licensing

Policy (NELP) that has provided a framework for companies to invest in India’s oil

and gas potential. Niko Resources Ltd. has participated in most of the NELP

rounds and has acquired working interests in 6 exploration blocks. Three of these

blocks are producing and comprise the majority of the Company's production.
Exploration and evaluation work continues on the other three blocks and one of the

producing blocks.

Competition Situation
The major policy shift towards an open and more globally integrated economy

since 1991 and subsequent formation of Directorate General of Hydrocarbon and

initiation of NELP have been seen able to attract some major foreign players. We

have also seen significant growth in Indian private sector in terms of Reliance and

Essar.

But when the Govt on one hand is trying to attract more top level players from

the international field by promising more transparency and fairness or

better quality data about blocks offered, problems still remains with the

regulatory ambiguity over the contracts.

So, it can be concluded that exploration and production sector in India still

remains an oligopoly market with PSUs dominating. As Indian downstream

section of Oil and Gas is heavily regulated and had an almost Govt monopoly – it

is tough for private players to earn a profit from the complete supply chain (up to

Retailing in the domestic market).

Regulatory Advantage & legal frameworks The main regulator body for E & P

section in Oil sector is Directorate General of Hydrocarbons.

The Directorate General of Hydrocarbons (DGH) was established in 1993 under

the administrative control of Ministry of Petroleum & Natural Gas through

Government of India Resolution. Objectives of DGH are to promote sound

management of the oil and natural gas resources having a balanced regard for

environment, safety, technological and economic aspects of the petroleum

activity.

Several key tasks done by DGHC are as follows:

1. Implementation of New Exploration Licensing Policy (NELP)

2. Production Sharing Contracts for discovered fields and exploration blocks

3. Promotion of investment in E&P Sector and monitoring of E&P activities

including review of reservoir performance of producing fields

4. Opening up of new areas of unconventional energy sources like CBM, Shale

gas etc.

NELP:

The New Exploration Licensing Policy, better known as NELP, was formulated

by the Government of India in 1997-98 to provide equal opportunities to both

public and private sector companies in the exploration and production of oil and

gas in the country.

So far 8 rounds of NELP have been completed. Some highlighting points of

currently going on NELPIX round is:

 There will be only one Exploration phase of 7 years for Onland and Shallow

water blocks and 8 years for Deep water blocks and Frontier Area blocks. There

will be no compulsory relinquishment after Initial Exploration Period (when

mandatory and committed program are to be completed) and operators will have

option to relinquish entire area after completion of Minimum Work Program or

retain the Block by committing to carry out drilling of one well per year in case of

Onland and Shallow water Blocks or one well in 3 years in case of Deepwater

Blocks. In any case, the entire area (leaving aside the Discovery Area and

Development Area) would require to be relinquished at the end of 7 or 8 years of

exploration, as the case may be.

 Up to 100 percent participation by foreign companies.

 No signature, discovery or production bonus.

 No mandatory State participation.

 No carried interest by National Oil Companies (NOCs).

 No customs duty on imports required for petroleum operations.

 Income Tax Holiday for seven years from start of commercial production of

“Mineral Oil”.

 Biddable cost recovery limit: Up to 100 percent.

To expedite the activities in E & P sector of India, DGH was formed in late 90s.

Since then it has been working as the nodal agency for all E & P related

regulation. Recently DGH is trying at many international levels to market India’s

strong E & P potential.

 Option to amortize exploration and drilling expenditures over a period of 10

years from first commercial production.

 Sharing of profit petroleum with Government of India based on biddable Pre-

Tax investment multiple achieved by the contractor.

 Recent Mergers & Acquisitions

Activities in the industry:

In pre-liberalization era, there was not much scope of M & A as the complete field

was overly dominated by state players. But after 91 reforms and subsequent

initiation of liberal FDI policy, NELP etc some significant M&A have taken

place. Though the no is not much as far other sectors are concerned, but an

upward trend is inevitable.

Major Deals: A. ONGC Videsh Ltd: ONGC Videsh Limited (OVL), a wholly

owned subsidiary of ONGC, was rechristened on 15th June 1989 from the

erstwhile Hydrocarbons India Private Limited, which was incorporated on 5th

March, 1965. The primary business of OVL is to prospect for oil and gas acreages

abroad including acquisition of oil and gas fields exploration, development,

production, transportation and export of oil and gas. In recent times OVL has tried

to pursue acquisition or joint ventures in some strategically important international

oil and gas fields with some of the global leaders.

 1. Acquisition of Imperial Energy Corporation Plc. OVL acquired Imperial

Energy Corporation Plc., an independent upstream oil Exploration and Production

Company having its main activities in the Tomsk region of Western Siberia,

Russia on 13th January, 2009 at a total cost of USD 2.1 billion. Imperial’s

interests comprise of seven blocks in the Tomsk region i.e. Block 69, 70, 74, 77,

80, 85 and 86 with a total licensed area of approximately 16,800 square

kilometers. The Production licenses were granted to the Company during 2005 to

2008 and are valid till 2028 to 2031. As on 1st April 2010, OVL’s share of 2P

reserves in the project was 112.871 MMT (O+OEG). The post acquisition

developmental plans of Imperial Energy, which included the drilling of 32 wells

and construction of facilities, has resulted in the ramping up of its oil production

to above 16,000 bopd in December 2009 from around 6,000 bopd at the time of

acquisition. On the exploratory front, Imperial is focused on evolving a complete

geological understanding of its fields through various geological and geophysical

studies. During the year 2009-10, Imperial Energy drilled 12 exploration and

appraisal wells which have led to four new discoveries. The Exploration and

Developmental program for the year 2010 envisages drilling of 43 wells in

addition to construction of facilities coupled with infusion of new technologies /

techniques. OVL’s share in the oil production was 0.543 MMT during 2009-10 as
against 0.076 MMT during 2008-09. The Company has invested approx USD

2,335 million till 31st March 2010 in the project.

2. MRPL acquisition by ONGC:

Though MRPL (Mangalore Refinery and Petrochemicals Ltd) is not a direct E & P

player, ONGC acquired it in 2003 from AV Birla group (it was a JV between

HPCL and AV Birla group) and further infused equity capital of Rs.600 crores

thus making MRPL a majority held subsidiary of ONGC. Currently ONGC's

holding in MRPL is 71.62 percent.

3. Acquisition in Private sector:

a. RPL with RIL (Intra organization merger):

The merger of Reliance Petroleum Limited (RPL) with Reliance Industries

Limited (RIL) in 09 has enabled seamless integration of operational scale and

financial synergies that existed between the two Companies. Shareholders of RPL

received 1 share of RIL in lieu of every 16 shares of RPL held by them, as per the

scheme of merger.

b. In 2008, in the Refining & Marketing business, Reliance took over majority

control of Gulf Africa Petroleum Corporation (GAPCO) and started shipping

products to the East African markets.

c. IPCL acquisition by RIL: Indian Petrochemicals Corporation Limited (IPCL) –

an erstwhile PSU in the refining and polymer business was acquired by RIL in

2002 as a Govt of India divestment process.

d. Cairn Vedanta deal on the table:

Cairn India ltd (the Indian public arm of the London stock exchange listed

company Cairn Energy ltd) has working in the Indian E & P sector for past few

years. The most notable operating asset of the entity is the Barmar Oil field in

Rajasthan where it holds a 70% stake .The rest is with Indian PSU ONGC.

Apart from that it has interest in Cambay basin block and eastern offshore Rawa

oil and gas fields and has also owned some of new fields in the recent licensing

round held by Govt of India.

Recently the parent arm has planned to sell up to 51% of its Indian subsidiary to

Vedanta Resources Ltd (a London based mining and metal giant) for an estimated

$ 9.6 bn deal.

But, till now the deal has not reached any significant headway because of some

reasons such as: Govt intervention because it had a PSC (Production sharing

contract) with Govt of india and its current partner is already a Govt owned firm.

Apart from this – as crucial natural resource like Oil and Gas is under question,
some political opposition may also create some issue apart from legal or

procedural ones.

Names of industry bodies The basic administrative task in the sector is done by

Govt of India - Ministry of Petroleum and Natural Gas through the entity called

The Directorate General of Hydrocarbons (DGH).

It was established in 1993 under the administrative control of Ministry of

Petroleum & Natural Gas through Government of India Resolution. Objectives of

DGH are to promote sound management of the oil and natural gas resources

having a balanced regard for environment, safety, technological and economic

aspects of the petroleum activity.

Other prominent industry bodies are:

1. Oil Industry Development Board (OIDB) : Statutory body which receives

grants from the government out of the cess collected on crude oil production in the

country funded through The Oil Industry (Development) Act, 1974. 2.

Petroleum Conservation Research Association (PCRA): promotes awareness of

energy conservation and good practices in the use and application of energy. It is

originally formulated as Petroleum conservation action group in 1976 after Oil

shock in 1970 and subsequently turned into PCRA in 1978.

3. Oil Industry Safety Directorate: endeavors to lay down norms for the industry,

based on requirements to be complied with under various applicable statutes.

4. Centre for High Technology: provides a central place for data on technology

etc. to prevent repetitive acquisition of technology by the industry

6. Petroleum India International: an industry body to pool the expertise available

with the various petroleum companies and to commercially exploit it overseas

through offer of various petroleumrelated services.

5. Petroleum Planning and Analysis Cell: Subsequent to the dismantling of the

Administered Pricing Mechanism (APM) in the petroleum sector with effect from

1st April, 2002 Oil Coordination Committee was abolished and a new cell,

Petroleum Planning & Analysis Cell (PPAC) was created w.e.f. 1st April, 2002

under the Ministry of Petroleum and Natural Gas. As per Government’s directives,

the expenses of the cell are borne by OIDB by way of grant.

The functions of the PPAC are, administration of subsidy on PDS Kerosene and

domestic LPG, administration of freight subsidy for far flung areas, maintenance

of Information data bank and communication system to deal with emergencies and

unforeseen circumstances, analyzing the trends in the international oil Market and
domestic prices, forecasting and evaluation of petroleum import and export trends,

operationalizing the sector specific surcharge schemes, if any.

6. Petrofed: Petroleum federation of India is a federation of various organizations

in the petroleum sector established in 2002 in Delhi. Some of the basic objectives

of this fed are

• Function as a facilitator for the oil industry in India.

• Coordinate with governments, regulatory agencies and other representative

bodies in the petroleum industry.

• Work for global competitiveness of the petroleum industry.

• Optimize resources and integration effort.

• Promote Safety, Healthy Environment and Energy conservation.

• Coordinate with oil marketing companies for ensuring compliance of “Good

Business Practices”.
• Provide forums for deliberating issues of common interest to industry members.

• Organize Seminars, Conferences, Training programs, lectures and publication

of Technical papers & newsletters.

Some of the prominent international member of this federations are BP, Cairn

energy etc.

Recent Auction for Exploration Field in India

The Anil Agarwal led Vedanta Ltd has bagged 41 out of 55 oil and gas

exploration blocks offered in India’s maiden open acreage auction, upstream

regulator.

State owned Oil India Ltd won nine blocks, while Oil and Natural Gas Corp

(ONGC) managed to win just two. State gas utility GAIL, the upstream arm of

Bharat Petroleum Corp Ltd and Hindustan Oil Exploration Co. (HOEC) received

one block each.

Vedanta, which had put in bids for all the 55 blocks, won the right to explore and

produce oil and gas in 41 of them.

PM Narendra Modi has set a target of cutting the oil import bill by 10% to 67% by

2022 and half by 2030. Import dependence has increased since 2015, when Modi

had set the target. India currently imports 81% of its oil needs.

The new policy replaced the old system of government carving out areas and

bidding them out. It guarantees marketing and pricing freedom and moves away

from the production sharing model of previous rounds to a revenue sharing model,

where companies offering the maximum share of oil and gas to the government

are awarded the block.

The government has been selecting and demarcating areas it feels can be offered

for bidding in an exploration licensing round. So far 256 blocks had been offered

for exploration and production since 2000. The last bid round happened in 2010.

Of these, 254 blocks were awarded but as many as 156 have already been

relinquished due to poor prospects.

 BIBLOGRAPHY
1. Petroleum Economics: Issues and Strategies of Oil and Natural Gas
Production.
2. Oil and Gas in Federal Systems.
3. Oil and Gas Sector of India.
4. Petroleum and it’s product.

Conclusion
The new policy replaced the old system of government carving out the areas and

bidding them out. It guarantees marketing and pricing freedom and moves away

from the production sharing model of previous rounds to a revenue sharing model,

where companies offering the maximum share of oil and gas to the government are

awarded the block.

The government has been selecting and demarcating areas it feels can be offered

for bidding in an exploration and production since 2000. The last bid round

happened in 2010 of these, 254 blocks were awarded but as many as 156 have

already been relinquished due to poor prospects.