Transcript Overview of Petroleum & Natural Gas Sector & Regulatory Perspective in India.

Overview of Petroleum & Natural Gas
Sector & Regulatory Perspective in India
Top Primary Energy Consuming Countries 2005
2
Total World Energy Consumption: 10537 mtoe
 5th largest energy consumer (Share 3.7%
of global energy)
 Per capita energy consumption - about
one third of world average
 Energy consumption projection(2031-32)
 to grow at 5 % CAGR (8% GDP growth)
as per Integrated Energy Policy
 3.4% CAGR upto 2025 (GDP: 5%)
 Energy import dependence is 30% (26%
on account of oil & 4% for Coal +
Power) and is likely to climb to 40-45%
by 2025
 Oil import dependence is around 72%
currently. Likely to go upto 90% level
2500
2337
2000
Fig. in MTOE
1554
1500
1000
680
525
500
387
324
318
India
Germ any
Canada
0
USA
China
Russian
Fed
Japan
Per-capita Energy Consumption
8000
kgoe
7794
6000
4000
1674
512
2000
1138
1068
China
Brazil
0
World
Source – Energy Information Administration (EIA)
US
India
Primary Commercial Energy Mix
3
World
2003
10517
mtoe
Oil
38%
Coal
24%
Oth
Nucl2%
2%
2003-04
327
mtoe
Oil
33%
Coal
27%
Oth
Nucl 2%
6%
Oil
36%
Coal
51%
Gas
9%
Source – World: EIA-2006; India: IEP 2006
2030
18040 mtoe
CAGR: 2%
 Oil
& Gas continue
to play major role
Gas
26%
Gas
24%
India
World
Oth
Nucl 8%
5%
Oth
Nucl
8%
6%
India
Oil
29%
2031-32
1651 mtoe
CAGR: 6.2%
Coal
51%
Gas
12%
Coal & Oil continue to
play major role; Gas is
emerging
Crude Oil Demand, Production & Import Trends
4
MMT
300
230
200
107
132
190
100
0
75
32
99
33
40
40
2001-02
2005 06
2011-12
2031 32
Oil Demand
Production from existing fields & discoveries
To be met from imports & new discoveries
POL - Imports & Exports
5
US$ Billion

Crude Oil
Import
Gross crude and petroleum products
• Crude/product Imports
: ~ 28% of total imports
• Product Exports
: ~ 8% of total exports
Product
Export
Product
Import
India - A Net Exporter of Products
Refineries & Product Pipelines
6
Refining
Refining Capacity: 178 MMT
Product Pipelines
Product Pipelines Length: 12017 KM
Capacity:
68.17 MMT
Capacity Utilisation:
77%
Refineries in India
(1.4.08)
7
Bhatinda
(9.0)
Panipat
(6.0), (9.0)
Existing
Ongoing/Planned
Digboi
(0.7)
Bongaigaon
(2.4)
Guwahati Numaligarh
(3.0)
(1.0)
Mathura
(8.0)
Barauni
(6.0)
Jamnagar
(33.0, 29.0, 10.5
Baroda
(13.7)
BINA
(6.0)
Haldia
(6.0), (1.5)
Paradip
(15.0)
Mumbai
(12) (5.5)
(2.4)
Mangalore
(9.7, 5.3)
Cochin
(7.5, 2.0)
Visakh
(7.5, 7.5)
Tatipaka
(0.1, 0.1)
Chennai
(9.5, 1.7)
Narimanam
(1.0)
IndianOil
BPC
HPC
ONGC / MRPL
Reliance (Pvt.)
Essar(Pvt.)
Total
Nos MMTPA
10
60.2
3
22.5
2
13.0
2
9.8
2
62.0
1
10.5
20
178.0
Expected Refining Capacity by 2011-12: 200-235 MMTPA
India’s product demand & refining capacity
8
Gap between Refining Capacity & Demand
350
302
300
250
142
200
200
150
68
149
160
132
129
21
100
50
0
2007-08
2011-12
Refining Cap
2016-17
Product Demand
Surplus refining capacity is expected to increase further by 2030
Source: XI Plan Demand
India will continue to be product surplus
Import/Export requirement for crude/products to be quite substantial
Petroleum Products
Pipelines in India
Jalandhar
Ambala
Roorkee
Sangrur
Najibabad
Panipat
Meerut
NahorkatiyaTinsukia
Delhi
Rewari
Loni Shahjahanpur
Sanganer
Mathura
Siliguri Bongaigaon
Digboi
Ajmer
Jodhpur
Tundla
Numaligarh
Chaksu
Lucknow
Kanpur
Guwahati
Jagdishpur
Kot
Chittaurgarh
Barauni
Sidhpur
Ahmedabad
Rajbandh
Kandla
Ratlam
Navagam
Budge
Mundra
Jamnagar
Maurigram
Koyali
Budge
Indore
Vadinar
Dahej Ankleshwar
Haldia
Bhatinda
Hazira
Mumbai
High
Manmad
Paradip
Mumbai
Vizag
Pune Secunderabad
Uran
Pakni
Hazarwadi
Vijayawada
Mangalore
Bangalore
Chennai
Products
9893 KM; 64 MMTPA
LPG
2124 KM; 4.5 MMTPA
Capacity Utilization
Prods. - 78%; LPG - 62%
Sankari Asanur
Karur
Coimbatore
Trichy
Kochi
Madurai
Existing
Product
Crude Oil
On-going
Product
Crude Oil
Existing
LPG
9
Distribution & Marketing Infrastructure
10
Marketing Infrastructure
Terminals/Depots
No.
383
LPG Bottling Plants
No.
170
Aviation Fuel Stations
No.
126
Retail Outlets
No.
37953
LPG Distributors
No.
9366
SKO/LDO Dealers
No.
6614
Long Term Demand Supply - Gas
11
Gas Pipelines
in India
Length- ~ 11000 kms
Gas Consumption- 39
bcm
LNG Import - 8-9 MMT, 1
mmtpa spot)
Players- GAIL, GSPCL,
GGCL, RGTIL
Pipeline length is likely to
double in next 4-5 years
Total infrastructure inadequate to
meet the country’s requirements
12
Government of India Policies
13

Administered Pricing Mechanism (APM) dismantling effective
1.4.2002

Gas Pricing

NELP

Policy on Refining

Auto Fuel Policy

Policy on Marketing of Petroleum Products

Gas Pipeline Policy

Petroleum Product Pipeline Policy

FDI Policy
Key Decisions
on APM dismantling
APM Dismantling
– KeyTaken
decisions
14

Crude oil producers/Refineries to be paid on import parity
basis from Apr’02

Market determined prices for all products except LPG &
Kerosene from Apr’02

Subsidies for LPG/Kerosene from fiscal budget on flat rate
basis since Apr’02. Free float thereafter
Key –Decisions
APM dismantling
Gas Pricing
July 2005Taken
Govt.on
order
15

Consumer price of APM gas increased from Rs. 2,050/mscm to Rs.
3,200/mscm linked to calorific value of 10,000 kcal/scm pending Tariff
Comm. recommendations

All APM gas to be supplied to only power & fertiliser sector consumers
against existing allocation as well as for specific end consumers under
court orders/small consumers having allocation upto 0.05 mmscmd

Rest of consumers to be supplied at market related price

APM gas price for other than power & fertiliser sectors further increased
from Rs 3,200/mscm to Rs 3,840/mscm wef June 2006

As against APM gas price of around $ 1.8/mmbtu, free market gas price
varies e.g., RLNG @ $ 3.86/mmbtu, PMT gas @ $ 4.75/mmbtu, spot LNG
purchases @ $ 7-8/mmbtu, etc.
New Exploration & Licensing Policy (NELP)
16

NELP introduced in 1999; so far VIII rounds held

Internationally competitive fiscal regime

Transparent Process, International competitive bidding

Contractual Fiscal Stability

Excellent Tax Incentives

Special deepwater concessions

Freedom to market production domestically
Policy on Refining
17

Administered Pricing Mechanism (APM) dismantled
for refineries in April 1998

Setting up of refineries de-licensed in June 1998

Refineries may be set up subject to meeting statutory
requirements

Private refineries by RIL and Essar set up in India

Others JV refineries are under implementation
Auto Fuel Policy - Road map for Fuel Quality
improvement in India
18
Passenger Cars, LCV & Heavy Duty
diesel vehicles
2/3 wheelers
BS-II
BS-III
BS IV
Euro III Eq Euro IV Eq
BS-II
BS-III
11 Major cities
(Delhi/NCR, Mumbai,
Kolkata, Chennai,
Bangalore,
Hyderabad,
Ahmedabad, Pune,
Surat, Kanpur & Agra)
Done
by
1-Apr-03
Done
by
1-Apr-05
Done
by
1-Apr-03
Done
by
1-Apr-05
Entire Country
Done
by 1-Apr-05
Target
1-Apr-10
Done
By
1-Apr-05
Preferably
from
1.4.2008 but
Source: Auto Fuel Policy, GoI
Target
1-Apr-10
Sulphur content in ppm (max)
Fuel
Petrol
Diesel
BS-II
500
500
BS-III/Euro-III
150
350
BS-IV/Euro-IV
50
50
not later than
1.4.2010
Policy on Marketing of Petroleum Products
19

Marketing of petroleum products except
subsidized products allowed to private
companies

Marketing of Transportation Fuels authorised:
– Subject to entities making investment or proposing
to invest Rs. 20 billion in exploration / refining /
pipelines / terminals /infrastructure etc.
FDI Policy
20

Exploration
– Up to 100% FDI: Automatic route through Competitive bidding

Refining
– Up to 100% FDI
– Up to 49% FDI: if project taken up along with Public Sector
Undertakings

Marketing
– Up to 100% FDI permitted in petroleum products marketing

Petroleum Pipelines
– Up to 100% FDI: Under automatic route

Natural Gas Pipelines
– Up to 100% FDI: Under automatic route
Petroleum and Natural Gas
Regulatory Board
22
Need for Reform
Need for reform on account of Provision of level playing field
capital intensive activities requiring
heavy investments
promoting competition
inviting foreign capital
attuning oil & gas sector in line with
international practices
protection of consumer interest
PNGRB Act, 2006
Enacted by Parliament in March’06
 All provisions (except Section 16) of the Act
notified w.e.f. 1.10.2007
 PNGRB formally established w.e.f. 1.10.2007
 One Chairperson and four full time Members


Basic Objectives –
– To protect the interest of consumers and entities
– To ensure uninterrupted and adequate supply in all
parts of the country
– To provide level playing field
– To promote competitive markets
23
Salient Functions of the PNGRB
24
Fostering
fair trade &
competition
amongst
entities
Register
entities formarketing
petroleum,
petroleum
products &
natural gas
establishing &
operating LNG
terminals
establishing
storage facilities
Authorize
entities forLaying, building,
operating or
expanding a
common carrier
or contract
carrier for
transportation of
natural gas or
petroleum
products
Laying, building,
operating or
expanding city
or local natural
gas distribution
network
Functions of the PNGRB (contd.)
25
Declaring
pipelines
as
common
carrier or
contract
carrier &
specify
access
code for
allowing
access to
such
pipelines
In respect of
notified petroleum,
petroleum products
& natural gas Ensure
adequate
availability
Monitor prices &
take corrective
measures to
prevent
restrictive trade
practices
Enforce retail
service
obligations &
marketing
service
obligations
Lay down
technical
standards &
specifications
including
safety
standards in
activities
relating to
petroleum,
petroleum
products &
natural gas
PROCESS OF FRAMING & FINALISING REGULATIONS
26
Internal
Deliberations
in PNGRB
Draft
Regulations
approved by
Board
Draft
Regulations
posted in
public domain
Open House
on Final Draft
Comments
from
stakeholders
considered
Open House
with
Stakeholders
Legal Vetting
Notification in
Official
Gazette
Regulations
finalized &
approved by
Board
26
Regulations for CGD & NG Pipelines notified so far
27
Regulations for
Date Notified
Authorizing entities to lay, build, operate or expand CGD
Networks
19.03.08
Exclusivity for CGD Networks
19.03.08
Determination of Network Tariff for CGD Networks and
Compression Charge for CNG
19.03.08
Authorizing entities to lay, build, operate or expand natural gas
pipelines
06.05.08
Technical Standards & Specifications including Safety
Standards for CGD Networks
27.08.08
Affiliate Code of Conduct for entities in Transporting and
Distributing Natural Gas
17.07.08
Regulations for CGD & NG Pipelines notified so far
28
Regulations for
Date Notified
Access Code for common carrier or contract carrier natural
gas pipelines
17.07.08
Determination of pipeline tariff for natural gas pipelines
20.11.08
Guiding Principles for Declaring or Authorising Natural Gas
Pipeline as Common Carrier or Contract Carrier
21.04.09
Procedure for Development of Technical Standards and
Specifications including Safety Standards
14.05.09
Authorisation for CGD Networks
Bidding Criteria -
29
(weightage)
- Least PV of overall unit network tariff over economic
life of project - (40%)
- Least PV of compression charge for CNG over
economic life of project - (10%)
- Highest PV of “inch-kilometer” of steel pipeline
during exclusivity period - (20%)
- Highest PV of PNG domestic connections during
exclusivity period - (30%)
Exclusivity Criteria for CGD Networks
30

Two periods of exclusivity provided to promote flow of
investments –
– Exclusivity of infrastructure over its economic life of
25 years
– Marketing exclusivity of 5 years after which 3rd
party access to the network for marketing of natural
gas would be available on payment of network tariff

Network Tariff to be generally decided on bid basis
Authorisation for Natural Gas Pipelines
Bidding Criteria -
31
(weightage)
- Least PV of unit tariff for 1st tariff zone over economic
life of project - (40% & 70% for pipelines < 300 KM)
- Least percentage increase for determining incremental
tariff for 2nd tariff zone - (20%; nil for pipelines < 300
KM & 30% for pipelines > 300 KM < 600 KM)
- Least percentage increase for determining
incremental tariff for 3rd and subsequent tariff zones (10% & nil for pipelines < 600 KM)
- Highest PV of natural gas volumes - (30%)
Process for Grant of Authorization
Suo-motu by
Board
EOI
15
days
Open Advt.
in paper for
“Public
Consultatio
n process”
Reject
the
Proposal
Consequen
ce of
Default &
Termination
of
Authorizatio
n
32
30
days
15
Firm-up
“Authorized days
Area”
No entity
gets
selected.
Board may
go for re-bid
Invite Bids
60 days
(extendable by
30 days)
Bid evaluation
30 days
Grant of Authorization
90 days
Post authorization
monitoring of
activities /meeting
the service
obligations/Quality
of Standard norms
Gas Tie-up
30 days
Financial Closure
City Gas and CNG
33
– Present Scenario
•Total Number of CNG vehicles - 7 lakh
•Number of entities - 19
•Number of GAs
- 25
– Future Scenario (next three years)
•Total Number of GAs - 86
•Expected CNG vehicles - 25 lakh
– Future Scenario (next five years)
•Number of GAs - 125
•Expected CNG vehicles - 33 lakh
– Future Scenario (next ten years)
•Number of GAs - 250
•Expected CNG vehicles - 58 lakh
PNGRB - Major Tasks on Hand
34

Notification of Regulations

Declaring/Authorizing petroleum products &
natural gas pipelines and city gas distribution
networks on common carrier basis

Specifying market service and retail service
obligations to protect consumers’ interests

Fostering Fair Trade and Competition

Laying down Standards and Safety Norms
Thank you