Oil Gas

TEDDY
E N E R G Y S U P P LY
AT A GLANCE
Domestic crude oil production during 2006/07 increased by
5.6% over the previous year, while natural gas production for
2006/07 registered a decline of 2% from its value in 2005/06.
Equity oil acquisition abroad was noteworthy, as OVL (ONGC
Videsh Ltd) signed three MoUs (memoranda of understand-
ing) and one PSC (production sharing contract), and ac-
quired 20% stake in Iran’s Yadavaran Fields.
Refining capacity at the beginning of the Eleventh Five-year
Plan was 148.97 MTPA (million tonnes per annum), with
Introduction
refining capacity addition of 34.3 MTPA during the Tenth
Five-year Plan. Essar Oil Ltd commissioned its grass-root
W
ith the production of domestic
refinery at Vadinar, which had a capacity of 10.5 MTPA in crude oil remaining nearly
November 2006. The IOCL (Indian Oil Corporation Ltd) stagnant for the past 15 years,
expanded its refinery at Panipat by 6 MTPA in January 2007. the gap between the domestic demand
While the consumption of petroleum products increased by and supply is continuously on the rise.
7%, ATF (aviation turbine fuel) recorded maximum growth To meet the deficit demand, India
imported crude oil during 2006/07; the
among all products in 2006/07 over the previous year.
import dependency increased to over
GAIL (Gas Authority of India Ltd) commissioned three gas 75%. To improve domestic production of
pipelines during 2006/07, namely, Kelaras-Malanpur pipeline crude oil and natural gas, exploration
(95 km), Bijaipur–Kota pipeline (192 km), and Jagoti- was intensified through NELP (New
Pithambur pipeline (91 km). Exploration Licensing Policy). There was
After a lot of controversy over pricing of natural gas discov- a reduction in the number of crude oil
discoveries by private players during
ered by the RIL (Reliance Industries Ltd) in Krishna–Godavari
2006/07; however, the number of their
Basin, the EGoM (Empowered Group of Ministers) approved
discoveries was still more than that of
the price at $4.20/mBtu (million British thermal unit) includ- the NOCs (national oil companies). To
ing the pricing formula at landfall point as against $4.33 mBtu acquire oil blocks abroad, the OVL
proposed by the RIL. (ONGC Videsh Ltd) signed MoUs
The PNGRB (Petroleum and Natural Gas Regulatory Board) (memoranda of understanding) with
was notified on 1 October 2007 to regulate the downstream three foreign companies, namely,
segment of the sector. PetroEucador (Ecuador’s state oil
company), Petrobras (Brazilian oil
The government issued the Policy for Development of company), and INTEVEP (Instituto de
Natural Gas Transmission Pipelines and City or Local Natural Tecnología Venezolana para el Petróleo,
Gas Distribution Networks. subsidiary of NOC of Venezuela, PDVSA
[Petroleos de Venezuela SA]) and one
PSC (production sharing contract) with
CUPET (Cubapetroleo, the state oil
company of Republic of Cuba). The
OVL also acquired 20% stake in Iran’s
Yadavaran Fields.
TERI Energy Data Directory and Yearbook 2007
In the downstream, India achieved the target for On the regulatory front, there were significant
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refining capacity addition of 34.3 MTPA (million developments during the year. The PNGRB (Petro-
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tonnes per annum) in the Tenth Five-year Plan leum and Natural Gas Regulatory Board), set up in
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(2002–07). As of April 2007, India’s refining capac- June 2007 to regulate the downstream segment of
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ity is about 148 MTPA. The year witnessed setting the sector, was notified on 1 October 2007. The
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up of India’s third private sector refinery, with a ca- Government of India issued the Policy for Develop-
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pacity of 10.5 MTPA, by Essar, and capacity addi- ment of Natural Gas Transmission Pipelines and
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tion of 6 MTPA at the IOCL’s (Indian Oil City or Local Natural Gas Distribution Networks.
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Corporation Ltd) Panipat refinery. India, with its
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Crude oil production and discoveries
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growing surplus refining capacity, is seeking for
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opportunities to emerge as a refining hub. Increasing at the rate of about 5.6% over the previ-
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During 2006/07, price of crude oil showed high ous year, the crude oil production for 2006/07 was
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degree of volatility, starting from $65/bbl (barrel) in 33.98 MT (million tonnes), of which 11.33 MT was
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April 2006 and peaking at price above $70/bbl in onshore and 22.66 MT offshore. Details of crude oil
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July 2006. However, the price decreased sharply production by company and region are given in
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thereafter till January 2007 when it was about $50/ Tables I and II, respectively.
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bbl. Thereafter, it increased and hovered around Crude oil production has been almost stagnant for
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$65–70/bbl. the last 15 years. However, since 1996/97, produc-
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Debates and controversies regarding multiple gas tion by private/JVs (joint ventures) has registered a
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pricing mechanism in India intensified in 2006/07, CAGR (compounded annual growth rate) of about
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with the RIL (Reliance Industries Ltd) seeking the 13.6%, whereas total production of crude oil by two
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government’s approval for fixing the price of its gas NOCs – ONGC (Oil and Natural Gas Corporation)
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from KG (Krishna–Godavari) Basin. With the in- and OIL (Oil India Ltd) – taken together declined over
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creasing pressure from the Government of Andhra the years. This was mainly due to a decline in crude oil
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Pradesh, the Ministry of Power, and the Ministry of production of ONGC at CAGR of about 1% in the last
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Chemicals and Fertilizer to keep the prices low, the decade. Despite the high growth rate of private sec-
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Committee of Secretaries was asked to look into the tor/JVs in the oil production, the segment is still
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RIL’s proposal. Their report was reviewed and finally dominated by NOCs, accounting for about 85% of
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the matter was entrusted to the EGoM (Empowered the total crude oil production in 2006/07.
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Group of Ministers). The group approved the price The dominance of NOCs in crude oil production is
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at $4.20/mBtu (million British thermal unit) as mainly due to Bombay High offshore oilfields of
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against the proposed price of $4.33/mBtu at land- ONGC, which, even after 31 years of commercial
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fall point with minor modification in the formula. production, contributed about 80% of total offshore
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Table I
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Crude oil production (by company, in MT)

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Onshore Offshore
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Year OIL ONGC Private/ JV Total ONGC Private/JV Total Grand total
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1996/97 2.87 8.50 0.04 11.41 20.18 1.31 21.49 32.90

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1997/98 3.09 8.39 0.04 11.52 19.86 2.47 22.34 33.86

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1998/99 3.30 8.10 0.08 11.47 18.29 2.97 21.25 32.72

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1999/2000 3.28 7.92 0.09 11.30 16.73 3.92 20.65 31.95

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2000/01 3.28 8.43 0.09 12.01 16.63 3.79 20.42 32.42

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2001/02 3.18 8.64 0.07 11.89 16.07 4.07 20.14 32.03

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2002/03 2.95 8.45 0.08 11.47 17.56 4.01 21.57 33.04

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2003/04 3.00 8.38 0.07 11.46 17.68 4.24 21.92 33.38

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2004/05 3.20 8.32 0.07 11.59 18.16 4.23 22.39 33.98

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2005/06 3.23 8.10 0.10 11.43 16.31 4.45 20.76 32.19

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2006/07 3.11 8.06 0.16 11.33 17.99 4.67 22.66 33.99

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OIL – Oil India Ltd; ONGC – Oil and Natural Gas Corporation; JV – joint venture; MT – million tonnes
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Source PPAC (2007)

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76 Oil and gas

Table II
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Crude oil production (by region, in MT)
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Onshore Offshore
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Andhra Andhra
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Arunachal Pradesh/ Assam/ Onshore Pradesh/ Bombay Offshore
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Year Pradesh Tamil Nadu Nagaland Gujarat total Tamil Nadu High total Total
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1996/97 0.04 0.38 4.81 6.18 11.41 1.31 20.18 21.49 32.90
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1997/98 0.04 0.39 5.12 5.98 11.52 2.47 19.86 22.34 33.86
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1998/99 0.08 0.45 5.08 5.86 11.47 2.97 18.29 21.25 32.72
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1999/2000 0.10 0.52 4.97 5.70 11.30 3.92 16.73 20.65 31.95
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2000/01 0.08 0.70 5.20 5.82 11.79 4.01 16.63 20.64 32.43
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2001/02 0.07 0.72 5.10 6.00 11.89 4.07 16.07 20.14 32.03
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2002/03 0.07 0.70 4.66 6.04 11.47 4.01 17.56 21.57 33.04
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2003/04 0.08 0.66 4.59 6.13 11.46 4.24 17.68 21.92 33.37
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2004/05 0.08 0.62 4.70 6.19 11.59 4.23 18.16 22.39 33.98
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2005/06 0.10 0.60 4.47 6.25 11 .430 4.45 16.31 20 .760 32.19
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2006/07 0.12 0.61 4.39 6.21 11.33 4.67 17.99 22.66 33.99
Source PPAC (2007) ○
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production in 2006/07. But, production of this off- With the increasing crude oil imports, depend-
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shore field witnessed a decline between 1996/97 and ency on the Middle East region is also increasing. In
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2006/07, with a CAGR of about –1.1%, while other 2001/02, India imported about 68% of its crude oil
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offshore basins of Andhra Pradesh and Tamil Nadu from Middle East region, which increased to about
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gained ground. The CAGR of 13.5% in production, 73.5% in 2005/06.1 In Middle East, the country that
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since 1996/97, from these regions has been impres- accounts for maximum share of export to India is
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sive, resulting in increased production share, from Saudi Arabia, which accounts for nearly a quarter of
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about 6% in 1996/97 of total offshore production to our total imports.

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20% in 2006/07. With regard to onshore oilfields,

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Enhanced oil recovery/improved oil recovery

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production from the two major regions – north-

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eastern and western Gujarat – has remained nearly Recovery from the existing major fields by imple-
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stagnant between 1996/97 and 2006/07 (Table II). menting EOR (enhanced oil recovery)/IOR (im-
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Continuous increase in crude oil demand and

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stagnant domestic production have resulted in in-

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creased dependency on imported crude oil. This de-

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pendency has increased over the years to about 76%

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in 2006/07, with India importing 111.5 MT of crude

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oil valued at Rs 2192 billion. However, the depend-

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ence on imports for meeting domestic demand for

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crude oil was about 71% in 2006/07. With the in-

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creasing crude oil import dependency and prices, the

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fiscal strain on the economy is also increasing, with

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large foreign exchange outflow of about 38% of the

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total foreign exchange earnings of India in 2006/07.

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While the monetary value of crude oil has gone up

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about 12 times between 1996/97 and 2006/07, Figure 1 Increasing import dependency and
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quantum of import has increased nearly three

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fiscal strain
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times, from about 33 MT (1996/97) to 111.5 MT

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Source MoPNG (2007)

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(2006/07) (Figure 1).

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1
Rajya Sabha Unstarred Question No. 148, dated 25 July 2006; Ministry of Petroleum and Natural Gas, Government of India
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Oil and gas 77

proved oil recovery) schemes, in particular, is targeted Table III
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to improve India’s crude oil production. The ONGC Oil discoveries (by company)
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has completed 12 IOR/EOR projects and another six
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Year ONGC OIL Private/JV
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are under implementation. The estimated gain from
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these projects is placed at 110 MT by 2030. 2002/03 1 5 0
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Another measure to improve the crude oil posi- 2003/04 2 3 4
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tion is to intensify domestic exploration and pro-
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2004/05 2 3 5
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duction efforts to explore new fields and increase 2005/06 1 5 7
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the proven reserve base of the country.
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2006/07 1 0 4
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Oil exploration and discoveries ONGC – Oil and Natural Gas Corporation; OIL – Oil India Ltd;
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JV – joint venture
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Discoveries by the national oil
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Note Discoveries of type ‘oil and gas’ are included in the above table.
companies
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Source DGH (2007)
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The ONGC made a single oil discovery in 2006/07
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in Kalanpur-1 (KPAA) in South Assam shelf.2 In the
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first and second quarters of 2007/08, the ONGC in the Upper Assam oilfields between 2002/03 and
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made two crude oil discoveries in Assam and Assam 2005/06 and CEIL’s (Cairn Energy India Ltd)
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Arakan Basin, namely, Disangmukh-3 discovery and crude oil discoveries in 2003/04 in Rajasthan (RJ-
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Panidihing-6 discovery (ONGC 2007). All these ON-90/1) had been noteworthy, but during 2006/
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discoveries are still under evaluation by the DGH 07 and first quarter of 2007/08, both the companies
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(Directorate General of Hydrocarbons). Another did not make any crude oil discovery.
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NOC, OIL (Oil India Ltd), had not come up with

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any oil discovery during 2006/07. Natural gas production and discoveries
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The natural gas production for 2006/07 registered a

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Oil discoveries by private players/joint decline of 2% from its value in the previous year. It
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ventures was 31.56 BCM (billion cubic metres), of which

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Taking into account the discoveries made by private 9.27 BCM was onshore and 22.28 BCM offshore.
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players during 2006/07, the BGEPIL (BG Explora- Details of natural gas production, by company, are
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tion and Production India Ltd) discovered oil and gas given in Table IV.
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in Panna Mukta fields and the RIL discovered crude

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oil in KG-DWN-98/3 block, and named it as

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Dhirubhai-26. Another private player, the GSPC

Table IV
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(Gujarat State Petroleum Corporation Ltd), made

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Production of natural gas (by company, in BCM)

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two oil and gas discoveries in KG-OSN-2001/3 block

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and CB-ONN-2000/1 block during the same period. Year OIL ONGC Private/JV Total
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During the first and second quarters of 2007/08, 1996/97 1.50 21.28 0.48 23.26
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various private players discovered oil and gas. The

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1997/98 1.67 23.05 1.68 26.40

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EOL (Essar Oil Ltd) discovered oil in its Mehsana

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1998/99 1.71 22.84 2.87 27.43

onshore exploration block CBON-3 in Gujarat.
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1999/2000 1.73 23.25 3.47 28.45

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Essar, which is the operator, holds 70% interest in

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the block, while the ONGC has the remaining 30% 2000/01 1.86 24.02 3.60 29.48
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interest.3 The RIL discovered oil and gas in Cauvery 2001/02 1.62 24.04 4.05 29.71
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deep-water basin in CY-DWN-2001/2 block. Other

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2002/03 1.74 24.24 5.41 31.40

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oil and gas discoveries include discovery by the

2003/04 1.88 23.58 6.49 31.96
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GSPC in CB-ONN-2002/3 block and by Cairn En-

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2004/05 2.01 22.99 6.78 31.77

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ergy in Ravva fields.

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During 2006/07 and first quarter of 2007/08, the 2005/06 2.27 22.57 7.36 32.20
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NOCs and private players did not witness similar 2006/07 2.27 22.25 7.04 31.56
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success in terms of number of crude oil discoveries

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OIL – Oil India Ltd; ONGC – Oil and Natural Gas Corporation;
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as compared to past few years (Table III). For in- JV – joint venture; BCM – billion cubic metres
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stance, OIL made a number of crude oil discoveries Source MoPNG (2007); PPAC (2007)
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2
Details available at <http://www.gasandoil.com/goc/discover/dix70535.htm>, last accessed on 29 August 2007.
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3
Details available at <http://www.essar.com/oil&gas/news/2007_07_18.htm>, last accessed on 29 August 2007.
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78 Oil and gas

Unlike crude oil production in India since 1996/ Natural gas exploration and discoveries
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97, natural gas production has registered about 3% Discoveries by national oil companies
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CAGR. This is essentially due to significant increase
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During 2006/07, the ONGC made seven natural gas
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in gas production by private owners/JVs with a CAGR discoveries. It notified two gas discoveries in deep-
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of about 31%. However, there has not been any major
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water block, namely, KG-DWN-98/2 and KG- DW-
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increase (CAGR of about 0.74%) in gas production S1, three discoveries in western onland, namely,
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by the NOCs between 1996/97 and 2006/07. In
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Deloli, Mahelaj, and Wadsar, one discovery in
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spite of the increasing share of private owners/JVs Cauvery onland, that is, Adichapuram, and the last
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over the years, the gas production is still dominated
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discovery in Mahanadi deep waters in block MDW-2.
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by the NOCs. In 2006/07, the NOCs together ac- Total reserve accretion during 2006/07 by the ONGC
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counted for 77.69% of the total natural gas produc-
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was 65.56 MTOE (million tonnes of oil equivalent).4
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tion, down from about 98% in1996/97. The ONGC recorded few more discoveries dur-
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Similar to the dominance of north-eastern states
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ing the first and second quarters of 2007/08—one
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and Gujarat in onshore crude oil production, the discovery in Mahanadi Basin in MN-DWN-98/3
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areas mentioned in Table V jointly account for
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block on East Coast of India about 60 km off
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about 63% of the total onshore gas production in Paradip coast, one in North Agartala dome in North-
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2006/07; however, the share has declined when
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eastern region, and another one in KG Basin.
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compared to the production in 1996/97 (about
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82%). When the onshore basins of Andhra Pradesh Discoveries by private owners/joint ventures
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and Tamil Nadu are taken into account, the pro- The private companies and JVs also met with success
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duction performance seems to be impressive with
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in their exploration activities, and the major discov-

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CAGR of about 7% and 28%, respectively, between eries during the year are summarized in Table VI.
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1996/97 and 2006/07. They accounted for about

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Discoveries by Reliance Industries Ltd

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28% of total onshore gas production in 2006/07

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(Table V). Despite the growing share of onshore gas

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The RIL has made some significant oil and gas dis-
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production, India’s natural gas production was still coveries in 2006/07. The company announced two
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largely dependent on Bombay High offshore.

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major discoveries in KG Basin off the East Coast of

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Owned and operated by the ONGC, it contributed India. The first in KG-OSN-2001/1 (NELP-III)
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more than 98% of offshore gas production till block5 and the second in KG DWN 98/3 (KG D6) 6
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1999/2000, after which private owners/JVs had sig- block. These discoveries were named Dhirubhai-28
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nificant production growth.

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Table V
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Production of onshore natural gas (by region, in BCM)

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Andhra Arunachal Assam/

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Year Pradesh Pradesh Nagaland Gujarat Rajasthan Tamil Nadu Tripura Total
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1996/97 0.80 0.03 1.94 2.96 0.01 0.09 0.15 5.98

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1997/98 1.02 0.03 2.02 3.18 0.15 0.10 0.20 6.68

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1998/99 1.22 0.04 2.06 3.28 0.16 0.11 0.31 7.17

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1999/2000 1.36 0.04 2.08 3.27 0.15 0.14 0.35 7.40

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2000/01 1.60 0.03 2.20 3.15 0.16 0.20 0.38 7.73

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2001/02 1.80 0.03 1.99 3.28 0.10 0.35 0.42 7.97

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2002/03 2.04 0.04 2.05 3.53 0.16 0.47 0.45 8.73

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2003/04 1.93 0.04 2.20 3.52 0.17 0.61 0.51 8.97

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2004/05 1.71 0.04 2.25 3.71 0.21 0.68 0.50 9.09

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2005/06 1.66 0.05 2.41 3.83 0.24 0.91 0.48 9.58

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2006/07 1.53 0.04 2.53 3.29 0.24 1.13 0.52 9.27

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Source MoPNG (2007); PPAC (2007)

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4
Details available at <http://www.ongcindia.com/Download/June28_07_Investors_Meet.pdf>, last accessed on 9 August 2007.
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5
Details available at <http://www.ril.com/downloads/pdf/rilgd.pdf>, last accessed on 7 August 2007.
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6
Details available at <http://www.ril.com/downloads/pdf/130307.pdf>, last accessed on 7 August 2007.
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Oil and gas 79

Table VI
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Oil and gas discoveries by private players in 2006/07
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Month
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Block/field Bidding round Operator Name of discovery Oil/gas of discovery Present status
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Panna-Mukta Field BGEPIL SWP-1 Oil/gas May 2006 Declared commercial on
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16 August 2007
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RJ-ON-90/6 Pre-NELP Focus SGL#1 Gas May 2006 Under evaluation by operator
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KG-OSN-2001/3 NELP-II GSPC KG-17 Oil/gas June 2006 Under evaluation by operator
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KG-DWN-98/3 NELP-I RIL Dhirubhai-26 Oil June 2006 Under evaluation by operator
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CB-ON/2 Pre-NELP GSPC Tarapur-G Gas July 2006 Under evaluation by operator
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CB-ONN-2000/1 NELP-II GSPC Sanand East (1) Oil and gas July 2006 Under evaluation by operator
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KG-OSN-2001/1 NELP-III RIL Dhirubhai-28 Gas September 2006 Under evaluation by operator
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CY-OS/2 Pre-NELP HARDY FAN A-1 Gas January 2007 Under evaluation by operator
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KG-DWN-98/3 NELP-I RIL Dhirubhai-31 Gas March 2007 Under evaluation by operator
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NEC-OSN-97/2 NELP-I RIL Dhirubhai-32 Gas March 2007 Under evaluation by operator
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NELP – New Exploration Licensing Policy; GSPC – Gujarat State Petroleum Corporation; RIL – Reliance Industries Ltd;
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BGEPIL – British Gas Exploration and Production India Ltd
Source DGH (2007) ○
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and Dhirubhai-31, respectively. Other hydrocarbon Gas discoveries in the last four years have as-
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discoveries on the East Coast of India by the RIL in- sumed a new dimension. The RIL, for example,
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came up with a series of gas discoveries10 in KG-

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clude discovery in NEC OSN 97/2 (NEC 25)

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block. 7 The RIL also discovered natural gas in DWN-98/3, NEC-OSN-97/1, and NEC-OSN-97/2
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Saurashtra basin in SR-OS-94/1 block. during 2002/03 and 2005/06. The ONGC, on the
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The RIL made significant natural gas discoveries other hand, had most of the gas discoveries in KG
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during the first and second quarters of 2007/08. The deep-water basin. The recent gas discoveries fol-
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RIL made two natural gas discoveries in KG Basin. lowed similar pattern, unlike oil discoveries, com-
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The first in KG DWN 98/3 (KG D6) block8 and pared to the past gas discoveries (Table VII).
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the second in KG-DWN-98/1 block. The RIL

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announced a single discovery on the West Coast of Strategic oil reserves

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India in GS-OSN-2000/1 (GS01) block. For enhancing energy security and to safeguard the
○
country against the short-term supply disruption,

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Discoveries by other private players the government has approved setting up of 5 MT of

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The GSPC made two oil and gas discoveries in 2006.

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One was in block CB-ON/2, which was awarded to it

Table VII
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in pre-NELP round. HARDY Oil and Gas made gas

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discovery, named Fan-A-1, in Block CY-OS/2 in the Gas discoveries (by company)
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Cauvery Basin off India’s East Coast. HARDY, the

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Year ONGC OIL Private/JV

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operator of the block, has 75% interest in the block.

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2002/03 5 0 6
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Another discovery was made by the Focus Energy

2003/04 4 0 3
○
(formerly known as Phoenix Overseas Ltd). The com-

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2004/05 2 0 7
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pany discovered natural gas in Rajasthan block, Rj-ON-

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90/6. All these three discoveries are under evaluation.9 2005/06 9 0 8

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During the first and second quarters of 2007/08, 2006/07 9 0 8

○
the GSPC made two natural gas discoveries in ONGC – Oil and Natural Gas Corporation; OIL – Oil India Ltd;
○
○
Block KG-OSN-2001/3. JV – joint venture

○
Source DGH (2007)

○
○
○
7
Details available at <http://www.ril.com/downloads/pdf/130307.pdf>, last accessed on 7 August 2007.
○
8
Details available at <http://www.ril.com/rportal/jsp/eportal/media/PressRelease.jsp?id=410>, last accessed on 7 August 2007.
○
9
Details available at <http://www.gasandoil.com/goc/discover/dix72423.htm>, last accessed on 7 August 2007.
○
10
Both oil and gas were discovered in D-24 and D-25 blocks in 2005/06, while the rest were only gas discoveries.
○
○
80 Oil and gas

strategic storage of crude oil by 2012 at three loca- Table VIII
○
○
tions in the country, namely, Mangalore (1.5 MT), Details of six NELP rounds
○
Visakhapatnam (1.0 MT), and Padur near Udipi
○
Parameter NELP-I NELP-II NELP-III NELP-IV NELP-V NELP-VI
○
(2.5 MT). The government also plans to raise the
○
reserves to 15 MT in next phase. These reserves Number of blocks 48 25 27 24 20 55
○
○
would be in addition to the operating stocks in exist- offered
○
ing crude oil and petroleum products maintained by Number of blocks for 28 23 24 21 20 52
○
○
the oil companies. The reserve will be used essen- which bids have been
○
tially as a hedge against the short-term supply dis- received
○
○
ruptions. Number of bids 45 44 52 44 69 165
○
The estimated capital cost of the project is about
○
received
○
Rs 24 billion. In addition, the cost of crude oil would Number of blocks 24 23 23 20 20 52
○
be about Rs 90 billion at $55/bbl crude price. The
○
awarded
○
ISPRL (Indian Strategic Petroleum Reserves Ltd),
○
Number of production 24 23 23 20 20 52
a subsidiary of the OIDB (Oil Industry Develop-
○
sharing contract signed
○
ment Board), will carry out the implementation
○
Number of bids/block 0.90 1.76 1.93 1.82 3.40 3.00
and management of strategic storage of crude oil
○
○
(MoPNG 2007). Signed in April July February February September March
○
Several MoUs have been signed with China, 2000 2001 2003 2004 2005 2007
○
○
Japan, and Korea to tap their experiences in the NELP – New Exploration Licensing Policy
○
creation of strategic storage of crude oil and ex- Source DGH (2007); compiled from various reports
○
○
change information, technologies, and knowledge.

○
○
New Exploration Licensing Policy

○
○
To supplement exploration and development efforts acreages either through NELP route or OALP
○
○
by the NOCs, the Government of India took various (Open Acreage Licensing Policy), to be announced
○
policy measures. However, the outcome of these by the government (MoPNG 2007).
○
○
measures was not encouraging. In all, nine rounds Coming to the present status of NELP, there has
○
were organized from 1979 to 1995, resulting in a to- been a significant improvement in private sector par-
○
○
tal investment of $2 billion. In the ninth round, the ticipation under these rounds. Of the total 162
○
concept of JV blocks was mooted, which met with blocks, 55 blocks have been awarded to either private
○
○
moderate success. With this background, NELP companies or to a consortium of private companies.
○
was announced by the government in 1997/98. It Foreign companies have also been awarded seven
○
○
was operationalized in January 1999 to provide a blocks for exploration and they can bid without en-
○
level playing field in which all parties could com- tering any JVs (Table IX).
○
○
pete on equal terms for the award of exploration In the sixth round of NELP, of the 52 blocks that
○
acreage. So far, six rounds of bidding under NELP were awarded, ONGC bagged 24 blocks (12 deep-
○
○
have taken place, and the seventh round of bidding water blocks, two shallow water offshore, and 10
○
is expected to be announced in January 2008.11 onland), Reliance got seven blocks (all in deep wa-
○
○
In the first six rounds of NELP, a total of 162 ter), while OIL got six onland blocks. Naftogaz of
○
blocks have been awarded (Map 1). The area of Ukraine was awarded three onland blocks and Santos
○
○
Indian sedimentary basins, including deep water of Australia was awarded two deep-water blocks. The
○
is 3.14 million km2 (square kilometres), of which GSPC and Essar Oil signed for two blocks each.12
○
○
1.09 million km2 area is under exploration, which is Apart from these awardees, Cairn Energy,
○
about 35% of the area. The break-up of blocks (by Geoglobal, Focus, Petrogas, Prize Petroleum, and
○
○
rounds) awarded is summarized in Table VIII. GSPC–GAIL (Gas Authority of India Ltd) were
○
It is projected that by the end of the Eleventh awarded one block each.
○
○
Five-year Plan period, up to 65% of Indian sedi- A summary of the blocks offered under various
○
mentary basins will come up under exploration NELP rounds is given in Table IX.
○
○
○
○
○
11
http://www.indianexpress.com/story/238878.html ,last accessed on November 26,2007
○
12
Details available at <http://www.oilgas24.com/bm/Oil/Politics_and_Policy_oil/indian-government-signs-pacts-for-52-oil-and-gas-b.shtml>, last accessed
○
on 17 September 2007.
○
○
Oil and gas 81

82
Oil and gas
○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○
Table IX
○
○
Summary of the NELP rounds
○
○
NOC/NOCs JV Private companies/private JVs
○
○
JVs
○
○
(domestic Total
○
NOCs/ NOC– Domestic private + Foreign private/ Operational Blocks
○
○
Rounds NOC JV private JV private foreign) companies private-JV blocks relinquished
○
○
NELP-I 7 1 9 2 1 12 20 4
○
○
NELP-II 14 0 2 2 0 4 18 5
○
NELP-III 13 1 0 9 0 9 23 0
○
○
NELP-IV 13 5 0 2 0 2 20 0
○
○
NELP-V 3 9 3 3 2 8 20 0
○
○
NELP-VI 18 17 7 7 3 17 52 0
○
Blocks relinquished 6 0 1 1 1 3 12
○
○
Total blocks + 74 33 22 26 7 55 162
○
blocks relinquished
○
○
NOCs – national oil companies; JV – joint venture; NELP – New Exploration Licensing Policy
Source DGH (2007) ○
○
○
○
The government proposes to commence seventh Open Acreage Licensing Policy

○
○
round of bidding for about 60 oil and gas blocks The Government of India is examining the possibil-
○
covering an area of 0.4 million km2.13 The signifi-

○
ity of introducing OALP, which would allow foreign

○
cance of this round lies in the initiative of the gov- companies to bid round the year for blocks they
○
ernment to bring in, for the first time, the blocks

○
would like to have rather than the government offer-

○
located in Punjab, and Jammu and Kashmir. The ing the blocks for exploration from time to time.
○
Government of India expects that seventh round

○
Under this policy, blocks will be available through-

○
would display greater competitive environment in out the year. The companies can visit data room
○
terms of participation of foreign oil companies that

○
anytime, and if they find any block attractive, they can

○
had not participated earlier. This could be as a re- bid for it. Once a bid is received for a block, it
○
sult of the proposed changes in the BEC (bid evalu-

○
would be notified and other bids from interested

○
ation criteria) in NELP-VII (Box 1) compared to parties would be invited for that block within the
○
those in NELP-VI.
○
○
○
Box 1 Proposed changes in the New Exploration Licensing Policy-VII

○
○
○
As per NELP (New Exploration Licensing Policy)-VI, onland, shal- vided Indian and foreign companies have to bid together
○
○
low water, and deep water were categorized on the basis of for two categories of deep-water blocks, subject to the
○
prospectivity into Type-A and Type-B. NELP-VII proposed condition that foreign/Indian companies must hold a
○
○
changes in the bid evaluation parameters for each of these cat- minimum of 10% participating interest.
○
egories of blocks, which are as follows. Work programme For any type of block in NELP-VII, only the
○
○
Technical capability For onland and shallow water blocks, number of wells, and not their depths, would be the bidding
○
‘zero’ weightage/point has been assigned to this criterion, as parameter in work programme.
○
○
it is converted to a pre-qualification criterion. It was 15 points Introduction of Type-s block Among small size onland
○
in earlier round, which were transferred to the biddable work blocks, a new type (Type-S) has been introduced within the
○
○
programme criterion. For deep-water blocks, weightage has well-explored basins. Successful bidders/consortium will not
○
○
been increased by 10 points (from 20 to 30), which is given be allowed to transfer their blocks/their participating interest
○
new parameter ‘consortium/partnership’. till the completion of Phase-I work programme, and technical
○
○
• This has been introduced into BEC (bid evaluation crite- capability has been assigned zero weights for Type-S blocks.
○
ria) to encourage consortium/partnership initiative, pro- Source DGH (2007a)

○
○
○
○
13
Details available at <http://www.thehindubusinessline.com/2007/08/05/stories/2007080551170200.htm>, last accessed on 16 August 2007.
○
Oil and gas 83

stipulated period to make it a transparent and com- in India and Congo Brazzaville. The ENI acquired a
○
○
petitive process. Based on the bids received and 34% participating interest in the deep-water block MN-
○
their evaluation, blocks would be awarded. DWN-2002/1, and the OVL acquired from the ENI a
○
○
20% participating interest in the MTPN (Mer Très
○
Equity oil Profonde Nord) exploration block, located in the deep-
○
○
The OVL plays a leading role in acquiring equity oil water offshore of Congo Brazzaville.22
○
assets from overseas. Several MoUs were signed by The OVL and a subsidiary of SINOPEC (China
○
Petroleum and Chemical Corporation) in a 50:50 JV
○
the OVL with foreign companies during 2006/07 and
○
first quarter of 2007/08. has acquired Omimex (Omimex de Colombia Ltd)
○
from Texas-based Omimex Resources, Inc. Omimex
○
The OVL signed MoUs with PetroEucador, Ecua-
○
dor’s state oil company, to bid jointly for oil and gas has gross proved reserves of more than 300 million
○
blocks in Ecuador and other countries in July barrels of oil and current production of approxi-
○
○
2006.14 Two MoUs were signed by the OVL in Sep- mately 20 000 barrels of oil per day.23
○
tember 2006—one with Petrobras for exploration The OVL and its partner IPR Red Sea Inc. made a
○
○
and production of hydrocarbon resources onland as significant discovery in their first exploration well,
○
well as in shallow and deep-water areas in India, Bra- North Ramadan-1A, in the North Ramadan Conces-
○
sion, Gulf of Suez, Egypt. It is expected to produce
○
zil, and third-world countries,15 and another with
○
INTEVEP, a subsidiary of NOC of Venezuela, 2979 BOPD (barrels of oil per day) and 1.5 MSCF
○
(million standard cubic feet)/day of gas.24
○
PDVSA for skill development in various aspects of
○
exploration and production. 16 The OVL has bagged 20% participating interest
○
The OVL has also agreed to extend its MoU with ○
○
in Iran’s Yadavaran Field, which is estimated to yield
Gazprom (Russia’s gas company) for another two 60 000 bpd (barrels per day) of crude.25
○
years. It deals with the mutual cooperation in the hy- The OVL has won three offshore exploration
○
○
drocarbon and power sector in India, Russia, and blocks in Colombia—two blocks in collaboration
○
third countries.17 with Ecopetrol (the National Oil Company of

○
Colombia) and one block in collaboration with

○
The OVL has signed a PSC with CUPET for two

○
offshore exploration blocks, N-34 and N-35, 18 and Ecopetrol and Petrobras.26
○
ONGC Mittal Energy Ltd bagged an offshore

○
with the National Oil Corporation of Libya for Con-

○
tract Area 43.19 block, NCMA-2, in Trinidad and Tobago. The block
○
Another PSC was signed between the OVL and Viet- is estimated to have gas reserves of 2 TCF (trillion
○
○
nam Oil and Gas Corporation (PetroVietnam) for cubic feet).27

○
blocks 127 and 128, offshore Vietnam in the Phu Khanh Essar Energy Holdings, a part of the Essar
○
○
Basin.20 The OVL acquired 30% interest in six explo- group, acquired an offshore exploration block,
○
ration blocks 25, 26, 27, 28, 29, and 30 in Cuba.21 Block 226, in Nigeria through an open bidding
○
process. The block is estimated to have oil reserves

○
The OVL and ENI (Ente Nazionale Idrocarburi),

○
Italy, have signed two parallel agreements for the swap of more than 80 million barrels. 28
○
○
of participating interests in exploration blocks located

○
○
14
Details available at <http://ongcvidesh.com/display1.asp?fol_name=News&file_name=news120&get_pic=ovl_news&p_title=&curr_f=
○
120&tot_file=137>, last accessed on 29 August 2007.

○
15
○

○
16
Details available at <http://ongcvidesh.com/display1.asp?fol_name=News&file_name=news127&get_pic=ovl_news&p_title=&curr_
○
f=127&tot_file=137>, last accessed on 29 August 2007.

○
17
○

○
18
○
124&tot_file=137> ,last accessed on 29 August 2007.

○
19
○

○
20
Details available at <http://www.ongcindia.com/press_release.asp?d=&page=11>, last accessed on 29 October 2007.
○
21
○
22
○

○
23
○

○
24
○

○
25
Details available at <http://www.thehindubusinessline.com/2007/08/13/stories/2007081352030100.htm>, last accessed on 30 August
○
2007.
○
26
○
27
Details available at <http://www.sarkaritel.com/news_and_features/august2007/13ongc_mittal-gasblock.htm>, last accessed on 30 August
○
2007.
○
○
28
Details available at <http://www.gasandoil.com/goc/company/cna72852.htm>, last accessed on 30 August 2007.
84 Oil and gas

GAIL (India) Ltd signed a PSA (production Refining
○
○
sharing agreement) with Myanmar Oil and Gas En- As on 1 April 2007, the total installed refinery ca-
○
terprise, acquiring 30% stake in Block A-7 located
○
pacity of the country stood at 149 MTPA (million
○
in Rakhine offshore area in Myanmar, with Silver tonnes per annum), of which 105.5 MTPA was in
○
Wave Energy as consortium partner.29
○
public sector and the rest in private sector. The in-
○
crease in the capacity from 132 MTPA, as on 1 April
○
Gas contract 2006, accompanied capacity expansion of existing
○
○
Petronet LNG (liquefied natural gas) has entered refineries and commissioning of new refinery. The
○
into long-term sales and purchase agreement EOL commissioned a new refinery at Vadinar with a
○
with Rasgas in Doha for supply of approximately
○
refining capacity of 10.5 MTPA in November
○
1.25 MT (million tonnes) LNG, which was re- 200631 and the IOCL expanded its refinery at
○
ceived at PLL Dahej Terminal from July 2007.30
○
Panipat by 6 MTPA in January 2007. As on April
○
2007, there are 19 refineries operating in India, of
○
○
which 17 are in public sector and two in private sec-
○
tor (Table X and Map 2).
○
○
Table X
○
○
Refining capacity and capacity utilization of refineries in India, as on 1 April 2007
○
○
Refinery State Capacity (MTPA) Throughput (MT) Utilization (%)
○
○
Public sector
○
IOCL, Guwahati Assam ○
1.00 0.84 0.84
IOCL, Barauni Bihar 6.00 5.47 0.91
○
○
IOCL, Koyali Gujarat 13.70 12.95 0.95

○
IOCL, Haldia West Bengal 6.00 5.84 0.97

○
○
IOCL, Mathura Uttar Pradesh 8.00 8.88 1.11

○
IOCL, Digboi Assam 0.65 0.58 0.89

○
○
IOCL, Panipat Haryana 12.00 9.43 0.79

○
Total (IOCL) 47.35 43.99 0.93

○
○
HPCL, Mumbai Maharashtra 5.50 7.42 1.35

○
HPCL, Visakhapatnam Andhra Pradesh 7.50 9.23 1.23

○
Total (HPCL) 13.00 16.65 1.28

○
○
CPCL, Manali Tamil Nadu 9.50 9.78 1.03

○
CPCL, Narimanam Tamil Nadu 1.00 0.62 0.62

○
○
Total (CPCL)a 10.50 10.40 0.99

○
ONGC, Tatipaka Tamil Nadu 0.08 0.09 1.13

○
○
MRPL, Mangalore Karnataka 9.69 12.53 1.29

○
Total (ONGC) 9.77 12.62 1.29

○
BPCL, Mumbai Maharashtra 12.00 12.04 1.00

○
○
KRL, Kochib Kerala 7.50 7.74 1.03

○
BRPL, Bongaigaon Assam 2.35 2.50 1.06

○
○
NRL, Numaligarh Assam 3.00 2.13 0.71

○
Total (public sector) 105.47 108.07 1.02

○
○
Private sector
○
RIL, Jamnagar Gujarat 33.00 31.67 0.96

○
○
Essar Oil, Vadinar Gujarat 10.50 1.76 0.17

○
Total (private sector) 43.50 33.43 0.77

○
○
Grand total All India 148.97 141.50 0.95

○
IOCL – Indian Oil Corporation Ltd; HPCL – Hindustan Petroleum Corporation Ltd; BPCL – Bharat Petroleum Corporation Ltd; ONGC – Oil and Natural Gas Corporation;
○
CPCL – Chennai Petroleum Corporation Ltd; KRL – Kochi Refineries Ltd; BRPL– Bongaigaon Refinery and Petrochemicals Ltd; NRL – Numaligarh Refinery Ltd; MRPL –
○
○
Mangalore Refinery and Petrochemicals Ltd; RIL – Reliance Industries Ltd; MT – million tonnes; MTPA – million tonnes per annum
○
a A group company of the Indian Oil Corporation Ltd.

○
b The Ministry of Company Affairs approved the merger of the KRL with the BPCL on 18 August 2006.
○
Source PPAC (2007)

○
○
○
29
Details available at <http://www.gailonline.com/gailnewsite/mediacenter/mediacenter_pressrelease_Dec8.html>, last accessed on 30 August 2007.
○
30
Details available at <http://www.petronetlng.com/news_details.asp?fol_name=story&file_name=story5&get_pic=news_media>,
○
last accessed on 30 August 2007.

○
31
Details available at <http://www.essar.com/oil&gas/pr/2006_11_24.htm>, last accessed on 6 October 2007.
Oil and gas 85

86
Oil and gas
○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○
In 2006/07, aggregate refinery throughput Table XII indicates plans for capacity addition
○
○
achieved was 141.5 MT, registering an increase of during the Twelfth Five-year Plan period (2012/13 to
○
14.5% over the previous year. Capacity utilization 2016/17) (Planning commission 2006). A rough assess-
○
○
decreased marginally to 94.99% in 2006/07 from ment indicates that a refinery capacity of 61.31 MTPA
○
95.86% in 2005/06. This was partly due to the fact (43.29 MTPA under public sector and 18.02 MTPA
○
○
that the capacity of Essar refinery and expanded ca- under private sector) is expected to be added during
○
pacity of Panipat were available only for a part of this the Twelfth Plan. With this capacity addition, the total
○
○
year for processing crude oil. However, capacity utili- refining capacity in the country is likely to reach a level
○
zation at refineries such as the HPCL (Hindustan of 302 MTPA by 2017 (Table XII).
○
○
Petroleum Corporation Ltd) refineries, IOCL,
○
Koyali, and BPCL (Bharat Petroleum Corporation Refining margin
○
○
Ltd), Mumbai, increased substantially. Another aspect for the refining segment has been the
○
GRM (gross refinery margin) earned by the oil com-
○
Future capacity addition
○
panies. The IOCL earned an average GRM of $4.19/
○
After having achieved the capacity addition target of bbl in 2006/07 as against $4.60/bbl during 2005/
○
○
34 MTPA during the Tenth Plan (2002/03 to 2006/07), 06.33 For the HPCL, the GRM was $4.07/bbl in
○
capacity addition target for the Eleventh Plan (2007/08 2006/07.34 The BPCL registered a lower refining
○
○
to 2011/12) has been set much higher than the Tenth margin of $3.64/bbl for Mumbai Refinery and
○
Plan target. As per the targets mentioned in the working $0.46/bbl for Kochi Refinery.35 As against the GRM
○
○
group report, at the end of the Eleventh Five-year Plan, of public sector refineries, for Reliance, the GRM
○
the total installed capacity of the Indian refineries is ex- was much higher at $11.7 for 2006/07.36 The higher
○
○
pected to be about 241 MTPA, with capacity addition of GRM enjoyed by Reliance as against the public sec-
○
about 92 MTPA during the plan period. Details of the tor refineries is mainly explained by configuration of
○
○
capacity addition during the Eleventh Plan are summa- the RIL having capability to process less expensive
○
rized in Table XI. high-sulphur crude. The RIL refinery has the cata-
○
○
Among the refineries expected to come up in the lytic cracking and the delayed coking as the main
○
next five years, the most significant is the export- secondary processing units, with Nelson Complexity
○
○
oriented RPL (Reliance Petroleum Ltd) refinery Index of 9.93, which implies high flexibility to proc-
○
with a capacity of 29 MTPA. The refinery is planned ess variety of crude oil to achieve high value prod-
○
○
to come up at the Jamnagar SEZ (special economic ucts. This technological advantage is also supported
○
zone) in 2008/09 at an investment of about Rs 270 000 by the fact that worldwide availability of low-sulphur
○
○
million.32 Among the public sector refineries, the crude is expected to decline, and according to an
○
IOCL is expected to come up with a 15-MTPA estimate, high-priced low-sulphur crude will be
○
○
capacity refinery at Paradip, HPCL with a 9- replaced by cheaper high-sulphur crude by 2012.
○
MTPA capacity refinery at Bhatinda, and BPCL In view of the above, the government took some
○
○
with a 6-MTPA capacity refinery at Bina. steps including appointment of Shell Global
○
○
○
○
Table XI Table XII

○
○
Cumulative refining capacity and capacity Refining capacity (in MTPA) of public and
○
additions during Eleventh Plan (by year) (MT) private sectors at the end of Twelfth Plan
○
○
○
1 April 2007 2008 2009 2010 2011 2012 1 April 2007 2012 2017
○
Refining 148.97 158.70 194.70 210.21 225.88 240.96 Public sector 105.47 158.96 202.25
○
○
capacity Private sector 43.50 82.00 100.02

○
○
Capacity 9.73 36.00 15.51 15.67 15.08 Total refining capacity 148.97 240.96 302.27
○
addition
○
Source Planning Commission (2006)

○
Source Planning Commission (2006)

○
○
○
○
32
○
33
Details available at <http://www.iocl.com/FinancalResult2006-2007.aspx>, last accessed on 17 September 2007.
○
34
○
Details available at <http://www.thehindubusinessline.com/2007/05/30/stories/2007053005540100.htm>, last accessed on 17 September 2007.

○
35
Details available at <http://www.bharatpetroleum.com/investors/financials.asp?from=investor#5>, last accessed on 17 September 2007.
○
36
Annual financial results of the various companies.
○
Oil and gas 87

Solutions International, an internationally reputed India: emerging as a refining hub
○
○
consultancy organization based in the Netherlands,
○
It is recognized all over the world that rise in gross
to find out ways to improve refining margins of
○
refining margins will result in the creation of more
○
public sector refineries, in December 2006.
○
refining capacity in future. Global investment in the
○
Fuel quality refining sector, projected at about $770 billion
○
○
($30 billion per year) in real terms till 2030, supports
In keeping with the worldwide trend and in line with
○
the need to have more refining capacity in the future
○
the directives issued from time to time by the MoEF
○
(IEA 2006). But, due to environmental concerns and
(Ministry of Environment and Forests), MoRTH
○
high compliance costs, North American and Euro-
○
(Ministry of Road Transport and Highways), and
○
pean refineries are finding it uneconomical to invest
MoPNG (Ministry of Petroleum and Natural Gas),
○
in cleaner fuels in the future. This could give rise to
○
the refineries have embarked upon major time-bound
○
supply deficit in North America, Western Europe,
quality improvement programme for supply of de-
○
and Asia-Pacific. This offers great opportunity to
○
sired quality of petrol and diesel throughout the
○
India to export petroleum products to these regions,
country in a phased manner.
○
particularly to Asia-Pacific region, and emerge as a
○
In connection with this, The National Auto Fuel
○
refining hub. India is also looking into the feasibility
Policy, 2003, provided the time lines for introduction
○
of setting up refineries abroad, as indicated in Box 2.
○
of Bharat Stage II, Euro-III, and Euro-IV grade fuels
○
across the entire country. According to these time Foreign direct investment policy
○
○
lines, fuels complying with Euro-III were introduced
○ Before February 2000, the refining sector was not
in 13 cities, including metros, in April 2005. The
○
eligible for automatic route for FDI (foreign direct

○
policy recommends marketing of Euro-III-equiva-

investment), and NRI (non-resident Indian) and
○
lent quality MS (motor spirit)/HSD (high-speed

○
OCB (Overseas Corporate Body) investments.

○
diesel) in the entire country and Euro-IV- equivalent

Whenever any investor chose to invest, he had to
○
quality MS/HSD in the metros and other cities (total

○
make an application to the FIPD (Foreign Invest-

○
13 cities) by April 2010.

ment Promotion Division), where the RBI (Reserve
○
The refineries, in line with the Auto Fuel Policy,

○
Bank of India) acts as the concerned agency for

○
2003, have installed/installing various facilities.

monitoring/reporting. After February 2000, FDI/
○
Though some of the projects, concerned with the up-

○
NRI/OCB investment under the automatic route

○
grading of fuel quality, of public sector refineries have

has been allowed in private refining, where FDI
○
already been commissioned, some are scheduled for

○
up to 100% is permissible. However, FDI up to

○
completion by 2009 and 2010. To meet these targets,

only 26% is permitted in case of public sector un-
○
substantial investments are being made by the Indian

○
dertaking, a JV partner, through FIPD.

○
refineries. According to the estimates of the MoPNG,

In the context of this policy background, public
○
Indian refineries would be making an investment of

○
sector undertaking refinery HPCL’s plan of joining

○
about Rs 300 billion to improve the fuel quality in line

the LN Mittal group as its equal partner with 50%
○
with Auto Fuel Policy, 2003.

○
○
○
○
○
○
○
Box 2 Foray of Indian refineries abroad

○
○
○
○
Indian companies like Reliance, Essar, and IOC (Indian Oil Corpo- and the Middle East, as it seeks to expand its overseas assets.2
○
ration) are planning to set up refineries abroad, that is, near the The Essar Group plans to set up 300 000-barrels-per-day refinery
○
○
source of crude oil, for better availability of crude. Reliance In- at Bandar Abbas, Iran.3 The IOC is also planning to set up a
○
dustries plans to set up 50 000-barrels-per-day refinery in Greenfield refinery in Nigeria.4

○
○
Yemen,1 and is also eyeing acquisition of oil refineries in the US

○
○
○
1 Details available at <http://www.thehindubusinessline.com/2007/01/17/stories/2007011703570300.htm>, last accessed on 17 September 2007.

○
2
○
Details available at <http://www.domain-b.com/companies/companies_r/reliance_industries/20070612_acquisitions.htm>, last accessed on 17 September 2007.

○
3 Details available at <http://www.domain-b.com/news_review/200701jan/20070109newsa.html>, last accessed on 17 September 2007.

○
4 Details available at <http://economictimes.indiatimes.com/News/News_By_Company/CompaniesA-Z/I_Companies_/IOC_likely_to_join_4-

○
bn_Nigerian_LNG_project/articleshow/1259742.cms>, last accessed on 17 September 2007.

○
○
88 Oil and gas

stake in the Bhatinda Refinery was not permitted in
○
○
February 2007. But, later, the government cleared
○
the proposal allowing LN Mittal’s group to pick up
○
○
49% stake in this project on its own merit.
○
○
Petroleum products
○
○
Demand and supply of petroleum products
○
○
The consumption of petroleum products registered a
○
○
growth of about 5% in 2006/07 compared to the pre-
○
vious year (Table XIII). Due to rapid growth in the
○
○
aviation sector, consumption of ATF (aviation tur-
○
bine fuel) showed an increase of 21.49% over the
○
○
previous year. Lubes, which had the highest growth
○
rate during 2005/06 of 57.4%, recorded a negative
○
○
growth of –13.79% in 2006/07.
○
In 2006/07, HSD accounted for about 36% of the
○
○
total petroleum product sales, followed by naphtha/
○
NGL (natural gas liquid) with a share of about 12%
○
○
(Figure 2). LPG – liquefied petroleum gas; MS – motor spirit;
○
○ NGL – natural gas liquid; ATF – aviation turbine fuel;
Import and export of petroleum products ○
SKO – superior kerosene oil; HSD – high-speed diesel;

○
The total production of petroleum products was

○
LDO – light diesel oil; FO – fuel oil; LSHS – low sulphur

○
139.97 MT in 2006/07, up from 124.082 MT in heavy stock

○
2005/06. In comparison, domestic consumption of

○
Figure 2 Percentage share of different

○
petroleum products was less than the production petroleum products in total sales (2006/07)
○
(Table XIII), implying surplus production in 2005/

○
Source PPAC (2007)

○
06 and 2006/07. India witnessed surplus produc-

○
tion from 2001/02 onwards (Figure 3). With excess refining capacity and surplus produc-
○
○
tion, India has turned from net importer of petro-

○
leum products into net exporter of petroleum

○
Table XIII
○
products in 2001/02 (Figure 4). During 2006/07, In-

○
Consumption of petroleum products dia’s net export of petroleum products was 15.77 MT,
○
○
with imports being 16.96 MT and exports being

2005/06 2006/07(P) Percentage
○
32.74 MT. It resulted in net export earnings of

○
Product (MT) (MT) growth

about Rs 405 billion for the same year, which was
○
○
LPG 10.46 10.86 3.82 84% higher than the previous year.
○
MS 8.65 9.30 7.51

○
○
Naphtha/NGL 12.91 13.78 6.74

○
○
ATF 3.30 4.01 21.52

○
○
SKO 9.54 9.47 –0.73

○
HSD 40.19 42.88 6.69

○
○
LDO 0.88 0.72 –18.18

○
○
Lubes 2.08 1.79 –13.94

○
○
FO/LSHS 12.83 12.58 –1.95

○
Bitumen 3.51 3.85 9.69

○
○
Others 9.59 10.61 10.64

○
○
Total 113.94 119.85 5.19

○
○
LPG – liquefied petroleum gas; MS – motor spirit; NGL – natural

○
gas liquid; ATF – aviation turbine fuel; SKO – superior kerosene

○
Figure 3 Demand–supply position of petroleum

○
oil; HSD – high-speed diesel; LDO – light diesel oil; FO – fuel oil;
○
LSHS – low sulphur heavy stock; P – provisional estimate

products for the past six years in India (in MT)
○
Source PPAC (2007); MoPNG (2006)

○
Source MoPNG (2005/06); PPAC (2006)

○
Oil and gas 89

verted from product service to crude service with
○
○
some changes. With regard to the existing pipelines,
○
the IOCL owns and operates 1870 km long Salaya–
○
○
Mathura–Panipat pipeline that traverses from
○
Salaya (near Vadinar) in Jamnagar district on the
○
○
coast of Gujarat to supply crude oil to the Indian
○
Oil’s refineries at Koyali (Gujarat), Mathura (Uttar
○
○
Pradesh), and Panipat (Haryana), and 943-km long
○
Haldia–Barauni pipeline. India is also planning to
○
○
further extend pipeline network. For example, the
○
IOCL plans to commission a crude oil pipeline
○
○
from Paradip (Orissa) to Haldia in West Bengal at a
○
cost of Rs 11.54 billion by December 2007.38
○
○
○
Product pipelines
○
○
Figure 4 Net export of petroleum products in India Bulk transportation of petroleum products is under-
○
taken by various means, namely, pipelines, rail wag-
○
Source PPAC (2007); MoPNG (2006)
○
ons, tank lorries, and so on. Transportation by
○
pipelines offers several advantages over other means
○
○
of transportation. Pipelines cause no environmental
○
The exports of petroleum products in 2006/07 ○
damage, and these are safer and more reliable means
are dominated by diesel (about 11.6 MT), followed
○
of transportation. In 2006/07, the length of total

○
by naphtha (8.6 MT), petrol (3.7 MT), and jet product pipelines (including LPG pipelines) was
○
fuel (3.7 MT). Naphtha37 and LPG (liquefied pe-

○
9577 km, with a capacity of 50.9 MT (PPAC 2007)

○
troleum gas) form a major chunk in the imported (Table XIV and Map 4). The capacity utilization of
○
petroleum products. Despite India’s impressive

○
product pipelines has increased from 62.9% in 2005/

○
growth in export of petroleum products, net ex- 06 to 73.4% in 2006/07.

○
port earnings from petroleum products were only

○
○
about 19% of the crude import bill in 2006/07. Natural gas pipelines
○
○
Unlike crude oil and petroleum product pipeline

Pipelines
○
network, a limited domestic natural gas pipeline net-

○
Crude oil pipelines

○
work exists in India for the development of domestic

○
Each day, India uses large quantity of crude oil to natural gas markets. With the expected increase in
○
○
support petroleum demand of the country. While gas supply, India has been planning to extend present
○
many forms of transportation are used to move crude gas pipeline network.
○
○
oil to refineries, pipelines remain the safest, most ef-

○
ficient, and economical means. As on 31 March Domestic gas network

○
○
2007, the total length of crude oil pipelines in India GAIL (India) Ltd is the main player in transporting
○
was about 4218 km, which increased from 3971 km natural gas. However, with the discovery of natural
○
○
(as on April 2006). The increase in the length by gas at different places, private companies are also
○
247 km took place due to the extension of setting up pipelines.

○
○
Dhuliajan–Digboi–Bongaigaon–Barauni pipeline of GAIL owns and operates over 5300 km of natural

○
OIL from 1158 km to 1405 km. Capacity of pipe- gas pipelines, covering 11 Indian states.39 The most
○
○
line transporting crude from various supply centres important pipeline of the country is HBJ (Hajira–
○
to demand centres (Map 3) has also increased by Bijaipur–Jagdishpur) pipeline (Map 5)—a 2800-km
○
○
about 6.7 MT between April 2006 and April 2007 long pipeline with a capacity of 60 MSCMD
○
since Mundra–Panipat crude pipeline of the IOCL (million standard cubic metres per day). The plan of
○
○
started operating in 2007. This pipeline was con- commissioning India’s first major inland cross-country
○
○
○
○
○
○
37
Naphtha produced in India cannot be extensively consumed by the domestic market because of the presence of high aromatic content. Therefore, high
○
aromatic naphtha has to be exported. To meet the domestic naphtha demand, LAN (low aromatic naphtha) is imported (Mandal 2001 ).
○
38
Details available at <http://www.projectsmonitor.com/detailnews.asp?newsid=12488>, last accessed on 24 August 2007.
○
39
Gujarat, Rajasthan, Madhya Pradesh, Delhi, Haryana, Uttar Pradesh, Maharashtra, Tamil Nadu, Andhra Pradesh, Assam, and Tripura.
○
90 Oil and gas

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○
Oil and gas

91
92
Oil and gas
○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○
○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○
Oil and gas

93
Table XIV
○
○
Status of existing product pipelines in India
○
○
Length (km) Capacity in 2005/06 2005/06
○
○
(as on 1 Oil/gas 2006/07 throughput throughput
○
Existing pipelines April 2007) company (MT) (MT) (MT)
○
○
Product pipelines
○
○
Barauni–Patna–Kanpur 745 IOCL 5.30 4.18 4.05
○
○
Guwahati–Siliguri 435 IOCL 0.82 1.26 1.23
○
Haldia–Barauni 525 IOCL 1.25 0.87 0.96
○
○
Haldia–Mourigram–Rajbandh 277 IOCL 1.35 1.76 1.90
○
○
Koyali–Ahmedabad 116 IOCL 1.10 0.52 0.54
○
○
Koyali–Navgam 78 IOCL 1.80 0.23 0.07
○
Koyali–Viramgam–Sidhpur–Sanganer 1056 IOCL 4.10 2.06 3.01
○
○
Mathura–Jalandhar 763 IOCL 3.70 4.63 4.99
○
○
Panipat–Bhatinda 219 IOCL 1.50 2.51 1.29
○
Digboi–Tinsukia 75 IOCL 1.00 0.52 0.47
○
○
Mathura–Tundla 56 IOCL 1.20 0.25 0.25
○
○
Panipat–Rewari 155 IOCL
○
○
1.50 0.91 1.24
Chennai–Madurai 683 IOCL 1.73 0.13 0.82
○
Koyali–Dahe 103 IOCL 0.66 0.18

○
○
Mumbai–Manmad–Mangliya 610 BPCL 4.33 3.79 4.30

○
○
Mumbai–Pune 506 HPCL 3.67 2.78 3.24

○
○
Visakhapatnam–Vijayawada–Secunderabad 572 HPCL 5.38 2.88 3.50

○
Vadinar–Kandla 100 PIL 1.25 1.12 0.19

○
○
Kochi–Coimbatore 292 PIL 3.30 1.10 1.22

○
○
Mangalore–Hassan–Bangalore 361 PIL 2.14 1.01 1.44

○
○
Subtotal 7727 47.08 32.51 34.89

○
LPG pipelines
○
○
Jamnagar–Loni 1250 GAIL 2.5 1.91 2.03

○
○
Visakhapatnam–Vijaywada–Secunderabad 600 GAIL 1.33 0.32 0.46

○
○
Subtotal 1850 3.83 2.23 2.49

○
Grand total 9577 50.91 34.74 37.38

○
○
IOCL – Indian Oil Corporation Ltd; BPCL – Bharat Petroleum Corporation Ltd; HPCL – Hindustan Petroleum Corporation Ltd;
○
○
PIL – Petronet India Ltd; GAIL – Gas Authority of India Ltd; MT – million tonnes
○
Source PPAC (2007)

○
○
○
HBJ gas pipeline, passing through Gujarat, Madhya Basin (8.6 km), Mumbai Ex-Uran Terminal
○
○
Pradesh, Rajasthan, Uttar Pradesh, Haryana, and (124.70 km), Rajasthan (Jaisalmer Basin), Cauvery
○
Delhi, was initiated in 1986, while it finally got com- Basin (163 km), and Tripura–Arakan Basin (59.71 km).
○
○
missioned in March 1997. This pipeline supplies gas These regional pipelines were constructed and operated
○
mainly to the power and fertilizer sector in the west- by the ONGC and others (like OIL, Ravva, and so on),
○
○
ern and northern India. but GAIL took over these regional gas pipelines as per
○
In addition to the HBJ pipeline, there are regional the government directive in June 199240 (Map 6).
○
○
gas pipelines of varying sizes in the North Gujarat re- However, with the growing demand for gas and
○
gion (142 km), South Gujarat region (257.2 km), series of gas discoveries in the last five years in all
○
○
Andhra Pradesh KG Basin (728 km), Assam–Arakan parts of the country (KG Basin, Mahanadi Basin,
○
○
○
○
40
Details available at <http://gail.nic.in/gailnewsite/businesses/gastransmissionregionalpipelines.html>, last accessed on 4 September 2007.
○
94 Oil and gas

○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○ ○
Oil and gas

95
Rajasthan, and so on), building up of nationwide 3 876-km long Jagdishpur–Haldia pipeline passing
○
○
gas pipeline network is considered necessary. In ad- through West Bengal, Jharkhand, Bihar, and Uttar
○
dition, LNG terminals on western coasts have been Pradesh
○
○
commissioned to bridge the increasing demand–sup- 4 730-km long Dabhol–Bangalore pipeline passing
○
ply gap. In view of this, GAIL commissioned five through Maharashtra and Karnataka
○
○
major pipeline projects,41 involving total actual cost 5 840-km long Kochi–Kanjirkkod–Bangalore and
○
of Rs 41.42 billion against the approved cost of Mangalore pipeline passing through Kerala, Tamil
○
○
Rs 51.13 billion between 2001 and 2006. Nadu, and Karnataka
○
The first quarter of 2007/08 has been very signifi-
○
○
cant as GAIL commissioned four pipelines, de- Reliance is the private player involved in the laying
○
scribed as follows. of gas pipelines through its wholly owned subsidiary,
○
○
95-km long Kelaras–Malanpur pipeline, with a ca- RGTIL (Reliance Gas Transportation and Infrastruc-
○
pacity to carry 2 MSCMD of gas in July 2006 for ture Company Ltd). The RGTIL is constructing
○
○
supplying gas to customers in Gwalior and Malanpur Kakinada–Hyderabad–Uran–Ahmedabad pipeline
○
in Madhya Pradesh. The gas supplied through this (1385-km long) for transporting gas from the KG Basin
○
○
pipeline will also support the city gas distribution to the consumers in Maharashtra and Gujarat. The
○
projects in Gwalior.The Kelaras–Malanpur pipeline RGTIL has also been granted authorization for the
○
○
is linked to the HBJ pipeline system.42 Vijaywada–Nellore–Chennai pipeline and its extension
○
192-km long Bijaipur–Kota pipeline, with a capacity to Tuticorin and Bangalore–Mangalore.These pipelines
○
○
of 3.47 MSCMD gas (as of December 2006) to fulfil would connect parts of Andhra Pradesh, Tamil Nadu,
○
the demand of Chambal Fertilizers, Sriram Fertiliz- and Karnataka to the Krishna–Godavari field.46
○
○
ers, Chambal Power, and other consumers.

○
Jagoti–Pithambur pipeline (91 km), with a capacity Import pipelines

○
○
of 3 MSCMD to cater to the demand of Ujjain India has been facing natural gas supply deficit over
○
(0.5 MSCMD), Dewas (0.5 MSCMD), Indore city the years. In 2005/06, natural gas deficit was
○
○
gas (0.5 MSCMD), and Pithampur (1.5 MSCMD). 61 MSCMD, with demand being 148 MSCMD of
○
The project was completed in March 2007. natural gas and supply being 87 MSCMD. In view
○
○
Dahej–Panvel–Dabhol pipeline (581 km), with a of this deficit, India has been planning to import
○
capacity of 12 MSCMD (as of July 2007) to carry natural gas through transnational pipelines and/or
○
○
R-LNG from Petronet LNG Ltd’s terminal at LNG terminals. Much talked about gas
○
Dahej to Dabhol. The pipeline will supply natural transnational pipelines are discussed below.
○
○
gas to the Dabhol Power Plant of RGPPL

○
(Ratnagiri Gas and Power Pvt Ltd), and thus Iran–Pakistan–India pipeline
○
○
help in the revival of the power plant. 43 Iran–Pakistan–India pipeline has been proposed for im-
○
porting natural gas from Iran into India and Pakistan.

○
○
Future plans The proposed pipeline is 2300-km long, with an esti-

○
GAIL plans to raise the carrying capacity of its pipe- mated cost of $7.5 billion.The first deliveries from gas-
○
○
lines to 300 MSCMD by the end of 2012.44 For rich Iran are expected in 2011.47 For a long time, the
○
achieving this target, GAIL has already sought approval political tension between India and Pakistan prevented
○
○
for the following five new natural gas pipelines.45 India to accept the Iran–Pakistan–India pipeline
○
1 610-km long Dadri–Bawana–Nangal pipeline project. Once India agreed to be part of the project,
○
○
passing through Uttar Pradesh, Delhi, Haryana, the deal received another setback on pricing issue
○
and Punjab, when Iran demanded a price of $7.2/mBtu of gas

○
○
2 310-km long Chainsa–Gurgaon–Jhajjhar–Hissar against India’s offer of $4.2/mBtu. India and

○
pipeline passing through Haryana and Rajasthan Pakistan finally agreed to pay Iran $4.93/mBtu for
○
○
○
41
Jamnagar–Loni LPG (liquefied petroleum gas) pipeline, Lanco–Kondapalli pipeline, Vizag–Secunderabad LPG pipeline, Dahej–Bijaipur pipeline,
○
○
and Thulendu–Phulpur pipeline.

○
42
Details available at <http://news.oneindia.in/2006/07/29/gail-commissions-kelaras-malanpur-pipeline-on-schedule-1154181817.html>, last accessed on
○
5 September.
○
43
Details available at <http://www.gailonline.com/gailnewsite/mediacenter/pressrelease_July14_07.html>, last accessed on 10 October 2007.
○
44
Details available at <http://www.hindu.com/2007/08/16/stories/2007081660601600.htm>, last accessed on 29 August 2007.
○
45
Details available at <http://www.hindu.com/2007/08/19/stories/2007081960351500.htm>, last accessed on 29 August 2007.
○
46
Details available at <http://www.energy-daily.com/reports/Iran_Pakistan_India_Agree_Gas_Price_For_Transnational_Pipeline_999.html>, last accessed
○
○
on 29 august 2007.
○
47
Details available at <http://en.wikipedia.org/wiki/Iran-Pakistan-India_gas_pipeline>, last accessed on 29 August 2007.
○
96 Oil and gas

its gas.48 However, still few issues remain to be fully re- eral MoU, which were not acceptable to India. As no
○
○
solved such as transit fee to Pakistan. agreement could be reached with Bangladesh on the
○
pipeline project, India decided to examine to re-route
○
○
Turkmenistan–Afghanistan–Pakistan the pipeline, bypassing Bangladesh to the detriment of
○
The governments of TAP (Turkmenistan–Afghani- both Bangladesh and India. In a major turn of events,
○
○
stan–Pakistan) proposed the transnational gas pipe- in July 2007, the Government of Myanmar cancelled
○
line to exploit the available gas reserves in contract with GAIL to source natural gas from A1 and
○
○
Turkmenistan. The Pakistan government has A3 blocks in Rakhine Offshore in Myanmar and gave
○
awarded the contract for laying the TAP gas pipeline it to China. The fields off the Rakhine coast have
○
○
project to the US-based IOC (International Oil proven reserves of 5.7–10 TCF of natural gas.52
○
Company), which is estimated to cost $10 billion.
○
Liquefied natural gas terminals
○
The ADB (Asian Development Bank)-funded pipe-
○
line is supposed to carry 30 BCM of gas per year In order to bridge the gap between demand and supply,
○
○
from Turkmenistan to Afghanistan and Pakistan.49 In one of the options considered has been to import natu-
○
order to meet its growing demand for gas, India has ral gas in liquefied form, commonly refer to as LNG.
○
○
also agreed to participate in the ADB-assisted TAP Further, to encourage the import of LNG, it has been
○
project.50 The pipeline would stretch from the placed under OGL (open general licence) list, and
○
○
Turkmenistan/Afghanistan border in south-eastern 100% FDI has been permitted in setting up LNG ter-
○
Turkmenistan to Multan, Pakistan (1271 km), with minals. At present, there are two operational LNG ter-
○
○
an extension of 640 km to India.51 minals, namely, Dahej LNG Terminal of 6.5–MTPA
○
capacity and Hazira terminal of 2.5–MTPA capacity.
○
○
Myanmar–India pipeline Commissioning of Dabhol Terminal at Maharashtra got

○
India has also been keen to import natural gas from delayed due to discontinuation of construction activities
○
○
Myanmar, and proposed a pipeline linking due to collapse of Enron (original promoter of LNG ter-
○
Myanmar, Bangladesh, and India. However, Bang- minal). Details of the present and forthcoming LNG
○
○
ladesh was putting bilateral preconditions in trilat- terminals are given in Table XV.
○
○
Table XV
○
○
Existing and proposed liquefied natural gas terminals in India

○
Project and developer Location (state) Capacity (MTPA) Supplier Status

○
○
Dahej LNG terminal (Petronet) Dahej (Gujarat) 6.5 (to be expanded to 10) Rasgas (Qatar-based Commissioned in February
○
○
LNG supply company) 2004 and commercial

○
and spot cargoes sales began in April 2004

○
○
Hazira LNG (Shell) Hazira (Gujarat) 2.5 (phase I) Spot cargoes Commissioned in
○
○
April 2005
○
Dabhol terminal (owned by Dabhol 5.0 Yet to be finalized 75% complete;

○
○
Ratnagiri Gas and Power (Maharashtra) commissioning delayed

○
Company) due to no firm supply

○
○
contracts
○
○
Kochi LNG (Petronet) Kochi (Kerala) 2.5 Yet to be finalized Project expected to be
○
completed by 2011
○
○
Ennore LNG (IOCL, CPCL) Ennore 2.5 Yet to be finalized Planned

○
(Tamil Nadu)
○
○
Mangalore ONGC and MRPL Mangalore 2.5 Yet to be finalized Planned

○
○
(Karnataka)
○
LNG – liquefied natural gas; IOCL – Indian Oil Corporation Ltd; CPCL – Chennai Petroleum Corporation Ltd; MRPL – Mangalore Refinery
○
○
and Petrochemicals Ltd; ONGC – Oil and Natural Gas Corporation; MTPA – million tonnes per annum
○
Source TERI compilation

○
○
○
48
○
Details available at <http://www.brecorder.com/index.php?id=608826&currPageNo=1&query=&search=&term=&supDate=>,

○
last accessed on 29 August 2007.

○
49
Details available at <http://www.indiadaily.com/editorial/8953.asp>, last accessed on 29 August 2007.
○
50
Details available at <http://www.tribuneindia.com/2006/20060520/nation.htm#7>, last accessed on 29 August 2007.
○
51
Details available at <http://www.projectsmonitor.com/detailnews.asp?newsid=14333>, accessed on 29 august 2007.
○
52
Details available at <http://ppac.org.in/OPM/Indian_basket_crude_Aug.pdf>, last accessed on 8 October 2007.
Oil and gas 97

Pricing
○
○
Crude pricing
○
○
With effect from 1 April 2006, the composition of
○
○
Indian basket is based on total industry processing of
○
sweet and sour crude oil and represents FOB (Free
○
○
on Board) prices of average Oman/Dubai crude for
○
sour and Brent (dated) for sweet grade in the ratio of
○
○
59.8:40.2.53
○
During 2006/07, prices of crude oil showed high
○
○
degree of volatility. The first quarter of this year
○
witnessed a sharp rise in crude price, which went on
○
○
increasing up to August 2006, starting from
○
monthly average price of $65/bbl in April 2006 and
○
○
peaking at monthly average price above $70/bbl in
○
July 2006. However, crude oil prices decreased Figure 5 Price of Indian crude basket
○
Source <http://www.iocl.com/crude_price.aspx>
○
sharply from July 2006 till January 2007 and were
○
about $50 in January 2007. Thereafter, they in-
○
○
creased and hovered around $65–70/bbl in July price, and so on in the issue price to keep them whole
○
2007 (Figure 5). Further, it reached above $70/bbl but that was not permitted in actual practice. Thus,
again in July–August 2007. ○
○
○ OMCs were experiencing increasingly large under-
recoveries in the marketing of MS/HSD, domestic
○
Petroleum prices and subsidies

○
LPG, and PDS kerosene.

○
Petroleum pricing
○
Prices of all petroleum products were decontrolled, ef- Gross under-recoveries by oil-marketing
○
companies
○
fective from 1 April 1998, except five commodities,

○
namely, petrol, diesel, domestic LPG, PDS (public dis-

○
To take care of mounting under-recoveries suffered

○
tribution system) kerosene, and ATF.While ATF prices by the OMCs, the government came out with the
○
were decontrolled in April 2001, APM (administered

○
formula of sharing them amongst upstream PSU

○
pricing mechanism) continued for the other four prod- (public sector undertaking) oil companies, govern-
○
ucts till 31 March 2002. With the dismantling of APM

○
ment, and OMCs.

○
from 1 April 2002, oil companies were allowed the free- The manner of distribution of the financial bur-
○
dom to sell their products, except domestic LPG and

○
den of under-recoveries of OMCs, in 2006/07, is

○
PDS kerosene, at market-determined prices. Accord- given in Table XVI.

○
ingly, OMCs (oil-marketing companies) started an-

○
Table XVI
○
nouncing prices of MS/HSD every fortnight in line

○
with import parity. The marketing oil companies were Distribution of under-recoveries over the years
○
○
informally consulting the government before imple- (Rs billion)

○
menting changes in prices in the market place. This

○
2005/06 2006/07
○
process continued till the later part of 2003 when inter-

○
Petrol 27.23 20.27

national prices showed sharp increase. Hence, the gov-
○
Diesel 126.47 187.76

○
ernment did not permit its oil companies to increase

○
market prices in line with international prices. Further PDS kerosene 143.84 178.83
○
○
increases permitted by the government from time to Domestic LPG 102.46 107.01
○
time were far from adequate, resulting in huge under-

○
Total 400 493.87

○
recoveries to the OMCs.

○
Contribution by upstream companies 140 205.07

○
Even though decision had been taken to phase

Oil bonds 115 241.21
○
out subsidy for domestic LPG and PDS kerosene in

○
Borne by OMCs 145 47.59

○
a period of three years, it has continued at one-

○
third level so far. In addition, subsidies being fixed PDS – public distribution system; LPG – liquefied petroleum gas;
○
OMCs – oil-marketing companies

○
amount, OMCs were to reflect increases in FOB

○
Source PPAC (2007); compiled from various newspaper reports

○
○
○
53
In so far as the Indian gas market is concerned, traditionally, the gas produced by the NOCs (national oil companies) (Oil and Natural Gas Corpo-
○
ration and Oil India Ltd) has been sold at a controlled price linked to a basket of fuels oils.
○
98 Oil and gas

Taxation Administered pricing mechanism gas
○
○
Taxes and duties on petrol and diesel Gas produced by the ONGC and OIL from the
○
On the one hand, the OMCs have been suffering under- nominated blocks, also known as APM gas, is supplied
○
○
recoveries on selling MS and HSD, on the other, the through GAIL at the government-controlled price of
○
government earns huge amount of taxes and duties from $1.97/mBtu to the power and fertilizer sectors and
○
○
these two products.Table XVII shows tax and duty bur- specific end-users, as committed under court orders/
○
den on these products (as of March 2007). small-scale consumers having allocations up to
○
○
Table XVII indicates that excise duty component ac- 0.05 MSCMD. The APM gas pricing is referred to
○
counts for the largest share of the RSP (retail selling the Tariff Commission for recommendation based on
○
○
price) of these two products. For example, in case of which the Government of India sets the price from
○
MS, it was 34% and for HSD, it was 16% of the RSP. time to time.
○
○
Apart from excise duty, the present share of sales tax
○
is also quite high for MS (15%) and HSD (10%). Cus- Gas from pre-New Exploration
○
○
toms duty components for these two products are least Licensing Policy joint venture blocks
○
among all taxes and duties. In line with the recommen- Natural gas is also being produced from the pre-
○
○
dations of the Rangarajan Committee, the customs duty NELP JV blocks. Once a market-determined price
○
on MS and HSD has been reduced to 7.5% from 10%, has been discovered between the parties through a
○
○
which comes to 3% for MS and 5% for HSD of the transparent competitive bidding process with spe-
○
RSP of these two (as of March 2007). cific sets of terms and conditions, the government
○
○
legally does not interfere with the gas pricing. In
○
Gas pricing ○
○
view of the continuous pricing process for private/
Natural gas market is still at a nascent and evolution- JVs in March 2005, PMT (Panna–Mukta–Tapti)
○
ary stage in India, and hence, its market has not yet consortium agreed to supply 6 MSCMD of gas to
○
○
acquired a fully integrated character.54 In fact, multi- GAIL for one year at $3.86/mBtu and to other end-
○
ple gas prices exist in India. users at $4.08/mBtu.55 However, a year later, it
○
○
agreed to supply gas, in excess of 4.8 MSCMD, to

○
GAIL at $4.75/mBtu till 31 March 2008.56 GAIL

○
○
Table XVII was required to sell the gas obtained from the con-
○
sortium at APM prices to the core sector consumers.

○
Incidence of tax and duty on MS (motor spirit) and

○
○
HSD (high-speed diesel) at Delhi, as on March 2007) Gas from blocks awarded under NELP
○
○
MS HSD Pricing of natural gas from the NELP blocks is dif-

○
(Rs/l) (Rs/l) ferent from the other types of gas pricing mecha-
○
○
Price without customs duty, excise 20.29 21.01 nisms. Operators of the NELP blocks, after they start
○
duty, and sales tax components gas production, have the freedom to market the oil
○
○
Custom duty 1.30 1.38 on international price parity basis and gas in the do-
○
mestic market on arms length basis. This pricing

○
Excise duty 14.67a 4.70b

○
mechanism encourages competition so as to enable

○
Sales tax (including 6.59 3.16

the contractor to recover the investment and make a
○
irrecoverable taxes)
○
good return on investment they have incurred in gas

○
Total of customs duty, excise 22.56 9.24 discovery. Role of the government in the process is to
○
duty, and sales tax components

○
approve the discovered price signed under the PSC.57

○
Retail selling price 42.85 30.25

○
○
MS – motor spirit. HSD – high-speed diesel Gas pricing formula of Reliance Industries Ltd
○
a 6% + Rs 13.00/l plus 3% education cess In June 2007, the RIL advised the government for
○
○
b 6% + Rs 3.25/l plus 3% education cess approval of its pricing formula for valuing gas it had
○
Source MoPNG (2006a) found in the KG Basin. Using the formula, the RIL
○
○
○
○
54
Details available at <http://www.financialexpress.com/news/story/174082/>, last accessed on 13 September 2007.
○
55
Details available at <http://www.tribuneindia.com/2007/20070828/biz.htm#2>, last accessed on 13 September 2007.
○
56
Article 21.6.3 of the PSC (production sharing contract) states: ‘… the formula or basis on which the prices shall be determined… shall be approved by the
○
government prior to the sale of natural gas to the consumers/buyers. For granting this approval, government shall take into account the prevailing policy,
○
if any, on pricing of natural gas including any linkages with traded fuels, and it may delegate or assign this function to a regulatory authority as and when
○
○
such an authority is in existence.’

○
57
http://164.100.24.208/lsq14/quest.asp?qref=28285, last accessed on 3 October 2006.
○
Oil and gas 99

arrived at a supplier price of about $4.59/mBtu that marketing is small as compared to the marketing
○
○
was later revised to about $4.33/mBtu. Transportation network of public sector OMCs.
○
charges and sales tax were to be added to give a deliv- MoPNG asked OMCs to undertake automation of
○
○
ered gas price of $5.5–6/mBtu. As the proposed gas all their retail outlets selling more than 200 kl per
○
price announced by the RIL is much higher than what month.58 Certain customer-friendly measures were
○
○
most consumers have been paying, the proposal has also recommended to be taken by the OMCs to im-
○
generated considerable controversy. prove the quality of the products and services of-
○
○
fered. These measures include OMCs to get third
○
Liquefied natural gas price party certification of all ROs selling more than
○
○
In the world market, the LNG prices (both long- 100 kl product per month; availability of premium
○
term and spot) have increased substantially conse- oil like Xtra-premium, Speed, Power, and so on, and
○
○
quent to the sharp increase in crude oil prices. Based diesel like Xtramile, Turbojet; acceptance of credit
○
on the GSPA (Gas Sales and Purchase Agreement) and debit cards for facilitating cashless transaction;
○
○
between Petronet LNG and Rasgas, the indicative installation of clean public convenience facilities,
○
CIF (cost, insurance, freight) price until 31 Decem- ATM, fast food kiosks, and convenience stores at
○
○
ber 2007 is $2.8/mBtu (FOB price = $2.53/mBtu). select locations, and so on.
○
However, the FOB price of this LNG from Rasgas,
○
Gas marketing
○
Qatar, is linked to crude oil price and will be subject
○
to variation with effect from 1 January 2009 within a Sectoral offtake of natural gas
○
○
band, with floating floor and cap indexed to average Offtake of domestically produced natural gas (ex-
○
crude price of previous five years. cluding imports of LNG) increased marginally from
○
○
LNG pricing mechanism has witnessed modifica- 30.774 BCM in 2004/05 to 31.025 BCM in 2005/
○
tions from time to time. To start with, suppliers con- 06. More than 70% of domestic natural gas was used
○
○
tracted and arrived at the gas price based on specific for energy purposes. The power sector accounts for
○
contract for procurement, which varies from contract maximum share of natural gas used for energy pur-
○
○
to contract. Later on, pooled price for all the con- poses (Figure 6). The natural gas is mainly used in
○
tracts was adopted to bring down the price for the fertilizer industries (87%) and petrochemical indus-
○
○
consumers. tries (12%) as feedstock.

○
On an aggregate basis, the power sector with

○
Marketing
○
about 38% share of the total natural gas, followed by

○
Petroleum products the fertilizer sector with 25% share are the major
○
○
Marketing of petroleum products is dominated by consumers of natural gas.

○
Penetration of natural gas is expected to increase

○
public sector OMCs. The IOCL has the largest and

○
well spread network of ROs (retail outlets) in the in the transport and household sectors. This is pri-
○
marily due to the focus on adoption of cleaner fuels

○
country. The BPCL and HPCL too have an all In-

○
dia presence through their extensive marketing net-

○
work. The number of RO dealerships (petrol

○
○
pumps) set up by the OMC during 2006/07

○
○
(April–December) was 1597. With this, the total

○
number of ROs as on 1 April 2007 was 34 696.

○
○
The government notified that any company invest-

○
ing or committing to invest Rs 20 billion in the In-

○
○
dian oil and gas sector in specified areas, over a

○
period of 10 years, can undertake the marketing of

○
○
transportation fuels. A bank guarantee of Rs 5 billion

○
is mandated from the interested companies. In

○
○
response to such notification, certain private compa-

○
nies like RIL, ESSAR, ONGC, NRL (Numaligarh LNG – liquefied natural gas
○
○
Refinery Ltd), Shell India, and MRPL (Mangalore Figure 6 Composition of domestic natural gas
○
Refinery and Petrochemicals Ltd) got the marketing offtake for energy purposes
○
○
rights. Still the share of private sector in the retail Source MoPNG (2006)
○
○
○
○
58
○
100 Oil and gas

and efforts to decrease dependence on petroleum The Government of India will fund the project. As a
○
○
products. Total number of vehicles using CNG follow-up of the demonstration project, Phase II will
○
(compressed natural gas) in 2006/07 was 408 888 consist of a self-sustaining expansion of the
○
○
and there were 356 CNG stations all over India. IGL programme, leading to the production of bio-diesel
○
(Indraprastha Gas Ltd) in Delhi and MGL required during 2011/12.
○
○
(Mahanagar Gas Ltd) in Mumbai are engaged in de- The MoPNG announced the Bio-diesel Pur-
○
veloping city gas distribution projects for the supply chase Policy in October 2005. The policy requires
○
○
of CNG and PNG (piped natural gas) to these cities. the purchase of bio-diesel by the OMCs at 20 speci-
○
Similarly, GAIL and other companies are taking fied purchase centres in 12 states at Rs 25/litre, in-
○
○
various steps to expand city gas distribution. clusive of taxes/duties, from January 2006. The
○
price was subject to review every six months.
○
Alternative fuels
○
○
Biofuels Ethanol
○
○
Biofuels are environment-friendly alternative fuel Ethanol is another potential alternative fuel for the
○
transport sector. It is an oxygenate containing 35%
○
options. Given the volatile international oil markets
○
and surging energy prices, shift to these alternative oxygen, which reduces vehicular emissions of hydro-
○
carbons and carbon monoxide, thus, reducing the
○
sources is an important option. According to the
○
IEA (International Energy Agency), soaring crude emission of pollutants. Twenty per cent of ethanol
○
can be blended with the gasoline. Ethanol is mainly
○
oil prices would make biofuels more competitive. In
○
India, bio-diesel and ethanol are the two primary produced from sugar cane juice/molasses in India.
○
The Government of India issued a notification on the
○
alternative fuels that are being considered.

○
EBP (Ethanol Blending Programme) in 2002. It made

○
Bio-diesel 5% ethanol blending in petrol mandatory in nine sugar-

○
○
Bio-diesel is an alternative fuel to mineral diesel due to producing states (Andhra Pradesh, Goa, Gujarat,
○
Haryana, Karnataka, Maharashtra, Punjab, Tamil

○
its superior properties. It contains almost no sulphur or

○
aromatics but possesses high lubricity and higher Nadu, and Uttar Pradesh) and three union territories
○
(Daman and Diu, Dadra and Nagar Havelli, and

○
flashpoint, and has the ability to burn fully. The main

○
sources for bio-diesel in India are non-edible oils Puducherry). However, oil companies experienced
○
the problems of availability and increasing prices of

○
obtained from plant species such as Jatropha curcas,

○
Pongamia pinnata, and Calophyllum inophyllum. ethanol. Subsequent to this, there was a notification in
○
October 2004, which said that 5% ethanol-blended

○
Amongst these plants, Jatropha curcas is considered to

○
be the most suitable due to its wider adaptability. petrol should be supplied in identified areas only if
○
the indigenous price of ethanol offered for ethanol-

○
As per the report of the Committee on Biofuel, the

○
estimated demand for HSD in 2006/07 was 52.3 MT, blended petrol programme is comparable to that
○
offered by the indigenous ethanol industry for

○
requiring 10.5 MT of bio-diesel and plantation of

○
J. curcas over about 8.8 million ha (hectares) of alternative uses;

○
the indigenous delivery price of ethanol offered

land. By the end of Eleventh Plan (2011/12), the
○
○
demand for HSD shall be 66.9 MT, requiring 13.38 for the ethanol-blended petrol programme at a
○
particular location is comparable to the import

○
MT of bio-diesel and plantation of J. curcas over

○
about 11.2 million ha of land. parity price of petrol at that location; and
○
there is adequate supply of ethanol.

○
Due to increasing importance of biofuels, the Gov-

○
ernment of India, through the Planning Commission, The existing EBP has been modified to cover the
○
○
set up a Committee on Development of Biofuel in July entire country under 5% EBP programme (except
○
2002. Based on the recommendations of the committee, north-eastern states, Jammu and Kashmir, Andaman
○
○
the National Mission on Biodiesel was launched in the and Nicobar islands, and Lakshwadeep) with effect
○
country. To support large-scale utilization of J. curcas,

○
from 1 November 2006.

○
the National Mission on Bio-diesel was proposed in The requirement of ethanol for implementation
○
two phases—Phase I from 2003 to 2007 and Phase II

○
for 5% EBP in the whole of the country is about

○
from 2007 to 2012. 0.56 million kl per annum.

○
Phase I was a demonstration/test phase and is still

○
Coal bed methane

○
under implementation. Phase I aims to cultivate

○
jatropha and similar plants in a total area of 0.4

○
CBM (coal bed methane) is an unconventional

○
million ha in various states across the country. source of natural gas. Endowed with the fourth
○
○
Oil and gas 101

largest proven coal reserves in the world, India comprehensive in a technical sense with respect to
○
○
holds significant prospects for the commercial re- optimal development of the hydrocarbon re-
○
covery of CBM. With an aim to harness this alter- sources’. With the setting up of the PNGRB, noti-
○
○
native source of energy, which has environmental, fied on 1 October 2007, downstream segment of
○
economic, and technical advantages, the Govern- the sector is to be regulated by it. However, the up-
○
○
ment of India formulated a CBM policy. Till now, stream sector of Indian oil and gas is still without a
○
three rounds of bidding for CBM blocks have been statutory regulator.
○
○
completed, under which 23 CBM blocks have been
○
awarded, and additionally, three blocks have been Petroleum and Natural Gas Regulatory Board
○
○
given on nomination basis to different parties and With the issuance of notification by the MoPNG un-
○
consortiums. All the three rounds taken together, der Section 3(1) of the PNGRB Act, 2006, the set-
○
○
there has been a dominance of private sector/JVs in ting up process of independent regulator was
○
serving the CBM blocks (Table XVIII). Participa- initiated ‘with a view to ensure that people on depu-
○
○
tion of private JVs has increased in CBM III while tation from PSU/private sector are objective and
○
JV of REL (Reliance Energy Ltd)–RNRL (Reliance fair... it may be ensured that any person on deputa-
○
○
Natural Resources Ltd)–Geopetrol alone ac- tion from a particular organisation does not handle
○
counted for four blocks in CBM III. The CBM re- any issue which specially relates to the organisation
○
○
serves in the awarded blocks are about 1400 BCM, to which he belongs.’ 60 Although there were doubts
○
with a production potential of about 38 MSCMD over advantage to the public sector in appointment
○
○
during peak production (MoPNG 2007). to the board, but at last, the PNGRB had been for-
○
The DGH is in the process of identifying the mally established by the government in June
○
○
prospective blocks for future round of bidding. It 2007.61 The chairperson and other members of the
○
may open up new areas like Rajmahal in Bihar, Board have been appointed. Mr L Mansingh has
○
○
Talcher and Ib Valley in Orissa, and Singrauli in taken over as the first chairperson of the Board, and
○
Madhya Pradesh for CBM exploration in the forth- Mr L K Singhvi, Mr B S Negi, and Ms Sudha
○
○
coming bidding round.59 Mahalingam have joined as members of the Board.

○
As per the statute, the PNGRB will regulate the

○
Regulation
○
downstream activities in the petroleum and natural

○
Till last year, upstream a segment was being regu- gas sector like refining, processing, storage, trans-
○
○
lated by the DGH, though not statutory, and down- portation, distribution, and marketing and sale of
○
stream segment by the MoPNG directly. The petroleum, petroleum products, and natural gas. This
○
○
Integrated Energy Policy (Planning Commission will protect the interests of consumers and entities
○
2006) states that ‘the current upstream regulation engaged in specified activities relating to petroleum,
○
○
provided by the DGH is neither independent nor petroleum products, and natural gas; ensure uninter-
○
rupted and adequate supply of petroleum, petroleum

○
○
products, and natural gas to all parts of the coun-

○
Table XVIII try; and promote competitive markets.

○
○
Details of awardees for the CBM (coal bed The functions of the Board include the following
○
methane) round (MoPNG 2006b).

○
○
Registration of entities to market-notified petro-

Private
○
leum, petroleum products, and natural gas; estab-

○
NOCs and companies/

○
lish and operate LNG terminals; and establish

Rounds NOCs joint ventures joint ventures Total
○
storage facilities beyond a certain capacity as

○
CBM I 2 3 5
○
may be specified by regulations.

○
CBM II 4 1 3 8 Declaring pipelines as contract or common carrier,

○
○
CBM III 2 8 10 for, the board shall provide the entity owning the
○
pipeline or network an opportunity of being

○
Total 4 5 14 23
○
NOCs – national oil companies heard, and fix the terms and conditions subject
○
to which the pipeline or network may be de-

○
Source MoPNG (2006c)

○
○
○
59
Details available at <http://timesofindia.indiatimes.com/articleshow/1161871.cms>, last accessed on 14 September 2007.
○
60
Details available at <http://petroleum.nic.in/june.pdf>, last accessed on 6 October 2007.
○
○
61
Details available at <http://economictimes.indiatimes.com/News/News_By_Industry/Watchdogs_set_to_float_association/articleshow/2367488.cms>,
○
last accessed on 14 September 2007.

○
102 Oil and gas

clared as a common carrier or contact carrier. It structure projects related to downstream petroleum
○
○
will also pass such orders as it deems fit with re- and natural gas sector’. In view of this section, the
○
gard to the public interest, competitive transpor- PNGRB wanted OISD (Oil Industry Safety Directo-
○
○
tation rates, and right of first use. rate) to be its technical arm, as OISD has the relevant
○
Lay down, by regulations, the transportation tar- technical and professional manpower with necessary
○

○
iffs for common carriers or contact carriers or city skills and background. However, the MoPNG disap-
○
or local natural gas distribution network and the proved the request of the PNGRB.
○
○
manner of determining such tariffs.
○
With regard to notified petroleum, petroleum Association of infrastructure sub-sector
○

○
products, and natural gas, the Board shall ensure regulators
○
adequate availability and display of retail selling It has been recognized that to facilitate exchange of
○
○
prices at the ROs, monitor prices and transporta- views and deliberate on and pursue issues common to
○
tion rates for common carrier or contract carrier, all energy sub-sector (power, coal, oil and gas,
○
○
and take corrective measures to prevent restrictive telecom) regulators, association of energy sub-regula-
○
trade practices and enforce retail service obliga- tors could be effective for all the sectors. In view of
○
○
tions for ROs and marketing service obligations this, the PNGRB and TRAI (Telecom Regulatory Au-
○
for entities. thority of India) have been trying to form an associa-
○
○
Lay down, by regulations, the technical standards tion of energy sub-sector regulators. The
○
and specifications including safety standards in association is likely to cover the regulatory aspects
○
○
activities relating to petroleum products and natu- common to a significant extent for all sectors.62
○
ral gas, including the construction and operation
○
Policy for Development of Natural Gas

○
of pipelines and infrastructure projects.

○
Maintain a data bank of information on down- Transmission Pipelines and City or Local
○
Natural Gas Distribution Networks

○
stream activities in the petroleum and natural gas

○
sector and lay down the technical standards and The Government of India issued the Policy for De-
○
○
specifications including safety standards. velopment of Natural Gas Transmission Pipelines

○
and City or Local Natural Gas Distribution Net-

○
○
The following section explains certain activities works. The objective of the policy is to promote in-
○
of the PNGRB Act. vestment from public as well as private sectors in

○
○
natural gas transmission and city or local natural gas

○
Unbundling of operations distribution networks, to facilitate open access for all

○
○
Among the number of provisions in the PNGRB Act, players to the pipeline network on a non-discrimina-
○
Section 21(1) of the Act says about establishment of tory basis, promote competition among entities,
○
○
the Affiliate Code of Conduct, which states that the thereby avoiding any abuse of the dominant position
○
code of conduct is applicable to those entities that by any entity, and secure the consumer interest in
○
○
are involved in laying, building, operating, and ex- terms of gas availability and reasonable tariff for
○
panding of pipelines and marketing of natural gas. natural gas transmission pipelines and city or local
○
○
The Act specifies that companies engaged in both natural gas distribution networks. The policy has to
○
business should have separate entities and may be read in conjunction with the PNGRB Act, 2006,
○
○
have separate ownership, and these separate entities which provides the legal framework for the develop-
○
would be required to comply with the Affiliate Code ment of the natural gas transmission pipelines and
○
○
of Conduct, if under same ownership/control. city or local gas distribution networks. The policy en-
○
visages development of a nationwide gas grid in a

○
○
Oil Industry Safety Directorate as a competitive environment, involving both public and
○
technical arm private sectors, under the supervision of a regulator.

○
○
Under the provisions of Section 11(1) of the PNGRB, According to the policy, the PNGRB will grant
○
2006, the Board shall ‘lay down, by regulations, the authorization to lay, build, operate, or expand
○
○
technical standards and specifications including transmission pipelines and city gas distribution net-
○
safety standards in activities relating to petroleum, work to entities only if the pipeline capacity is at
○
○
petroleum products, and natural gas, including the least 33% more than the capacity requirement of
○
construction and operation of pipelines and infra- the concerned entity plus the firmed up contracted
○
○
○
○
○
62
Details available at <http://petroleum.nic.in/june.pdf>, last accessed on 6 October 2007.
○
Oil and gas 103

capacity (termed as total capacity). This extra ca- MoPNG (Ministry of Petroleum and Natural Gas).
○
○
pacity would be used on common carrier basis by 2006c
○
any third party on open access and non-discrimina- Policy for Development of Natural Gas Pipelines
○
○
tory basis at transportation rates laid down by the and City or Local Natural Gas Distribution
○
Board. The pipeline policy emphasizes the need for Networks
○
○
building a national gas grid with open market New Delhi: MoPNG, Government of India
○
access for all players on a non-discriminatory basis.
○
MoPNG (Ministry of Petroleum and Natural Gas). 2007
○
The policy also suggests setting up of GAB (Gas
○
Annual Report 2006–07
Advisory Board) to promote and develop the gas
○
New Delhi: MoPNG, Government of India
○
pipeline network and city or local gas distribution
○
Details available at <http://petroleum.nic.in/jsp/
network in the country.
○
annual_report.jsp>, last accessed 21 June 2007
○
○
References ONGC (Oil and Natural gas Corporation). 2007
○
○
Presentation at Investor and Analyst Meet,
○
DGH (Directorate General of Hydrocarbons). 2007a
ONGC, India
○
Interactive session of DGH and E&P companies
○
Details available at < http://www.ongcindia.com>, last
○
Details available at <http://www.dghindia.org/>, last
accessed on 27 October 2007
○
accessed on 14 August 2007
○
○
Planning Commission. 2006
IEA (International Energy Agency). 2006
○
Report of the Working Group on Petroleum and
○
World Energy Outlook 2006
○ Natural Gas Sector for the XI Plan (2007–2012)
Paris: IEA
○
New Delhi: Planning Commission, Government of India

○
○
Mandal A. 2001
Bibliography
○
Naphtha Marketing in India: domestic and export

○
○
domestic demand till 2011/12 shifts to NTGG, Planning Commission. 2006

○
ONGC, India Sub Group Report on Exploration and Production

○
○
New Delhi: Planning Commission, Government of India

MoPNG (Ministry of Petroleum and Natural Gas).
○
○
2005/06 TERI (The Energy and Resources Institute). 2007

○
Annual Report TEDDY (TERI Energy Data and Directory

○
○
New Delhi: MoPNG, Government of India Yearbook), 2005/06

○
[Oil and Gas Chapter]

○
MoPNG (Ministry of Petroleum and Natural Gas). 2006

○
New Delhi: TERI

Basic Statistics 2005–06
○
○
New Delhi: Economics and Statistics Division, MoPNG, Website

○
Government of India
○
DGH (Directorate General of Hydrocarbons). 2007

○
○
MoPNG (Ministry of Petroleum and Natural Gas). Details available at <www.dghindia.org>, last accessed
○
2006a on 12 August 2007

○
○
Standing Committee on Petroleum and Natural

PPAC (Petroleum Planning and Analysis Cell). 2006
○
Gas (2006–07)
○
Details available at <www.ppac.org>, last accessed on

○
[Fourteenth Lok Sabha]

○
21 August 2007
○
○
PPAC (Petroleum Planning and Analysis Cell). 2007

○
MoPNG (Ministry of Petroleum and Natural Gas).

Details available at <www.ppac.org>, last accessed on
○
2006b
○
25 July 2007
○
The Petroleum and Natural gas Regulatory Board

○
Act 2006
○
○

○
○
○
○
○
○
○
○
○
○
○
○
104 Oil and gas

○
Chronology of events
○
○
○
○
November 2006 BP Exploration (Alpha) Ltd signs PSC for CBM block in the third round.
○
○
○
December 2006 India’s Burma pipeline will be routed through Mizoram, Assam, West Bengal, and Bihar, and will bypass
○
Bangladesh.
○
○
The oil ministry caps exclusivity for companies selling natural gas.
○
The ONGC bags Golden Peacock Award for its excellent performance in the sphere of corporate govern-
○
○
ance.
○
○
○
January 2007 Iran, India, and Pakistan officials agreed on gas pricing formula for the export of Iranian gas to India.
○
The EGoM on the RGPPL decided to pool the price of gas for Dabhol.
○
○
○
February 2007 India and Yemen signed a protocol of bilateral cooperation in the oil and gas industry.
○
○
The Government of India amended MDGs (Marketing Discipline Guidelines) and control orders.
○
The RIL got approval to set up a pipeline network to distribute natural gas across 60 towns in Karnataka.
○
○
The RIL and British Gas took GAIL to arbitration panel over gas pricing issues on PMT (Panna–Mukta–
○
Tapti) oil and gas fields.
○
○
Petrol and diesel prices reduced by Rs 2 and Re 1, respectively.
○
○
○
March 2007 The budget reduced excise duty on petrol and diesel from 8% to 6%.
○
The RIL made two oil and gas discoveries on the East Coast in the Krishna–Godavari and Mahanadi
○
○
basins.
○
The OVL signed exploration and production sharing agreement with the National Oil Corporation of Libya
○
○
for four hydrocarbon blocks.

○
BPCL and TPL (Tata Petrodyne Ltd) signed an agreement to acquire a participating interest of 25% each in
○
○
North Sea blocks – 48/1b and 48/2c – from Encore and Norwest.
○
The RIL got approval to convert Jamnagar refinery into EOU (export oriented unit).
○
○
The ONGC signs deal for five offshore vessels.

○
Petronet tied up with the RGPPL for supplies for Ratnagiri Gas Project.
○
○
Myanmar refused to export gas to India.

○
Indian Oil launches loyalty card for cash customers.

○
○
RIL signs an MoU with US-based Rohm and Haas Co for chemical plant.
○
○
○
April 2007 Bangladesh agreed to import 0.12 MT diesel per annum from India.
○
The IOC lost its monopoly in Nepal for supply of petroleum products.
○
○
The RIL strikes gas in a block off Saurashtra.

○
The ONGC inks service contracts for development of 14 onshore fields.

○
○
The ONGC Videsh drills a mega oil find in Egypt.

○
The OVL announced a new oilfield discovery in their first exploration well North Ramadan-1A in Egypt.
○
○
The ONGC and OIL renewed MoU for Assam crude movement.
○
Essar starts LPG and kerosene supplies to PSUs.

○
○
The IOC, GAIL sign agreement to sell piped gas in West Bengal.
○
The GSPC ties up with the RIL on gas transport.

○
○
○
May 2007 The Reserve Bank of India allowed Navratna PSUs to invest in unincorporated entities in the oil sector
○
○
abroad under the automatic route, without prior approval.

○
Alkor Petro acquires seven oil and gas blocks—three in the Cambay Basin and two each in Yemen and Egypt.
○
○
Essar Energy bags oil block in Nigeria.

○
The ONGC strikes gas in Mahanadi Basin for the second time.
○
○
The RIL announced gas discovery in two blocks: one in deep water of East Coast and another in shallow
○
waters of West Coast of India.

○
Continued
○
○
Oil and gas 105

○
○
Chronology of events (Continued)
○
○
○
The OVL finds gas in Iran’s Farsi Offshore block.
○
Cairn announced oil and gas discovery in two new Rajasthan sites.
○
○
The NTPC (National Thermal Power Corporation Ltd) signed MoU with Nigerian government for importing
○
LNG.
○
○
Karnataka clears Reliance’s city gas distribution projects.
○
The NTPC signed swap deal with Nigeria to secure LNG for running plant.
○
○
The Government of India launches the PCPIR (Petroleum, Chemicals and Petrochemical Investment
○
Regions) Policy.
○
○
○
June 2007 The ONGC makes five oil and gas finds in eastern offshore and North-East India.
○
○
The Essar Oil starts production from Mehsana wells.
○
The ONGC strikes gas in Tripura region.
○
○
The ONGC to invest Rs 12.85 billion in offshore near Bombay High.
○
The Cabinet allows Mittal to pick up 49% stake in Bhatinda Refinery.
○
○
The High Court ordered that no gas from the RIL’s KG Basin would be available to third party other than
○
the NTPC and RNRL.
○
○
Petrol and diesel prices rose by Rs 0.67 per litre in Delhi.
○
○
○
July 2007 The government approved Rajiv Gandhi Institute of Petroleum Technology at Rai Bareli.
○
The union petroleum and natural gas ministry constituted the PNGRB with Mr L Mansingh as its first
○
○
chairman.
○
The MRPL signs agreement with State Trading Corporation of Mauritius to supply petroleum products to the
○
○
island nation for three years.

○
The GSPC strikes oil in Cambay Olpad block.

○
○
The British Oil and Gas Exploration Firm strikes gas in Assam.
○
The MRPL bags the Nehru Refinery Award for Energy Performance of Refineries for 2006/07.
○
○
Cairn, ONGC to split cost of pipeline, evacuating crude oil from Cairns energy’s Rajasthan Block, in 70:30
○
ratio.
○

○
Gujarat state firm reopens sale of its 30% equity in the blocks in KG Basin.
○
GAIL signs integrity agreement to increase transparency in work.

○
The RIL hikes fuel prices by Rs 1.5 a litre.

○
○
○
August 2007 The Norsk Hydro takes 10% stake in the ONGC’s KG block.
○
○
ONGC–Mittal wins gas block in Trinidad and Tobago.

○
The Essar Oil strikes more oil in Mehsana oilfield in Gujarat.

○
○
The Gujarat Gas and the GSPC join hands for marketing gas.
○

○
The EGoM to discuss the RIL’s gas pricing.

○
India and the US have signed MoU for cooperation in gas hydrates.
○
○
○
September 2007 ONGC installs VATMS (Vessel and Air Traffic Management System) for offshore vigil.
○
○
Naftogaz bags two Bina refinery projects.

○
The Indian Oil begins crude oil trading on MCX (multi commodity exchange).
○
○
Reliance acquires majority stake in Tanzania’s Gapco.

○
The government clears reliance gas pricing formula with some changes.
○
○
○
October 2007 Reliance signed a deal to explore for oil and gas in two exploration blocks in Iraq’s Kurdish region.
○
○
OMEL, the joint venture between OVL and MIS (Mittal Investment Sarl), acquired 30% interest in an
○
exploratory block in offshore Turkmenistan in Caspian Sea.

○
○
The consortium of the GSPC, Jubilant Oil, and Gas and Geo Global Resources discovers oil blocks in
○
Cambay.
○
Continued
○
○
106 Oil and gas

○
○
Chronology of events (Continued)
○
○
○
Jubilant Energy announced its oil discovery in a block near Gujarat’s Mehsana district.
○
The RIL has discovered a medium-sized oil reserve in a Cauvery Basin offshore exploration block.
○
○
Cairn India Ltd announced oil find at one of its exploration wells in the Ravva field off the East Coast.
○
The GSPC reported a new 6.3-TCF gas discovery in its eastern offshore Krishna–Godavari basin discovery
○
○
block KG-OSN-2001/3.
○
The LN Mittal group has signed an MoU with the HPCL, French oil major Total, GAIL, and Oil India for jointly
○
○
developing a $6-billion refinery-cum-petrochemical complex in Visakhapatnam.
○
○
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TEDDY

Crude oil production (by company, in MT)

1996/97 2.87 8.50 0.04 11.41 20.18 1.31 21.49 32.90

1997/98 3.09 8.39 0.04 11.52 19.86 2.47 22.34 33.86

1998/99 3.30 8.10 0.08 11.47 18.29 2.97 21.25 32.72

1999/2000 3.28 7.92 0.09 11.30 16.73 3.92 20.65 31.95

2000/01 3.28 8.43 0.09 12.01 16.63 3.79 20.42 32.42

2001/02 3.18 8.64 0.07 11.89 16.07 4.07 20.14 32.03

2002/03 2.95 8.45 0.08 11.47 17.56 4.01 21.57 33.04

2003/04 3.00 8.38 0.07 11.46 17.68 4.24 21.92 33.38

2004/05 3.20 8.32 0.07 11.59 18.16 4.23 22.39 33.98

2005/06 3.23 8.10 0.10 11.43 16.31 4.45 20.76 32.19

2006/07 3.11 8.06 0.16 11.33 17.99 4.67 22.66 33.99

Source PPAC (2007)

76 Oil and gas

about 6% in 1996/97 of total offshore production to our total imports.

20% in 2006/07. With regard to onshore oilfields,

Enhanced oil recovery/improved oil recovery

production from the two major regions – north-

Continuous increase in crude oil demand and

stagnant domestic production have resulted in in-

creased dependency on imported crude oil. This de-

pendency has increased over the years to about 76%

in 2006/07, with India importing 111.5 MT of crude

oil valued at Rs 2192 billion. However, the depend-

ence on imports for meeting domestic demand for

crude oil was about 71% in 2006/07. With the in-

creasing crude oil import dependency and prices, the

fiscal strain on the economy is also increasing, with

large foreign exchange outflow of about 38% of the

total foreign exchange earnings of India in 2006/07.

While the monetary value of crude oil has gone up

quantum of import has increased nearly three

times, from about 33 MT (1996/97) to 111.5 MT

Source MoPNG (2007)

(2006/07) (Figure 1).

Oil and gas 77

proved oil recovery) schemes, in particular, is targeted Table III

NOC, OIL (Oil India Ltd), had not come up with

The natural gas production for 2006/07 registered a

ventures was 31.56 BCM (billion cubic metres), of which

in Panna Mukta fields and the RIL discovered crude

oil in KG-DWN-98/3 block, and named it as

Dhirubhai-26. Another private player, the GSPC

(Gujarat State Petroleum Corporation Ltd), made

Production of natural gas (by company, in BCM)

two oil and gas discoveries in KG-OSN-2001/3 block

various private players discovered oil and gas. The

1997/98 1.67 23.05 1.68 26.40

EOL (Essar Oil Ltd) discovered oil in its Mehsana

1998/99 1.71 22.84 2.87 27.43

1999/2000 1.73 23.25 3.47 28.45

Essar, which is the operator, holds 70% interest in

deep-water basin in CY-DWN-2001/2 block. Other

2002/03 1.74 24.24 5.41 31.40

oil and gas discoveries include discovery by the

GSPC in CB-ONN-2002/3 block and by Cairn En-

2004/05 2.01 22.99 6.78 31.77

ergy in Ravva fields.

success in terms of number of crude oil discoveries

78 Oil and gas

in their exploration activities, and the major discov-

1996/97 and 2006/07. They accounted for about

Discoveries by Reliance Industries Ltd