Policy
Location Shifting Alone Won’t Solve Mega Refinery’s Problems
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IOC Prefers Stable Places For Acquiring Overseas E&P Assets
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PSU Oil Firms Increase Dividend Payouts To Government
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India’s Natural Gas Market Is In A Logjam
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Temporary Freeze On Retail Fuel Prices Looks Imminent
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Regulation
Move For Common Carrier Principle In LNG Terminals Dropped
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ONGC Advised To Review Its Overall R&D Strategy
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Massive Expansion Of Retail Outlets By PSU Oil Marketing Cos
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India Inches Towards A National Gas Grid
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Alternative Energy / Fuel
CIMFR To Start Pilot Project To Use Methanol As Alternative Fuel
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Ethanol Blending With Petrol Makes Impressive Progress
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GAIL And BHEL Sign MoU To Develop Solar Power Projects
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New Projects
KOC-Kuwait Awards Large Contract To L&T
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Chevron Lummus Global Wins Technology Contract From CPC
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Market Watch
Shell Deal Links LNG Prices to Coal
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Companies
Invenire Energy Private Limited
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Oil And Gas Companies Team Up For Rs 3.20 Billion Startup Fund
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Vedanta Reports Oil Discovery In Krishna-Godavari Basin
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IGL & Tata Power Signed MoU To Offer Integrated Services
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Press Release [FREE Access]
Petro Intelligence » Clear-Headed Regulation Required; Policy Tinkering Will Not Work

By R. Sasankan

The quest for the Holy Grail can be truly frustrating. The road to nirvana is almost always tough, tortuous and peppered with hard choices -- and inevitably poor outcomes. India’s petroleum industry regulators have been thrown into a feeding frenzy at a trough of policy options with one sole objective in mind: crank up domestic oil and gas production.

India imports close to 83 per cent of its crude oil requirement and that has prompted Prime Minister Narendra Modi to set a target for a 10 per cent reduction in oil and gas imports by 2022. Goal-setting by a hard task master can often trigger imprudent policy choices by bureaucrats eager to show that they are cracking the whip.

Within a short period, the government has scrapped the production sharing New Exploration policy (NELP) in favour of a revenue sharing Open Acreage Licensing Policy (OALP) and started auctioning discovered, small and marginal fields that stated-owned Oil and Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) did not consider commercially attractive. The latest in the series is the initiative to bid out blocks in less explored sedimentary basins without any revenue sharing arrangement as such but with exploratory work commitments.

Almost simultaneously, the Directorate General of Hydrocarbons (DGH) has asked ONGC and OIL to submit “by the second week of July 2019” all data pertaining to their 59 nomination fields. “The data should include exploration and development history of the field, reservoir characteristics, well details, oil and gas initially in place and field production history since inception. Besides, technical data including raw 2D and 3D seismic data as well as gravity magnetic and petrophysical data, well completion report, cost incurred, reservoir performance and report on field infrastructure.”

The directive from the petroleum ministry stems from its conviction that the national oil companies are not doing enough to arrest flagging domestic production. It also comes in the wake of the stymied move by the Niti Aayog to hand over ONGC’s major producing fields to private and foreign parties. It is just a matter of time before we see further policy tweaks resulting from this exercise.

But this begs the question: Are we moving in the right direction, or are we groping in the dark? Increasingly, petroleum industry mavens have started to ask this question. Speed matters, but speed without a well thought-out strategy will not produce the desired results. Neither the government’s policy think-tank, the Niti Aayog, nor the proxy regulator, Directorate General of Hydrocarbons (DGH), has the competence to orchestrate reforms in the E& P sector.

The petroleum pundits seem to believe that India is floating on oil and periodic policy changes can lead to increased domestic production. India is acknowledged to have only 2 per cent of the world’s hydrocarbon reserves. This is precisely why India’s exploration acreage bidding rounds do not attract international oil majors. Multinational companies normally do not drill more than one or two wild cat wells as part of their exploration commitment in addition to the mandatory seismic survey. This sort of strategy will not lead to oil and gas discoveries in India, which is not prolific in hydrocarbon reserves. Its sedimentary basins require intense drilling, the type that ONGC and Oil India have been doing reasonably successfully. Periodic political interference in purchases, award of contracts and internal corruption have adversely affected the performance of these companies over the years. The solution is not to weaken them by taking away their producing fields and handing them over to private parties.

Recent reports suggest that a leading service provider, the US-based Schulumberger, has been seeking several deviations in ONGC’s tender norms for the Geleki field in the state of Assam. It was the only company to bid for the right to step up production from that field. There were no takers for the Balol field in Gujarat for which ONGC was seeking a service provider.

The production disaster which hit RIL-operated DI, D3 fields of KG D6 is fresh in collective memory. The production plan was approved by the DGH on the basis of its assessment that these two fields together had gas reserves of over 10 TCF which supposedly would ensure a peak production of 80 mmscmd. Incidentally, RIL’s upstream wing was headed by a former ONGC expert who contributed immensely to the production mess at Bombay High. A competent regulator could have averted such a disaster. The DGH could not even prevent gas migration from ONGC’s adjacent block to KG D6. In any other country, the two petroleum experts who presided over DGH during those days would have landed up in jail. But India is acknowledged to be a soft state.

The government has its own, perverted priorities. It repeatedly shied away from setting up an independent regulator for the upstream sector. Many agencies including the erstwhile Planning Commission recommended the creation of an independent regulator for the E&P sector. Instead, MoPNG went in for a downstream regulator through an Act of Parliament. But the entire exercise was stultified and soon degenerated into a parking slot for retired bureaucrats and oil executives.

A strong regulator is perceived as a threat that would weaken the powers of politicians and bureaucrats. The petroleum sector in India is cash rich and this is precisely why an independent regulator for the upstream is inconvenient. The DGH is not a regulator as is often made out to be. It is only a technical wing of the Ministry of Petroleum and Natural Gas and has no powers to take any decision whatsoever. It can only advise the ministry on issues referred to it; nothing more. At times, it suits the ministry to project the DGH as a regulator which gives him the illusion of being a heavy weight.

All the policy initiatives which MOPNG announced in recent months would have led to positive results had they been done through an independent regulator. Experts acknowledge that all the measures have floundered because of the very compromised and non-independent upstream regulator. The contracts are full of loopholes and subject to multiple interpretations in every case. My submission, therefore, is that we need to revisit the contracts and come out with a professional document that is at least in conformity with international standards.

Let us acknowledge the reality that the prospectivity of the Indian sedimentary basins is poor and that is the key reason why foreign companies are wary of bidding for concessions. This reluctance is compounded by an inability to deal with poorly drafted contracts that force you to deal with the local power structure. So we can give everything to the bidders but what we get is ONGC, OIL, Reliance Industries and Anil Agarwal. BP’s entry into India was dictated by a totally different situation. This problem can only be resolved if we finally embrace truly independent law and evidence-based informed, upstream regulation. Nothing else will work.

 



To download the latest issue 'Volume 26 Issue 1 - April 10, 2019', click here
Petro Intelligence [FREE Access]
Clear-Headed Regulation Required; Policy Tinkering Will Not Work
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ONGC Resists Niti Aayog, Regains Its Mojo
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The Great Indian Rip-off
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US Sanctions Cast A Cloud On Chennai Petroleum’s Expansion Plans
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Foreign Investment
Oilex Hopes To Resolve Cambay Dispute With GSPC
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Overseas Investment
Sri Lanka Plans $4 Billion Refinery At Hambantota
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Gas Scene
Increasing Dependence of Imported RLNG
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Russian Company Gazprom’s Average Gas Production Cost
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Natural Gas Price: Global / India
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India’s Sectoral Consumption of Natural Gas (FY 2018, FY 2023 & FY 2030)
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CFSR Study Report - Seamless Development of Gas Value Chain
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Potential LNG and FLNG Projects Aiming for FID in 2019-2020
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Domestic Natural Gas Scene in February 2019
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Advantage of strong Regulatory Environment for CGD Industry
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Domestic, Global Natural Gas Price Trends
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Market Natural Gas and CGD: Attractive Industry
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Adani Gas: Infrastructure Development to Propel Gas Demand India
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Update: Coal Bed Methane (CBM) Gas Development In India
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LPG Business Continues Its Robust Saga
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Capacity Utilization of Gas Pipelines
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Update: PNG Connections
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LNG Import Projection By Industry Group
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Status Of Gas Pipelines Under Construction
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Trends In Domestic Natural Gas Price & International Bench Marks
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Capacity Utilization of LNG Regasification Terminals
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Data Section
Monthly Upstream Data
Monthly Downstream Data
Historical database
Data Archives
Special Database
World Oil Demand 2018 & 2019
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Global Drilling Rig Count Drops in February 2019
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Growth In Sales Of Passenger Vehicles, Two Wheelers drops
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Indian Rig Count vs. Indian Basket Crude Price
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Price of Crude in the Indian Basket processed in Indian Refineries up to March 2019
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Price build-up of PDS kerosene at Mumbai and Element-wise explanation
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Retail Selling Price (RSP) of major products in India & neighbouring countries
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Power Supply Position Improves In February 2019
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Share of High Sulphur Crude Down In February 2019, Up In April-February
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Petroleum Products Import Up In February 2019, Petcoke Dominates.
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Crude Oil Imports Down In February 2019, OPEC Share Drops
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Global Rig Count Vs Crude Prices
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Solar Power Generation Growth Likely To Outweigh Other Sources By 2022
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Area-wise and Total Estimate of Renewable Energy Potential
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Domestic Oil & Gas Production vis-ŕ-vis Overseas Production in January 2019
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Petroleum Products Import Declines in January 2019
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Crude Oil Imports Dip In January 2019
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GRMs Of Indian Refineries During April-December 2018
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Ownership Pattern of Major Oil and Gas Companies
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State-Wise Balance Recoverable Crude Oil Reserves
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Merger & Acquisitions In The Indian Oil And Gas Sector
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Company-wise Length & Capacity of Product and Crude Pipelines in India
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Tenders [FREE Access]
Cairn Oil and Gas
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ONGC
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