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New Exploration Licensing Policy - NELP

New Exploration Licensing Policy - NELP. Upstream Industry Development. OALP. NELP era 203 + 36 Blocks. Pre NELP era 28 Blocks, 29 Fields. Nomination era. PSC Regime. Pre Independence era. 1886 - 1946. 1947 - 1990. 1990 - 1996. 1997 – till date. Future. PSC Regime – Pre NELP.

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New Exploration Licensing Policy - NELP

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  1. New Exploration Licensing Policy - NELP

  2. Upstream Industry Development OALP NELP era 203 + 36 Blocks Pre NELP era 28 Blocks, 29 Fields Nomination era PSC Regime Pre Independence era 1886 - 1946 1947 - 1990 1990 - 1996 1997 – till date Future

  3. PSC Regime – Pre NELP • Pre-NELP (1990 – 1996) • Liberalized economic policy adopted by Govt. of India • Petroleum sector de-regulated and de-licensed • Formation of Directorate General of Hydrocarbons in 1993 • Small size producing fields offered to Pvt. Operators / JVs • Acreages, both offshore and onshore, offered through competitive bidding • Poor response - 270 blocks offered - only 35 blocks contracted to Pvt. Companies

  4. BLOCKS AWARDED- PRE NELP Need for better Fiscal and Contractual terms

  5. PSC Regime - NELP • NELP (1997 - till date) • New Exploration Licensing Policy (NELP)announced in 1997 • Administrative Price Mechanism (APM) abolished • 100% FDI in E&P sector approved • Hydrocarbon Vision 2025 released in March 2000 • Eight rounds of international bidding completed • 235 blocks awarded till NELP-VIII

  6. First bidding round in 1999 Award of licenses through international competitive bidding Fast track approval mechanism Directorate General of Hydrocarbon (DGH) as single window No acreages on nomination basis No State participation or any carried interest International pricing for Crude oil & market driven prices for Natural gas NEW EXPLORATION LICENSING POLICY

  7. No Oil Industry Development cess No signature, discovery or production bonus No custom duty on imports for Petroleum Operation Income Tax holiday of 7 years for Mineral Oil No ring fencing of expenditures and incomes for income tax purposes Cost recovery biddable- Up to 100% Sharing of Profit Petroleum with Govt. on biddable pre-tax investment multiple FISCAL HIGHLIGHTS - NELP Contd..

  8. Fiscal stability as part of the contract Low to moderate royalty rates between 5% to 12.5% Special concessions for deepwater blocks Full repatriation of profits Liberal set off of losses and carry forward provisions for income tax purposes Tax Incentives for Site Restoration Fund Scheme (SRFS) FISCAL HIGHLIGHTS - NELP

  9. INVESTOR FRIENDLY POLICIES INDIA Open & Transparent Bid rounds Negotiated Access Indonesia 2007 Nigeria 2006 Brazil Round 9 USGOM Bidding Technical Weight INDIA Fiscal Weight Nigeria 2006 Indonesia 2007 Brazil Round 9 USGOM Optimizing Bid Evaluation Rich-Accessible Data INDIA Brazil Round 9 Undeveloped Indonesia 2007 Nigeria 2006 USGOM Data availability INDIA Brazil Round 9 Weak Nigeria 2006 Strong Indonesia 2007 USGOM Norms & Benchmarking INDIA Brazil Round 9 Market-based Indonesia 2007 Administered Nigeria 2006 USGOM Pricing INDIA Indonesia 2007 Brazil Round 9 USGOM Diversi-fied Concentrated Nigeria 2006 Competitive Landscape Source :PFC Energy

  10. Bid Evaluation Criteria • Acreage Holding • Operatorship Experience • Annual Accretion of proved reserves • Annual Production • Consortium Criteria • Access to Resources • 1. Technical Capability • To be evaluated for Deep • Water blocks only • For Shallow water and • Onland blocks it is a • Qualifying criteria. • 2. Work Program • 3. Fiscal Package Profit share to Government Cost recovery

  11. PSC GROWTH 41

  12. REVENUE MANAGEMENT

  13. Cost Sharing Mechanism • Production Sharing Contracts signed with Government based on Pre Tax Investment Multiple (PTIM) Tranches • Liberal provisions for assignment of Interest and securitization of participating interest for raising project finance allowed • 100% of all exploration and drilling expenditure is allowed each year (both capital and revenue)

  14. Cash Flows Under PSC Regime Production value Royalty Production Cost Petroleum Exploration Profit Petroleum Development Contractor’s share Government’s share Government’s take Income tax Contractor’s take 14

  15. Petroleum Expenditure & Revenue Profile Costs Revenues Exploration & Appraisal Development Abandonment & Reclamation Production $ 5 10 20 30 40 15

  16. Sharing of Profit Petroleum • Profit share bidding (example) : Upto 1.5 3.5 & above ProfitShare PTIM

  17. Income Tax Regime in Oil Industry 33.66%

  18. Royalties (10%-12.5%)

  19. Cost Oil Limits 100%

  20. Profit Petroleum to GOI in Rs Crores

  21. Policy Relevance in Present Setup 21

  22. Effective Regulatory Mechanism POLICY • Hydrocarbon sector vision • Role for different sectors in energy fuel mix Ministry of Petroleum & Natural Gas Prime Minister’s Office Planning Com • Managing resource base • Bringing accountability • Managing licensing • Mandate for data repository 1950s-93 • Investing capital and technology NATIONAL OIL COMPANIES 1993+ REGULATOR OPERATOR Public (State): GSPC Private: Reliance Jubilant Videocon Essar Public (Central): ONGC OIL GAIL Foreign: BG ENI Cairn Niko Upstream: DGH Downstream: Gas Regulator 22

  23. Evolutionary Glitches? • Declining number of new players NELP VII onwards • Diminished sanctity of PSC terms • Conflict between corporates vitiated investment climate • Degeneration of DGH delegated powers • Focus on increasing E&P activities diluted • Diminished clarity in roles of policy making, technical monitoring & revenue management 23

  24. NELP – Increasing Response

  25. Evolutionary Glitches? • Transparent & expeditious award of PSCs, but greater outstanding issues • Eg: RJ-ON-90/1 royalty issue • Successful exploration efforts, inconsistent fiscal terms • Inconsistency in policy • Gas Mineral Oil definition in 2007 • Mineral Oil definition changed in 2008 • Gas pricing re-interpreted after major gas find 25

  26. Diminished sanctity of PSC terms • Additional rules for evaluation of FDPs, DoCs • Increased monitoring of estimates leading to infructuous delay in development activities • Ambiguity on taxation as per PSC terms versus Income Tax rules • Re-interpretation of existing PSC terms: gas pricing • Increasing layers of controls by Government • Management Committee constitution altered

  27. Devolution of DGH delegated powers • Set up on lines of Norwegian Petroleum Directorate, in practice • Diminished autonomy • Inconsistent dual role of advisory in policy making & regulation of implementation • Notified powers withdrawn • Technical monitoring decisions subject to Government approval

  28. Way forward • Requisites in E&P policy • Consistent long term fiscal policy for E&P to facilitate growth of sector • Clarity in ‘Mineral oil’ definition • Clarity in ‘royalty’ policy • Upholding of PSC terms commitments by Government • Restructuring of monitoring agencies for greater clarity in role definition, objectivity & transparency

  29. Way forward • Restructuring of sector regulator(s) • DGH autonomous body as independent regulator • Independent cadre for objective decision making • Focus on evaluation of exploration potential of India • Technical monitoring • Enhanced role of MoP&NG inclusive of • E&P sector revenue management • Audit of PSCs • Arbitration

  30. Potential devolution of powers

  31. Thank You धन्यवाद

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