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

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Presentation on theme: "Overview of Petroleum & Natural Gas Sector & Regulatory Perspective in India."— Presentation transcript:

1 Overview of Petroleum & Natural Gas Sector & Regulatory Perspective in India

2 2 5 th largest energy consumer (Share 3.7% of global energy) Per capita energy consumption - about one third of world average Energy consumption projection( 2031-32 ) to grow at 5 % CAGR (8% GDP growth) as per Integrated Energy Policy 3.4% CAGR upto 2025 (GDP: 5%) Energy import dependence is 30% (26% on account of oil & 4% for Coal + Power) and is likely to climb to 40-45% by 2025 Oil import dependence is around 72% currently. Likely to go upto 90% level Per-capita Energy Consumption Total World Energy Consumption: 10537 mtoe Fig. in MTOE Top Primary Energy Consuming Countries 2005 Source – Energy Information Administration (EIA)

3 3 Primary Commercial Energy Mix World Source – World: EIA-2006; India: IEP 2006 10517 mtoe 2003 Oil & Gas continue to play major role Coal & Oil continue to play major role; Gas is emerging World 2030 18040 mtoe CAGR: 2% India 327 mtoe 2003-04 India 2031-32 1651 mtoe CAGR: 6.2%

4 4 Crude Oil Demand, Production & Import Trends MMT

5 5 POL - Imports & Exports US$ Billion Crude Oil Import Product Export Product Import India - A Net Exporter of Products Gross crude and petroleum products Crude/product Imports : ~ 28% of total imports Product Exports : ~ 8% of total exports

6 6 Refining Product Pipelines Product Pipelines Length: 12017 KM Capacity: 68.17 MMT Capacity Utilisation: 77% Refining Capacity: 178 MMT Refineries & Product Pipelines

7 7 Mumbai Mathura(8.0) Guwahati (1.0) (1.0) Barauni(6.0) Haldia (6.0), (1.5) Cochin (7.5, 2.0) Baroda(13.7) Digboi(0.7) Narimanam(1.0) Mangalore (9.7, 5.3) Panipat (6.0), (9.0) Visakh (7.5, 7.5) Numaligarh(3.0) Bongaigaon(2.4) Chennai (9.5, 1.7) Jamnagar (33.0, 29.0, 10.5 Tatipaka (0.1, 0.1) Paradip(15.0) Bhatinda(9.0) ExistingOngoing/Planned BINA(6.0) (5.5)(2.4) (12) Nos MMTPA IndianOil 10 60.2 BPC 3 22.5 HPC 2 13.0 ONGC / MRPL 2 9.8 Reliance (Pvt.) 2 62.0 Essar(Pvt.) 1 10.5 Total 20 178.0 Expected Refining Capacity by 2011-12: 200-235 MMTPA Refineries in India (1.4.08)

8 8 Indias product demand & refining capacity Gap between Refining Capacity & Demand 142 21 India will continue to be product surplus Source: XI Plan Demand Import/Export requirement for crude/products to be quite substantial 68 Surplus refining capacity is expected to increase further by 2030

9 9 Mumbai Vizag Panipat Guwahati Koyali Nahorkatiya Haldia Mathura Manmad Vijayawada Kochi Barauni Kanpur Bhatinda Kandla Vadinar Chaksu Ahmedabad Jalandhar Jodhpur Budge Kot Delhi Bongaigaon Siliguri Meerut Sidhpur Digboi Tinsukia Karur Chennai Mumbai High Uran Ankleshwar Navagam Tundla Lucknow Mangalore Bangalore Secunderabad Indore Sanganer Pune Maurigram Rajbandh Najibabad Roorkee Ambala Sangrur Rewari Ajmer Chittaurgarh Dahej Coimbatore Sankari Asanur Trichy Madurai Paradip Mundra Product Crude Oil Existing Product Crude Oil On-going Jamnagar Loni Shahjahanpur Hazira Jagdishpur Numaligarh Ratlam Pakni Hazarwadi Existing LPG Petroleum Products Pipelines in India Products 9893 KM; 64 MMTPA LPG 2124 KM; 4.5 MMTPA Capacity Utilization Prods. - 78%; LPG - 62%

10 10 Marketing Infrastructure Distribution & Marketing Infrastructure Terminals/DepotsNo.383 LPG Bottling Plants No.170 Aviation Fuel Stations No.126 Retail Outlets No.37953 LPG Distributors No.9366 SKO/LDO Dealers No.6614

11 11 Long Term Demand Supply - Gas

12 12 Length- ~ 11000 kms Gas Consumption- 39 bcm LNG Import - 8-9 MMT, 1 mmtpa spot) Players- GAIL, GSPCL, GGCL, RGTIL Pipeline length is likely to double in next 4-5 years Total infrastructure inadequate to meet the countrys requirements Gas Pipelines in India

13 13 Administered Pricing Mechanism (APM) dismantling effective 1.4.2002 Administered Pricing Mechanism (APM) dismantling effective 1.4.2002 Gas Pricing Gas Pricing NELP NELP Policy on Refining Policy on Refining Auto Fuel Policy Auto Fuel Policy Policy on Marketing of Petroleum Products Policy on Marketing of Petroleum Products Gas Pipeline Policy Gas Pipeline Policy Petroleum Product Pipeline Policy Petroleum Product Pipeline Policy FDI Policy FDI Policy Government of India Policies

14 14 Key Decisions Taken on APM dismantling APM Dismantling – Key decisions Crude oil producers/Refineries to be paid on import parity basis from Apr02 Crude oil producers/Refineries to be paid on import parity basis from Apr02 Market determined prices for all products except LPG & Kerosene from Apr02 Market determined prices for all products except LPG & Kerosene from Apr02 Subsidies for LPG/Kerosene from fiscal budget on flat rate basis since Apr02. Free float thereafter Subsidies for LPG/Kerosene from fiscal budget on flat rate basis since Apr02. Free float thereafter

15 15 Key Decisions Taken on APM dismantling Gas Pricing – July 2005 Govt. order Consumer price of APM gas increased from Rs. 2,050/mscm to Rs. 3,200/mscm linked to calorific value of 10,000 kcal/scm pending Tariff Comm. recommendations Consumer price of APM gas increased from Rs. 2,050/mscm to Rs. 3,200/mscm linked to calorific value of 10,000 kcal/scm pending Tariff Comm. recommendations All APM gas to be supplied to only power & fertiliser sector consumers against existing allocation as well as for specific end consumers under court orders/small consumers having allocation upto 0.05 mmscmd All APM gas to be supplied to only power & fertiliser sector consumers against existing allocation as well as for specific end consumers under court orders/small consumers having allocation upto 0.05 mmscmd Rest of consumers to be supplied at market related price Rest of consumers to be supplied at market related price APM gas price for other than power & fertiliser sectors further increased from Rs 3,200/mscm to Rs 3,840/mscm wef June 2006 APM gas price for other than power & fertiliser sectors further increased from Rs 3,200/mscm to Rs 3,840/mscm wef June 2006 As against APM gas price of around $ 1.8/mmbtu, free market gas price varies e.g., RLNG @ $ 3.86/mmbtu, PMT gas @ $ 4.75/mmbtu, spot LNG purchases @ $ 7-8/mmbtu, etc. As against APM gas price of around $ 1.8/mmbtu, free market gas price varies e.g., RLNG @ $ 3.86/mmbtu, PMT gas @ $ 4.75/mmbtu, spot LNG purchases @ $ 7-8/mmbtu, etc.

16 16 NELP introduced in 1999; so far VIII rounds held NELP introduced in 1999; so far VIII rounds held Internationally competitive fiscal regime Internationally competitive fiscal regime Transparent Process, International competitive bidding Transparent Process, International competitive bidding Contractual Fiscal Stability Contractual Fiscal Stability Excellent Tax Incentives Excellent Tax Incentives Special deepwater concessions Special deepwater concessions Freedom to market production domestically Freedom to market production domestically New Exploration & Licensing Policy (NELP)

17 17 Administered Pricing Mechanism (APM) dismantled for refineries in April 1998 Administered Pricing Mechanism (APM) dismantled for refineries in April 1998 Setting up of refineries de-licensed in June 1998 Setting up of refineries de-licensed in June 1998 Refineries may be set up subject to meeting statutory requirements Refineries may be set up subject to meeting statutory requirements Private refineries by RIL and Essar set up in India Private refineries by RIL and Essar set up in India Others JV refineries are under implementation Others JV refineries are under implementation Policy on Refining

18 18 Passenger Cars, LCV & Heavy Duty diesel vehicles 2/3 wheelers BS-IIBS-III Euro III Eq BS IV Euro IV Eq BS-IIBS-III 11 Major cities (Delhi/NCR, Mumbai, Kolkata, Chennai, Bangalore, Hyderabad, Ahmedabad, Pune, Surat, Kanpur & Agra) Done by 1-Apr-03 Done by 1-Apr-05 Target 1-Apr-10 Done by 1-Apr-03 Done by 1-Apr-05 Entire CountryDone by 1-Apr-05 Target 1-Apr-10 Done By 1-Apr-05 Preferably from 1.4.2008 but not later than 1.4.2010 FuelBS-IIBS-III/Euro-IIIBS-IV/Euro-IV Petrol500 150 50 Diesel500 350 50 Sulphur content in ppm (max) Auto Fuel Policy - Road map for Fuel Quality improvement in India Source: Auto Fuel Policy, GoI

19 19 Marketing of petroleum products except subsidized products allowed to private companies Marketing of petroleum products except subsidized products allowed to private companies Marketing of Transportation Fuels authorised: Marketing of Transportation Fuels authorised: – Subject to entities making investment or proposing to invest Rs. 20 billion in exploration / refining / pipelines / terminals /infrastructure etc. Policy on Marketing of Petroleum Products

20 20 Exploration Exploration – Up to 100% FDI: Automatic route through Competitive bidding Refining Refining – Up to 100% FDI – Up to 49% FDI: if project taken up along with Public Sector Undertakings Marketing Marketing – Up to 100% FDI permitted in petroleum products marketing Petroleum Pipelines Petroleum Pipelines – Up to 100% FDI: Under automatic route Natural Gas Pipelines Natural Gas Pipelines – Up to 100% FDI: Under automatic route FDI Policy

21 Petroleum and Natural Gas Regulatory Board

22 22 Need for Reform Need for reform on account of - Provision of level playing field capital intensive activities requiring heavy investments promoting competitioninviting foreign capital attuning oil & gas sector in line with international practices protection of consumer interest

23 23 PNGRB Act, 2006 Enacted by Parliament in March06 Enacted by Parliament in March06 All provisions (except Section 16) of the Act notified w.e.f. 1.10.2007 All provisions (except Section 16) of the Act notified w.e.f. 1.10.2007 PNGRB formally established w.e.f. 1.10.2007 PNGRB formally established w.e.f. 1.10.2007 One Chairperson and four full time Members One Chairperson and four full time Members Basic Objectives – Basic Objectives – – To protect the interest of consumers and entities – To ensure uninterrupted and adequate supply in all parts of the country – To provide level playing field – To promote competitive markets

24 24 Salient Functions of the PNGRB Fostering fair trade & competition amongst entities Register entities for- marketing petroleum, petroleum products & natural gas establishing & operating LNG terminals establishing storage facilities Authorize entities for- Laying, building, operating or expanding a common carrier or contract carrier for transportation of natural gas or petroleum products Laying, building, operating or expanding city or local natural gas distribution network

25 25 Functions of the PNGRB (contd.) Declaring pipelines as common carrier or contract carrier & specify access code for allowing access to such pipelines In respect of notified petroleum, petroleum products & natural gas - Ensure adequate availability Monitor prices & take corrective measures to prevent restrictive trade practices Enforce retail service obligations & marketing service obligations Lay down technical standards & specifications including safety standards in activities relating to petroleum, petroleum products & natural gas

26 26 Internal Deliberations in PNGRB Draft Regulations approved by Board Draft Regulations posted in public domain Open House with Stakeholders Comments from stakeholders considered Open House on Final Draft Regulations finalized & approved by Board Legal Vetting Notification in Official Gazette 26

27 27 Regulations for CGD & NG Pipelines notified so far Regulations forDate Notified Authorizing entities to lay, build, operate or expand CGD Networks 19.03.08 Exclusivity for CGD Networks19.03.08 Determination of Network Tariff for CGD Networks and Compression Charge for CNG 19.03.08 Authorizing entities to lay, build, operate or expand natural gas pipelines 06.05.08 Technical Standards & Specifications including Safety Standards for CGD Networks 27.08.08 Affiliate Code of Conduct for entities in Transporting and Distributing Natural Gas 17.07.08

28 28 Regulations for CGD & NG Pipelines notified so far Regulations forDate Notified Access Code for common carrier or contract carrier natural gas pipelines 17.07.08 Determination of pipeline tariff for natural gas pipelines20.11.08 Guiding Principles for Declaring or Authorising Natural Gas Pipeline as Common Carrier or Contract Carrier 21.04.09 Procedure for Development of Technical Standards and Specifications including Safety Standards 14.05.09

29 29 Authorisation for CGD Networks Bidding Criteria - (weightage) - Least PV of overall unit network tariff over economic life of project - (40%) - Least PV of compression charge for CNG over economic life of project - (10%) - Highest PV of inch-kilometer of steel pipeline during exclusivity period - (20%) - Highest PV of PNG domestic connections during exclusivity period - (30%)

30 30 Exclusivity Criteria for CGD Networks Two periods of exclusivity provided to promote flow of investments – – –Exclusivity of infrastructure over its economic life of 25 years – –Marketing exclusivity of 5 years after which 3rd party access to the network for marketing of natural gas would be available on payment of network tariff Network Tariff to be generally decided on bid basis

31 31 Authorisation for Natural Gas Pipelines Bidding Criteria - (weightage) - Least PV of unit tariff for 1 st tariff zone over economic life of project - (40% & 70% for pipelines < 300 KM) - Least percentage increase for determining incremental tariff for 2 nd tariff zone - (20%; nil for pipelines 300 KM < 600 KM) - Least percentage increase for determining incremental tariff for 3 rd and subsequent tariff zones - (10% & nil for pipelines < 600 KM) - Highest PV of natural gas volumes - (30%)

32 32 Suo-motu by Board EOI Reject the Proposal Open Advt. in paper for Public Consultatio n process Firm-up Authorized Area Invite BidsBid evaluation No entity gets selected. Board may go for re-bid Grant of AuthorizationGas Tie-upFinancial Closure Post authorization monitoring of activities /meeting the service obligations/Quality of Standard norms Consequen ce of Default & Termination of Authorizatio n 15 days 30 days 15 days 60 days (extendable by 30 days) 30 days 90 days 30 days Process for Grant of Authorization

33 33 City Gas and CNG – Present Scenario Total Number of CNG vehicles - 7 lakh Total Number of CNG vehicles - 7 lakh Number of entities - 19 Number of entities - 19 Number of GAs - 25 Number of GAs - 25 – Future Scenario (next three years) Total Number of GAs - 86 Total Number of GAs - 86 Expected CNG vehicles - 25 lakh Expected CNG vehicles - 25 lakh – Future Scenario (next five years) Number of GAs - 125 Number of GAs - 125 Expected CNG vehicles - 33 lakh Expected CNG vehicles - 33 lakh – Future Scenario (next ten years) Number of GAs - 250 Number of GAs - 250 Expected CNG vehicles - 58 lakh Expected CNG vehicles - 58 lakh

34 34 PNGRB - Major Tasks on Hand Notification of Regulations Notification of Regulations Declaring/Authorizing petroleum products & natural gas pipelines and city gas distribution networks on common carrier basis Declaring/Authorizing petroleum products & natural gas pipelines and city gas distribution networks on common carrier basis Specifying market service and retail service obligations to protect consumers interests Specifying market service and retail service obligations to protect consumers interests Fostering Fair Trade and Competition Fostering Fair Trade and Competition Laying down Standards and Safety Norms Laying down Standards and Safety Norms

35 Thank you


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