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

2. Top Primary Energy Consuming Countries 2005
Total World Energy Consumption: mtoe
5th largest energy consumer (Share 3.7% of global energy)
Per capita energy consumption - about one third of world average
Energy consumption projection( )
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
Fig. in MTOE
Per-capita Energy Consumption
India has been one of the world’s most consistent growth stories, and India’s GDP growth rate has accelerated from about 5% in the 1980’s and 1990’s to about 6% over the past 5 years. Today, Indian policy makers and planners accept that 6-7% annual growth is more likely.
Source – Energy Information Administration (EIA)

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

4. Crude Oil Demand, Production & Import Trends
MMT

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

6. Refineries & Product Pipelines
Refining
Refining Capacity: 178 MMT
Product Pipelines
Product Pipelines Length: KM
Capacity: MMT
Capacity Utilisation: %
IndianOil, through strategic mergers and acquisitions, has strengthened its leadership position in the downstream oil sector in India. The IndianOil group accounts for 41% of national refining capacity, 51% of product pipeline capacity, and 47% of market share.

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

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

9. Petroleum Products Pipelines in India
Jalandhar
Bhatinda
Ambala
Roorkee
Sangrur
Najibabad
Panipat
Meerut
Nahorkatiya
Tinsukia
Rewari
Delhi
Loni
Sanganer
Shahjahanpur
Mathura
Ajmer
Siliguri
Bongaigaon
Digboi
Jodhpur
Chaksu
Tundla
Numaligarh
Lucknow
Kanpur
Jagdishpur
Guwahati
Kot
Chittaurgarh
Sidhpur
Barauni
Ahmedabad
Rajbandh
Kandla
Ratlam
Mundra
Navagam
Budge Budge
Jamnagar
Koyali
Maurigram
Indore
Vadinar
Dahej
Ankleshwar
Haldia
Hazira
Manmad
Mumbai
High
Mumbai
Paradip
Pune
Secunderabad
Vizag
Existing
Uran
Product
Crude Oil RR
India, already has a network of oil pipelines for supplying crude oil to the inland refineries viz. Guwahati, Mathura, Panipat, Barauni, Koyali etc., and for transportation of the petroleum products from the refineries and port terminals to inland depots and bulk consumers.
Most of these pipelines are located in Eastern, western and northern parts of the country.
At present the country has about 11,500 km of cross-country pipelines for transportation of crude oil and petroleum products. These pipelines are owned and operated by various oil and gas companies viz. Indian Oil Corporation Limited (IOCL), Gas Authority of India Limited (GAIL), Oil India Limited (OIL), Oil & Natural Gas Corporation Limited (ONGCL), Hindustan Petroleum Corporation Limited (HPCL), Bharat Petroleum Corporation Limited (BPCL) and Petronet VK Limited (PVKL). Except PVKL, all other companies are state owned.
70% of countries pipeline owns & operated by IOC. Total Pipeline capacity is MMTPA
Pakni
Hazarwadi
Vijayawada
Products
9893 KM; 64 MMTPA
LPG
2124 KM; 4.5 MMTPA
Capacity Utilization
Prods. - 78%; LPG - 62%
Mangalore
Bangalore
Chennai
On-going
Product
Crude Oil
Sankari
Asanur
Karur
Existing
Coimbatore
Trichy
Kochi
LPG
Madurai 9

10. Distribution & Marketing Infrastructure
Terminals/Depots
No.
383
LPG Bottling Plants
170
Aviation Fuel Stations
126
Retail Outlets
37953
LPG Distributors
9366
SKO/LDO Dealers
6614
IndianOil, through strategic mergers and acquisitions, has strengthened its leadership position in the downstream oil sector in India. The IndianOil group accounts for 41% of national refining capacity, 51% of product pipeline capacity, and 47% of market share.

11. Long Term Demand Supply - Gas

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

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

14. APM Dismantling – Key decisions
Key Decisions Taken on APM dismantling
APM Dismantling – Key decisions
Crude oil producers/Refineries to be paid on import parity basis from Apr’02
Market determined prices for all products except LPG & Kerosene from Apr’02
Subsidies for LPG/Kerosene from fiscal budget on flat rate basis since Apr’02. Free float thereafter

15. Gas Pricing – July 2005 Govt. order
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
All APM gas to be supplied to only power & fertiliser sector consumers against existing allocation as well as for specific end consumers under court orders/small consumers having allocation upto 0.05 mmscmd
Rest of consumers to be supplied at market related price
APM gas price for other than power & fertiliser sectors further increased from Rs 3,200/mscm to Rs 3,840/mscm wef June 2006
As against APM gas price of around $ 1.8/mmbtu, free market gas price varies e.g., $ 3.86/mmbtu, PMT $ 4.75/mmbtu, spot LNG $ 7-8/mmbtu, etc.

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

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

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

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

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

21. Petroleum and Natural Gas Regulatory Board

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

23. PNGRB Act, 2006 Enacted by Parliament in March’06
All provisions (except Section 16) of the Act notified w.e.f
PNGRB formally established w.e.f
One Chairperson and four full time Members
Basic Objectives –
To protect the interest of consumers and entities
To ensure uninterrupted and adequate supply in all parts of the country
To provide level playing field
To promote competitive markets

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. 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. PROCESS OF FRAMING & FINALISING REGULATIONS
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. Regulations for CGD & NG Pipelines notified so far
Date Notified
Authorizing entities to lay, build, operate or expand CGD Networks
Exclusivity for CGD Networks
Determination of Network Tariff for CGD Networks and Compression Charge for CNG
Authorizing entities to lay, build, operate or expand natural gas pipelines
Technical Standards & Specifications including Safety Standards for CGD Networks
Affiliate Code of Conduct for entities in Transporting and Distributing Natural Gas

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

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

32. Process for Grant of Authorization
Suo-motu by Board
EOI
Reject the Proposal
Open Advt. in paper for “Public Consultation process”
Firm-up “Authorized Area”
Invite Bids
Bid evaluation
No entity gets selected. Board may go for re-bid
Grant of Authorization
Gas Tie-up
Financial Closure
Post authorization monitoring of activities /meeting the service obligations/Quality of Standard norms
Consequence of Default & Termination of Authorization
15 days
15 days
30 days
60 days (extendable by 30 days)
30 days
90 days
30 days

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

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

35. Thank you