Energy is a key driver of economic growth and the Government’s focus has been to bring about transformational changes in the energy landscape of India to fulfil the twin objectives of energy justice and climate justice. The Petroleum and Natural Gas Ministry has endeavoured to “Reform, Perform and Transform’ the sector. The government has taken several reforms and accomplished major task with far-reaching impacts in the sectors of Exploration and Production, Refinery, Marketing, Natural Gas and international cooperation.
Exploration & Production:
In a major drive to give a boost to upstream hydrocarbon sector, the Government has unveiled a series of policy initiatives. The reforms in hydrocarbon sector are based on the guiding principles of enhancing domestic oil and gas production, increasing investment, generating sizable employment, enhancing transparency and reducing regulatory burden. Some of the notable policy reforms are listed as under:
To incentivize gas production from difficult areas such as High Pressure- High Temperature (HP-HT) reservoirs and deepwater and ultra deepwater areas, Government, in March, 2016, granted marketing including pricing freedom on natural gas production with a price ceiling announced on half yearly basis.
Policy Framework for Early Monetization of CBM Gas
To develop alternate sources of natural gas including Coal Bed Methane (CBM) and promoting gas economy, Government provided marketing and pricing freedom for Coal Bed Methane (CBM), and streamline the operational issues vide the Policy Framework for Early Monetization of CBM Gas in April 2017.
Discovered Small Fields Policy
For early monetization of unmonetized discoveries of National Oil Companies (NoCs), Government in September, 2015 approved 69 marginal fields/discoveries for offer under Discovered Small Fields Policy. These Contract Areas are awarded under the new regime of Revenue Sharing Model. First bidding round under the Discovered Small Field Policy was launched on 25th May 2016, offering 67 discovered small fields/discoveries clubbed into 46 Contract Areas for international bidding. Total 30 contracts for 43 discovered small fields/discoveries were signed in March, 2017. It is expected that in-place locked hydrocarbons reserves of 40 Million Metric Tonnes (MMT) of oil and 22 Billion Cubic Metres (BCM) of gas will be monetised over a period of 15 years. On 7th February, 2018, Government approved the Discovered Small Field (DSF) Policy Bid Round-II, an extension of the Discovered Small Field Policy notified on 14.10.2015. Under DSF Bidding Round-II, 59 discovered small fields/unmonetized discoveries estimated to have 189.61 Million Metric Tonnes (MMT) Oil and Oil equivalent gas in-place are offered for bidding. Total 23 contracts comprising 57 contract areas/discoveries were signed in March-2019.
Hydrocarbon Exploration and Licensing Policy (HELP)
Government notified Hydrocarbon Exploration and Licensing Policy (HELP) on 30th March, 2016 and formally put in operation w.e.f. 1st July, 2017 with notification of Open Acreage Licensing Policy and operationalization of National Data Repository (NDR). HELP is a paradigm shift from Production Sharing Contract (PSC) regime to Revenue Sharing Contract (RSC) regime which completely overhauls the regulatory regime for the future Exploration and Production (E&P) activities by reducing the regulatory burden based on the principle of ‘Ease of doing business’. It provides for single License for exploration and production of conventional as well as non-conventional Hydrocarbon resources, pricing and marketing freedom, reduced rate of royalty for offshore blocks etc. Open Acreage Licensing Policy (OALP) means potential investors/companies can carve out exploration acreages of their choice and submit Expressions of Interest round the year.
A new policy was notified in early 2019 on providing incentives for exploration in unexplored basins wherein several fiscal and contractual incentives have been offered for exploration in category-II Basins & Category III Basins. These policy measures are expected to encourage E&P companies to enter new areas which are largely unexplored.
National Seismic Programme (NSP)
Government formulated National Seismic Programme (NSP) in October, 2016 to appraise the unappraised areas in all sedimentary basins of India where no/scanty data was available. Under the programme, Government approved the proposal for conducting 2D seismic survey for data Acquisition, Processing and Interpretation (API) of 48,243 Line Kilo Metres (LKM).
Govt of India has set up an E&P data bank, National Data Repository (NDR), with state-of-the-art facilities and infrastructure for preservation, upkeep and dissemination of data to enable its systematic use for future exploration and development in July, 2017. Having an NDR for India has helped in enhancing prospects of petroleum exploration and facilitating the Bidding Rounds by improving the availability of quality data. With this action, India has joined the league of countries that have an NDR and can compete effectively in the hydrocarbon exploration and production sector.
Gas Based Economy:
Natural Gas is an environment friendly clean fuel and it has a potential to play a significant role in providing solutions to the environmental challenges as well as in meeting ever growing energy needs in a sustainable manner. Since 2014 and onward, Government of India is consistently taking initiatives, revamping policies and framing new ones towards making India a gas-based economy –initially, by increasing the share of gas in India’s primary energy mix from current 6 percent to 15 percent, a goal laid out by Hon’ble Prime Minister. Currently, world’s average natural gas share in primary energy basket is about 24 percent. The only Indian state which has a higher gas mix than the global average—~25 percent— is Gujarat.
In the past five years, Government has transformed domestic gas pricing regime in 2014 by linking it with global gas markets, marketing and pricing freedom regime is progressively being provided for new fields from 2016 onwards to attract investment in exploration and production activities, enhancing LNG import capacity by developing new terminals and augmenting existing capacities, and, connecting the eastern and north-eastern parts of the country with gas grid by developing the 2650-km Pradhan Mantri Urja Ganga project and the 1565-km North-eastern Region Gas Grid project. Capital support of about Rs. 10,676 crore has been extended to these projects to make gas accessible in remote areas. Country is having over 16,800 km long gas pipeline network and additionally another 14,700 km gas pipelines are under different stages of construction.
A strong emphasis has been laid on expansion of city gas distribution (CGD) networks across the country by covering 407 districts with a potential to make gas accessible to over 70 percent of the population. The distribution networks would enable the supply of cleaner cooking fuel (like, PNG) to households, industrial & commercial units as well as transportation fuel (like, CNG) to vehicles. There is an expected investment of Rs 120,000 crore in over the next 10 years.
In addition to natural gas, an initiative called “Sustainable Alternative Towards Affordable Transportation” (SATAT) has been taken up to extract economic value from bio-mass waste in the form of Compressed Bio Gas (CBG) and bio-manure. Municipal solid waste, sugar industry waste (press mud) and agricultural residue have significant potential for production of the same. Our oil and gas CPSEs have come forward to promote the use of CBG by offering floor price to offtake CBG for the first 10 years through upfront commercial agreements. Given the abundance of biomass in the country, CBG has the potential to support the development of alternate clean fuel in automotive, industrial and commercial uses in the coming years. We have proposed that CBG plants be primarily set up through independent entrepreneurs. CBG produced at these plants will be transported through cascades of cylinders to the fuel station networks of OMCs for marketing as a green transport fuel alternative.
Liquefied Natural Gas (LNG) has also emerged as one of the feasible alternate economical and environment friendly fossil fuel for the medium & Heavy Duty Vehicles (HDV). To kick start the development of LNG fuelled based transport ecosystem in the country, thrust has been given to build LNG filling stations along the golden quadrilateral. Usage of LNG in transport sector would also facilitate in reducing the import bill.
Our greatest leverage is the size of our market and its stability. Therefore, it makes perfect business sense for gas producing countries to realign existing and long term market conditions with the prevailing market conditions.
The downstream sector in India had humble beginnings in 1901 when India’s first refinery at Digboi in Assam supplied petroleum products to the region. The oil industry has evolved over the years with the downstream supply chain ensuring distribution of petroleum products to every citizen across the length and breadth of our vast and diverse country.
Indian petroleum consumption is driven by its robust domestic demand owing to growth in key sectors including automobiles, aviation, freight and petrochemicals. India is the largest two-wheeler market and the fourth largest four-wheeler market in the world.
Technologically advanced initiatives through bio fuel production from refinery-off gases, crude to chemicals, CO2 capture & valorisation along with coal gasification and water conservation through reducing fresh water intake are redefining the petroleum refining business in India.
The total refining capacity in India stands at 249.4 million tonnes, making the country, the second largest refiner in Asia and the fourth largest refiner in the world. By 2025, this is expected to increase to over 400 MMTPA.
New Initiatives in Marketing
Ministry of Petroleum and Natural (MoPNG) Gas vide Resolution dated 08.11.19 revised the guidelines for authorization to market transportation fuels (MS & HSD) which have been published in the Gazette of India. The revised guidelines would promote ease of doing business and boost private players to invest in retail sector.
A novel concept of Door to Door Delivery of Petroleum products (DDD) to deliver Petroleum Products to customers at their door-steps primarily to industries/organizations/consumers largely engaged in the areas of mining, infrastructure, telecommunication, port equipments etc. This initiative is aimed at directly dispensing HSD into the stationery equipments of the end users through specially designed 3KL – 6 KL Browsers fully equipped with secured dispensing equipment. This initiative will bring in convenience, efficiency and safety for the end users and will be an effective aid in the Govt.’s state objective of “ease of doing business”. The DDD initiative has new age technology features like geo-fencing, secured and digitized dispensing, automated billing, mobile app, digital payment mechanism etc. for higher efficiency and delivery assurance. OMCs (including private oil company) have since embarked upon this program and 86 DDD Browsers have already been commissioned.
Price of diesel has been made market-determined by the Government with effect from 19.10.2014. Since then, the Public Sector Oil Marketing Companies (OMCs) take appropriate decision on pricing of diesel in line with international product prices and other market conditions. Daily revision of retail selling price (RSP) of petrol and diesel has been implemented in the entire country with effect from 16th June, 2017. Daily pricing has been introduced to bring more transparency and efficiency in pricing to benefit consumers.
In order to tackle the issue of vehicle tail-pipe emissions from its large and rapidly motorizing population, it was imperative for India to adopt a regulatory pathway to limit the adverse outcomes of these emissions. In view of the urgency to provide relief to the population from the adverse impact on health, Govt of India decided to leap-frog from the BS-IV emission norms to the BS-VI norms, without going through the BS-V stage, as recommended by the Expert Committee. The schedule was substantially compressed, in order to catch up with the more developed nations of the world. Where the Expert Committee had recommended roll-out of BS-V auto fuels across the country effective 1.4.2020, Govt of India decided had implement BS-VI emission norms effective that date.
It is significant that European countries moved from Euro-IV norms to Euro-VI norms over a period of about 9.5 years. The Indian Petroleum Sector has accomplished this transition in 3 years, to substantially reduce the lag behind the advanced countries of the world.
With the twin challenge of enhancing energy access and simultaneously curbing carbon emissions, the context is set for energy transition. Climate change, sustainable development goals and air pollution constitute the very basis of this transformation. This will lead to greater focus on Gas, Renewables & Bio-fuels aided by policy, technology & Innovation.
We are living in times where there is a dire need to maintain ecological balance. Increasing Pollution levels are cause for concern. Keeping this in mind, the Ministry of Petroleum and Natural Gas has taken several initiatives to bring in sustainability.
National Policy on Biofuels
The National Policy on Biofuels-2018 notified on 08.06.2018, inter-alia, allows production of ethanol from damaged food grains like wheat, broken rice etc. which are unfit for human consumption. The policy also allows conversion of surplus quantities of food grains to ethanol, based on the approval of National Biofuel Coordination Committee. The National Policy on Biofuels-2018 envisages an indicative target of 20% blending of ethanol in petrol and 5% blending of bio-diesel in diesel by 2030.
With an aim to provide more choices of alternative automotive fuels to consumers, the following approvals have been given by the Government:
(i) Retailing of 100% Ethanol (E-100) as a transportation fuel on a pilot basis by Oil Marketing Companies at a few retail outlets in areas where ethanol is sufficiently available.
(ii) Retailing of petrol blended with methanol (M15) as an automotive fuel by Indian Oil Corporation Ltd. at a few outlets in Assam and NE States on a pilot basis.
To maximize the production of ethanol in the country for the purpose of blending with petrol, other options/routes for enhancing ethanol production need to be explored. Government has already allowed procurement of ethanol produced from other non-food feedstock besides molasses, like cellulosic and lignocelluloses materials including petrochemical route.
2G Ethanol Projects
Subsequent to opening up of alternate route i.e. Second Generation (2G) route for ethanol production, Public Sector Oil Marketing Companies under the administrative control of Ministry of Petroleum and Natural Gas are in the process of setting up 12, 2G bio-refineries with an investment of Rs.14,000 crore.
In order to encourage setting up of second generation bio-fuels plants, Government has launched as scheme namely i.e. “Pradhan Mantri JI-VAN (Jaiv Indhan- Vatavaran Anukool fasal awashesh Nivaran) Yojana” for providing financial support to integrated bio-ethanol projects, using lignocellulosic biomass and other renewable feedstock. In this scheme, financial support to twelve Integrated Bio ethanol Projects using lignocellulosic biomass & other renewable feedstock with total financial outlay of Rs 1969.50 crore for the period 2018-19 to 2023-24 will be provided along with support to ten demo projects for 2G technology.
UCO has been identified as a potential raw material for production of biodiesel and therefore in order to encourage production of biodiesel from Used Cooking Oil (UCO), Oil Marketing Companies floated an Expression of Interest last year for supply of biodiesel produced from UCO at 100 locations across the country which was then extended to 200 locations.
Strategic Crude Oil Storage
Indian Strategic Petroleum Reserve Limited (ISPRL) has already completed the construction of underground rock caverns for SPR with total crude oil storage capacity of 5.33 Million Metric Tonne (MMT) at three locations, viz. (i) Vishakhapatnam (1.33 MMT), (ii) Mangalore (1.50 MMT) and (iii) Padur (2.5 MMT). The Vishakhapatnam, Mangalore and Padur storage facilities have been commissioned and were dedicated to the nation by Prime Minister on 10th February 2019.
The Union Cabinet have given “In Principle approval for establishing 6.5 MMT Strategic Petroleum Reserves at two locations Chandikhol (4 MMT) in Odisha and at Padur (2.5 MMT) Karnataka including dedicated SPM’s for the two SPR’s. The ‘In Principal’ approval is to take up the project under PPP model to reduce budgetary support of Government of India.
Investment Opportunity in BPCL as GOI is disinvesting 53.29% of Shareholding – EOI submission is 30 September 2020.