India Day- A New E&P Paradigm

India Day- A New E&P Paradigm

Offshore Europe 20175th September 2017 | Aberdeen

Ministry of Petroleum and Natural GasGovernment of India

Directorate General of Hydrocarbons

DGH

Agenda

India’s Energy Outlook1

Production Enhancement Contract 6

Discovered Small Field Bid Round4

Key Success Stories7

Open Acreage Licensing Programme5

Policy Reforms in Indian E&P Sector2

HELP – A Paradigm Shift3

India’s Energy Outlook

0

50

100

150

200

250

300

1986 1991 1996 2001 2006 2011 2016

Total Production (O+OEG) Total Consumption (O+OEG)

701

1603

2015 2035

+129%

Historic Trend - Oil and Gas Demand Supply Future Demand Outlook

India is the 3rd largest consumer of oil and petroleum products after USA and China India’s share of global demand is expected to grow from current 5.5% to 9%

by 2035 India has emerged as a leading energy consumer in the World

Total Primary Energy Consumption (MTOE)

Source : BP Statistical Review 2017, BP Energy Outlook, Country and Regional Insights - India

Category II: Identified Prospectivity

India’s Conventional Hydrocarbon Potential

Category I: Proven Commercial Productivity

Category III: Prospective Basins

Category IV: Potentially Prospective

Ganga Valley 230 MMT12

Upper Assam 3180 MMT

2

Assam- Arakan1860 MMT

6

Bengal Basin190 MMT

16

Mahanadi Basin145 MMT

9

Krishna Godavari1130 MMT

4

Andaman Nicobar180 MMT

10

Cauvery Basin700 MMT

5

Conventional hydrocarbon prognosticated resources in 15 sedimentary basins is ~28 Billion Tonnes (O+OEG); Yet to Find Oil & Gas Potential of 16-17 Billion Tonnes of O+OEG (100 billion Barrels)

Conventional hydrocarbon prognosticated resources in 15 sedimentary basins is ~28 Billion Tonnes (O+OEG); Yet to Find Oil & Gas Potential of 16-17 Billion Tonnes of O+OEG (100 billion Barrels)

3.14 Million Sq. Km. of area spread across 26

sedimentary basin

Deepwater AreasPre-Cambrian Basement- TectonisedSediments

Himalayan Foreland 150 MMT

11

Rajasthan Basin380 MMT

7

Cambay Basin2050 MMT

1

Kutch Basin760 MMT

8

Saurashtra Basin280 MMT

14

Mumbai Offshore9190 MMT

3

Kerala-Konkan660 MMT

15

Deepwater7000 MMT

Source: DGH

Policy Reforms in Indian E&P Sector

Availability & Upgradation of E&P Data

Regulatory Framework for E&P

Improved Market Access

National Data Repository (NDR) Operationalised

Appraisal of Unapprised Areas

Survey of Offshore areas through Multi-client Speculative Mode

Re-assessment of Prognosticated Hydrocarbon Resources of India

Hydrocarbon Exploration and Licensing Policy (HELP)

Open Acreage Licensing (OAL)

Discovered Small Field Policy

Good International Petroleum Industry Practices (GIPIP)

Policies for reducing regulatory burden & contractual inflexibility in Production Sharing Contracts (PSC)

New Domestic Gas Pricing Guidelines

Marketing and pricing freedom for gas produced from Deepwater, Ultra deepwater and High Pressure High Temperature (HPHT) areas

Full Marketing and Pricing Freedom under HELP and DSF

Plans for Free Market Pricing for existing domestic production

Transforming India’s E&P sector through a series of proactive policy reforms

Earlier Regime: Production Sharing Contracts (PSC)

New Exploration and Licensing Policy (NELP) launched in 1999

241 Discoveries made under PSC regime

Total investment under PSCs till date is USD 40 billion with further USD 12 billion in the pipeline.

Production Sharing Contract (PSC) with Pre Tax Investment Multiple (PTIM)

Based on Cost Recovery mechanism

Government carved out blocks for bidding with limited choicefor investors

Currently there are about 130 blocks in PSC/ NELP regime

Currently, 8864 Sq.Km of area is under Mining Lease

HELP – A Paradigm Shift for Indian E&P SectorHydrocarbon Exploration and Licensing Policy

(HELP)

Revenue Sharing Model

Full Marketing & Pricing Freedom

Fiscal Incentives

Unified License for all type of Hydrocarbons

Freedom to carve out blocks

National Data Repository

Open Acreage LicensingReconnaissance Contract

(RC)Petroleum Operations

Contract (POC)Salient Features

Entire Sedimentary Basins under the New Policy Regime with several attractive features through:

India now offers

Reconnaissance Contract (RC)

Petroleum Operations

Contract (POC)

1st Round Concluded

Subsequent rounds under

Planning

Production Enhancement

Contract (PEC)

1 2 3

Discovered Small Fields Bid Round

Open Acreage Licensing Program

Operating Mature Fields

of NOCs

Discovered Small Field Bid Round I

134 e-bids received from 47 Companies

20 Companies awarded

13 New entrants to E&P industry

30 Contracts awarded (23 Onland & 7 Offshore)

Success of DSF Bid Round 2016 in the face of global economic slowdown and low oil prices manifests the benefits of new E&P regime

for investors

Government of India is planning to launch the Round II of Discovered Small Field Bids and likely to announce contract areas by Q4, 2017

Government of India is planning to launch the Round II of Discovered Small Field Bids and likely to announce contract areas by Q4, 2017

Discovered Small Field Bid Round IIProposed Fields Offered

37 Fields

Initial in-place

volumes

Over 146MMTOE

16 Onland 21 Offshore

Adjoining facilities of ONGC and OIL

Bidders can access wellhead equipment, surface and nearby facilities on chargeable basis

Assam fields – 9Reserves – 8.56

Mmtoe

Andhra Pradesh fields – 11 (6

Offshore)Reserves – 57.47

Mmtoe

Rajasthan fields – 2Reserves – 1.71 Mmtoe

Mumbai fields – 8(all offshore)

Reserves – 64.18 Mmtoe

Gujarat fields – 7 (7 offshore)

Reserves – 14.85 Mmtoe

37 fields expected to be offered

The exact fields and related data shall be provided in Round II Bid Document expected to be notified by Q4’ 2017

Areas Offered under OAL

Total Area offered across 26 Sedimentary

Basin2.84 Million

Sq. Km

Zone – I (Sufficient Data)0.7 Million

Sq. Km

2.14 Million Sq. Km

Zone – II & III (Moderate to Sparse

Data)

Bidders can carve out their own blocks (min 10’ by 10’

Grid – 336 Sq. Km)1.72 million LKM of 2D seismic data

1.72 million LKM of 2D seismic data

0.61 million SKM of 3D seismic data

0.61 million SKM of 3D seismic data

11,600 well log data11,600 well log data

1 Degree X 1 Degree Map

* Area offered includes 7 producing areas

Data Available on NDR

Zone I is available for Petroleum Operation Contract only

Zone II & III are available for Reconnaissance Contract and Petroleum Operation Contract

Zone I is available for Petroleum Operation Contract only

Zone II & III are available for Reconnaissance Contract and Petroleum Operation Contract

Note – Min. 1’X1’ Grid allowed for adjoining areas to existing blocks and areas where it is not possible to carve 10X10 Grid

Open Acreage License ProcessInvestor studies G&G data available on NDR

Carves out blocks for interested area for any

of the two contracts

POCContract Period

8 to 10 years: Exploration

20 to 30 years: Development and Production

RCContract Period –

2 to 3 years

Submission of EOISubmission of EOI

Finalization of Block and Invitation to Bid through

NIO

Finalization of Block and Invitation to Bid through

NIO

Bid Submission, Evaluation

Bid Submission, Evaluation

Legend -POC – Petroleum Operations Contract

RC – Reconnaissance Contract

EoI – Expression of Interest

NDR – National Data Repository

NIO – Notice Inviting Offer

Award of ContractAward of ContractPOC RC

Key Points -• Party submitting EOI for an

area shall be ‘Originator’• EOI for POC would be

preferred over RC for same area

• EOIs can be submitted in two cycles per annum (every 6 months)

Enabling Ease of Doing Business for E&P Investors through OAL ProcessEnabling Ease of Doing Business for E&P Investors through OAL Process

OAL Timelines

16th

Dec15th

Feb31st

Mar15th

May

Timeline (Closing Dates)15th

Dec15th

Nov

Last Date of EOI Submission

16th

June15th

Aug31st

Oct15th

Nov15th

June15th

May

Window 1

Window 2

Finalization and Review of EOI

Issue of Bid Document

Bid Submission Deadline

Bid Evaluation and Award (on or

before)

Contract Signing (on or before)

Key Milestones

1

2

3

4

5

6

DGH to Evaluate EOIs and Issue Bid within 1 month

Timing is critical to avail originators incentive –Investors have two windows for submission of EOIs

Carved out contract areas available for bidding to all parties (2 months)

Contract signing and post-award facilitation by DGH

Reconnaissance and Petroleum Operation Contracts

Completion of 80% Work Programme

Intent to Migrate at least 90 days prior to expiry of RC

Condition Precedents

Meets Technical & Financial Eligibility for POC

ReconnaissanceContracts (RC)

Petroleum Operation

Contract (POC)

Migration from RC to POC

Exploration activities, surveysand drilling of wells is covered

Contract Period: 2+1 years

Right to lease data for 12 years

Reconnaissance Contracts are exclusive but contractor can allow other parties to conduct survey at its discretion Government’s Revenue Share

based on a linear scale

Marketing & Pricing Freedom on arm’s length basis

Exploration Period of 8 & 10 years for onland/shallow water and deepwater/ frontier blocks respectively

Well defined timelines

Development Period of (20+5+5) years

Contractual model significantly lowers the regulatory burden and provides operational flexibility to E&P operators

Contractual model significantly lowers the regulatory burden and provides operational flexibility to E&P operators

Ease of Entry

1 Nominal Application Fees and Reasonable Bid Participation Bondat the time of submitting the EOI

2Reasonable Technical Qualification Criteria for ReconnaissanceContracts (RC) and Petroleum Operation Contract (POC)

3Low Financial Qualification Criteria - Positive Networth for RC andMinimum Networth equal or more than higher of expenditure or LDvalue of Committed Work Programme for POC

4 Due Diligence Report of the geological prospectivity of areas forwhich EOI is submitted (subject to availability of sufficient G&G Data)

Bid Parameters

50%

45%

Bidders to quote Low Revenue Point (LRP) and Higher Revenue Point (HRP) – percentage share to be linearly interpolated between the two points

Bidders to quote for 2D seismic, 3D seismic, exploratory wells, core analysis

Revenue Share

Biddable Work

Program

Weights

Originator Incentive

Originators to be assigned highest marks on a First Come First Served Basis 5%

Petroleum Operations Contract

For Reconnaissance Contract - 70 marks is for biddable work program (2D, 3D, exploratory wells), 25 marks for Data Price and 5 marks for

Originator Incentive

For Reconnaissance Contract - 70 marks is for biddable work program (2D, 3D, exploratory wells), 25 marks for Data Price and 5 marks for

Originator Incentive

Bid Incentives to Bidders

Migration Incentive

Originators Incentive

Investors submitting EOI for RC or POC shall be called as Originators on First Come First Served Basis

Originators of successful fields will be awarded Incentive (5 Marks) at the time of bid evaluation provided the composition of Consortium remains same

Contractors migrating from RC to POC are provided Migration Incentive (5 Marks)

This incentive is only provided if the RC Contractors remains Operators for POC in the bid

Type of Hydrocarbons Duration

Royalty Rates

(Oil)

Royalty Rates(Natural

Gas/CBM)Onland Throughout 12.5% 10%

Shallow water Throughout 7.5% 7.5%

Deep waterFirst 7 years Nil Nil

After 7 years 5% 5%

Ultra-Deep waterFirst 7 years Nil Nil

After 7 years 2% 2%

Fiscal Incentives to Bidders• Fiscal incentives are provided to investors under the Hydrocarbon

Exploration and Licensing Policy (HELP) regime

• Low graded Royalty Rates (Deepwater areas, in particular)

• Exemption of Oil Cess and Custom Duty

• Benefit under Section 42 of Income Tax Act

Royalty rates applicable under the HELP are one of the lowest when compared to rates levied by various countries globally

Royalty rates applicable under the HELP are one of the lowest when compared to rates levied by various countries globally

OAL Information Access

• Access to India’s Online Exploration Database

• Users can register and login to view E&P data

• Users can order data through portal and can make online payment

• Users can also explore NDR databases through a Browsable Catalogue

• For Queries: indr@dghindia.gov.in

National Data Repository (NDR)

EOI Submission Portal

http://www.ndrdgh.gov.in

http://www.dghindia.gov.in/help• Bidders can register and login to submit their

EOIs online• Users can view sectors for which EOIs are

already received• Users need to fill in application form and

upload a Due Diligence Report and scan copy of Participation Bond as per OAL document

• For queries: facilitationoal@dghindia.gov.in

Production Enhancement Contract (PEC)

Infusion of world class E&P technologies

Infusion of best-in class management practices

Encourage private & foreign investments

Maximize production from mature fields

Key Policy Goals

61851 Sq. Kms

Area under Nomination Fields

Gas - 24 BCM

Current Production from Nomination Fields

Oil - 25.6 MMT

PEC Potential

Government plans for a PEC Policy in Nominations fields operated by NOCs –Two models under consideration: Farm-in Model and Technical Services Model

Key Success Stories

• Early exploration done by ONGC & Shell• PI transferred from Shell to Cairn• Already recovered cumulatively 60 mmt of O + OEG• Total Investment – US$ 6 Billion• Cumulative revenue - US$ 30 Billion• Contractor share of profit – US$ 10 Billion

RJ-ON 90/1 Block - One of the successful discoveries in Barmer, Rajasthan

KG Basin - India’s most prolific deepwater gas discovery

• Awarded to RIL & NIKO in NELP-I• BP acquired 30% PI from RIL• Already recovered cumulatively 3.7 mmt of Oil and

77.8 BCM of Gas• Total Investment – US$ 8.9 Billion• Cumulative revenue - US$ 13.2 Billion• Contractor share of profit – US$ 1.2 Billion

Other Success Stories - Hazira | Panna-Mukta | Mid & South Tapti | Kharsang | Dholka

Currently, 130 contracts are operational under PSC/ NELP regime

Focus on Higher Production and Low Government Take

0%10%20%30%40%50%60%70%80%90%

100%Sanarudravaram

Achanta

Bhim

anapalli

Koravaka

Kherem

Hilara

Duarmara

Jeraipathar

N.Patharia

Charaide

o

Barsilla

Laxm

ijan

Dipling

Elao

Kham

bel

Kambo

i

South Patan

West B

echraji

Noh

ta

Sade

wala

Bakhri‐Tibb

a

Karaikal

Ned

uvasal KD

B‐15

B‐17

4

B‐9

B‐12

7E

B‐80

GS‐59

Royalty Government's Share of revenue (%) Total Government Take

Average Government Take for 30 Contract areas awarded under DSF Bid Round

32.3%

The average total government take from the total revenue for the 30 contract areas awarded under DSF Bid Round I is ~32%

which is among the lowest compared to other countries

The average total government take from the total revenue for the 30 contract areas awarded under DSF Bid Round I is ~32%

which is among the lowest compared to other countries

Source: DGH, Note: 1) Royalty rates as applicable 2) Government’s Share of revenue based on LRP +5% 3) The total government take does not include corporate / Sales tax

A Promising Investment Opportunity

01Low Demand Risk

A ready market with robust oil & gas demand

02Low Market Risk

Full marketing and pricing freedom for Oil & Gas

03

Low Regulatory BurdenEasy to administer revenue sharing contracts with operational autonomy to

contractor

04Transparent and Full Availability of Data

Large amount of data available (in NDR) for the Sedimentary basins –Easy, fair and transparent access to Investors

04Low Government Take

Governments focus on higher production and not higher revenue share

DGH India

@DGHIndia

DGH India

Directorate General of Hydrocarbons(Under Ministry of Petroleum & Natural Gas)Phone: +91-120-2472000,Fax: +91-120-2472049Email: dg@dghindia.gov.in Website: dghindia.gov.in

Thank You