Production Sharing Contracts are robust, transparent and efficient contracts which have a fair balance between financial risks and rewards to the government and the contractor. In India, PSC is a Contract between Government of India (GOI) and the Contractor (oil companies) to conduct Petroleum Operations comprising of Exploration, Development and Production of hydrocarbons. The Government of India constituted the Rangarajan Committee to look into the PSC’s mechanism and efficacy.The PSC’s fiscal model - cost recovery and sharing of profit petroleum – is likely to see reforms.

1. Oil & Gas in India – Facilitating Exploration and Production Activities
15th Energy Summit, Indian Oil & Gas Sector – To meet future energy needs
ASSOCHAM Seminar on Oil & Gas in India
“Production Sharing Contract”
Dr. Sunil Bharati
04 January 2013 Head (Corporate Affairs & Communications)

2. Oil & Gas in India – Facilitating Exploration and Production Activities 2
Why PSC?
o PSC regime has a fair balance between financial risks and
rewards to the government and the contractor
o Several countries at India’s stage of hydrocarbon development
have adopted the PSC regime to attract risk capital; mature
markets prefer concessionary regime
o Countries like China, Indonesia and Brazil pre-salt (deepwater),
Mozambique, Nigeria and Angola are key examples
o PSC is a robust, transparent and an efficient contract

3. Oil & Gas in India – Facilitating Exploration and Production Activities 3
PSC – A rigorous contractual model
o In India, PSC is a Contract between Government of India (GOI)
and the Contractor (oil companies) to conduct Petroleum
Operations comprising of Exploration, Development and
Production of hydrocarbons
o GoI has so far awarded a total of 282 (28 Pre-NELP and 254
NELP) exploration blocks under the PSC regime
Source: PIB, 7th December 2012

4. Oil & Gas in India – Facilitating Exploration and Production Activities 4
Exploration Landscape
60
PEL Distribution (per cent)
50
50 44
0.54
40 1
18 26
Per cent
30 9
22 22
17 18
20 15
12
45
10
0
Moderate to Well Poorly Explored Exploration Unexplored
Explored Initiated
Western Offshore Eastern Offshore Andaman-Nicobar
1995-96 2011-12 Ganga Valley Deccan Synclise Others
o Of the total 3.14 million sq.km sedimentary area, only 0.93 million
sq.km is held under PEL
o Key regions still to be explored
o Ganga Valley and Deccan Synclise potentially prospective
Source: Hydrocarbon Exploration &
Production Activities, 2011-12, DGH

5. Oil & Gas in India – Facilitating Exploration and Production Activities 5
Countries have proven that it can
be done 4000
3500
o Norway, Brazil and India were at
similar hydrocarbon position few 3000
decades back 2500
2193
2039
2000
o Conducive policy framework has 1500
been a game-changer for their
1000
hydrocarbon landscape 858
500
148 175
6
o These countries has proven that 0
India Brazil Norway
intensive exploration can reduce 1971 1981 1991 2001 2011
import dependence significantly
Production in thousands barrels per day
Source: BP Statistical Review of World Energy, 2012

6. Oil & Gas in India – Facilitating Exploration and Production Activities 6
NELP Regime: Paradigm Shift
o Post liberalisation GOI encouraged participation from foreign
and private Indian companies in E&D activities
o In the pre-NELP 1991-2000 period, GOI invited bids on a
regular basis
o GoI awarded 47.3% of sedimentary basin area for exploration
through NELP, as compared to only 11% in pre-NELP era
Source: Economic Survey 2010-11

7. Oil & Gas in India – Facilitating Exploration and Production Activities 7
Role of private sector has increased
o Investments in the Indian oil 8000
& gas exploration and
7000
development sector has
increased significantly 6000
5000
o Investment made by Indian 4000
and foreign companies was 3000
of the order of US $15.88 2000
billion: 1000
NA
0
US $8.5 bn on exploration & NELP I NELP II NELP NELP NELP NELP NELP NELP
III IV V VI VII VIII
US $7.37 bn on development Exploration Development
Source: Economic Survey 2011-12, Infraline
Graph figures in US$ million

8. Oil & Gas in India – Facilitating Exploration and Production Activities 8
PSC Administration
o The industry, however, Status of 107*
increasingly sees PSC Hydrocarbon Discoveries
administration as a challenge under NELP
o Sanctity of contracts is
31
imperative to continue 76
attracting investments
o Commercial production
commenced from 6 NELP
discoveries Discoveries declared commercial
Remaining Discoveries
*A total of 111 discoveries (40 oil and 71 gas) have
Source:15th Report of the Standing Committee on been made in 38 NELP blocks. Segmented data
Petroleum & Natural Gas available only for 107 discoveries

9. Oil & Gas in India – Facilitating Exploration and Production Activities 9
Reforms being initiated
o GoI constituted Rangarajan Committee to look into the PSC’s
mechanism and efficacy
o PSC’s fiscal model - cost recovery and sharing of profit petroleum
– likely to see reforms
o To overcome difficulties in managing existing models, the
committee recommends a new contractual system and fiscal
regime based on a royalty payment and production based
revenue sharing for future blocks ………………
o ………….… there are 228 active PSCs …

10. Oil & Gas in India – Facilitating Exploration and Production Activities 10
… PSC Administration
o Disciplined & timely conduct of the MC and its administration is
critical. Focus should be to ensure optimisation of JV / work
programme performance
o MC could function like board of a company. The Chairman of the
MC should have increased accountability
o MC meeting calendar for the forthcoming year could be drawn;
much like a board meeting calendar

11. Oil & Gas in India – Facilitating Exploration and Production Activities 11
PSC Administration
o PSC administration could be in line with the overall stated
objective and spirit of the PSC and the NELP policy
o International best practices emphasize that irrespective of the
contracting regime, contract administration and right incentives
enable increase production in numerous countries
o Focus, therefore, could be to improve the efficacy of contract
administration

12. Oil & Gas in India – Facilitating Exploration and Production Activities
15th Energy Summit, Indian Oil & Gas Sector – To meet future energy needs
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