Natural Gas – Whose

Resource?

Mangala Mishra (427)

Sanish Nair (428)
Ranjit Raichurkar (435)
Sujan Salian (440)
Darshit Sanghvi (442)
Rohan Tamanekar (454)
Sub:EEB
Prof : V. Date
Div : D – Group 10
The Energy Snapshot

 Fuel of the 21st Century

 Efficient and Cost Effective
 India Produces - 87 mmscmd
 Major Players : ONGC – OIL
 PSC : Private Players
 NELP : Mkt Gas @ Mkt Price
87 MMSCMD ?? What
next?
 InternalConsumption
 Extraction of LPG
 74 mmscmd  Sell  Consumers
Primary Energy Resource
Net Import
NELP (1999)
 Objective:
 Intensive Exploration
 To bring in state of art technology

 Attributes:
 Fiscal Stability
 No customs Duty on imports
 No Mandatory State participation
 Equality to all the companies participating
 Transparent bidding system
 Freedom to the contractor
 No cess on crude oil production
 Exemption of Tax for 7yrs
NELP Comparison
MoU and GSMA:
 MoU
 Signed between : Ambani Brothers
 Quantity and Price Fixed
 Gas not for commercial trade
 GSMA
 Signed between : RIL vs Subsidaries(RNRL
later)
 Quantity Fixed but Price not fixed
Pricing and Foreign Players
 Ministry of Petroleum and Natural gas
 Directorate General of Hydrocarbons
(DGH)
 New Exploration Licensing Policy (NELP)
 Production Sharing Contract (PSC)
 Cairn India,Exxon Mobil,Royal Dutch
Shell etc
Money Game
EGoM : -Authority to decide pricing policy
-Gas prices depends on crude oil prices
-Price Natural gas between $2.4 & $4.2 per mBtu

Expected Production KG D6 block- 80 mmscmd

Price Sales Capital Operating Net Cash Govt RIL Income
Per mBtu $bn Exp. Exp. Flow $bn $bn Tax
$bn $bn $bn $bn

$2.34 21.35 9.41 1.59 10.35 3.84 7.81 1.3

$4.20 38.36 9.41 1.59 27.3 8.44 16.28 4.25

Expected Loss of Government if RIL sales gas at $2.34 per mBtu

is $8.4 bn ~ INR 40,000 crores
Govt’s Say
 Ambani brothers are fighting over something
that does not belong to them
 Article 297: petroleum as a resource :India
authority
 RIL can’t sell it unilaterally
 Price of $4.20 was approved by EGoM
 Govt. can’t approve of the price lower than $
2.34
 Has objections regarding the MoU
Various Scenarios
 Scenario 1 : Mukesh should compensate the govt. for loss
of revenue from the supply of gas to Anil at $ 2.34/mmbtu.
 Downside : Power companies currently buying gas at $
4.20 could object over this.

 Scenario 2 : RNRL gives up its demand for $ 2.34 but

continues to have claim on 28 mmscmd gas share from KG
Basin as well as 40% share in future discoveries by RIL.
 Downside : Government of India has objections over Anil’s
claim on future discoveries.
Various Scenarios
 Scenario 3: Allow complete freedom to RIL to price gas thereby
repealing the govt. approved gas pricing formula.
 Downside : RIL could supply gas to certain buyers at a price more
than $ 4.2.

 Scenario 4 : The Supreme court could annul the provisions of the

MoU. It could ask RIL to compensate RNRL for non-supply of gas at
$ 2.34/mmbtu.
 Downside : ADA group’s new gas based plants are going to face
delays.
Meanwhile…
 Global investment inflow
 Foreign Players
 Concerned new investors
 Govt decision to be done for the Profit of
the Nation
Thank you