Transcript Dr. Avinash Chandra

How Policy changes can encourage
more investment in Oil & Gas sector
along with present status and future
action plan to revive growth
Dr. Avinash Chandra
23rd May 2013
26 sedimentary basins:
Sedimentary AreaOnshore- 1.39 M. Sq. Km
Shallow Water- 0.40
Deep Water-
1.35
______
3.14
Total onshore- 44%
Total offshore- 56%
2
Contracts Under Operation ( Up to NELP VIII)
Awarded
Under
Operation
Pre NELP
28
15
NELP
235
185
Fields
28
27
CBM
33
30
Total
324
257
4
Synopsis of Activities in Indian
Sedimentary Basinal Areas
•
Reduction in Unexplored Areas:
1.
2.
In 9 years (1995-2004) - 28%
In 7 years (2005-2012) - 10%
Achievement declined- 54%
•
Increase in Exploration Initiated Areas
1.
2.
In 9 years (1995-2004) - 19%
In 7 years (2005-2012) – 7%
Achievement declined - 53%
•
Increase in Moderate to poorly explored areas
1.
2.
In 9 years (1995-2004) - 9%
In 7 years (2005-2012) – 1%
Achievement declined - 86%
5
What is extremely worrying is that between
1st to 6th round of NELP about 220,000 sq. km (or
7% of country’s sedimentary area) was offered
under each round.
But during NELP Round VII (2008) to NELP Round
IX (2012) only 31,000 sq. km was offered i.e.
of over 85% (or only 0.99% of country’s
sedimentary area.
7 times less accreage offered than earlier
rounds
Exploration Blocks awarded in NELP
Rounds
60
52
50
41
40
32
30
20
24
23
23
20
20
19
22
10
0
Date of
Signing
9
8
7
6
5
4
3
2
1
2000 2001 2003 2004 2005 2007 2008 2010 2012
8
Suggestions for Improvements
• Offer more Blocks for Exploration each year.
Earlier (1993 & 1995) Blocks were offered every 6
months. Whereas , after 2004 Blocks were offered
every 18-24 months. Atleast, Blocks should be
offered every year.
• Open accreage system to be introduced
immediately as Blocks will then be available on
continuous basis throughout the year .
Thus, Companies will not have wait for
announcement of bids each year. This will greatly
save time and accelerate the exploration of Indian
basins.
9
• To revive interest of Oil Companies offer
incentives for exploration atleast in following
areas:
a) Non- Hydrocarbon producing basins eg.
Vindhyan, Deccan Syneclise , Ganga & Bengal
basins etc.
b) In known hydrocarbon producing basins only for
following categories:
i. Logistically difficult terrain of certain parts of
NE India & lower Himalayas
ii. Blocks in deep & ultra deep waters
10
Incentives can be in many different ways eg.
Tax holidays, reduced royalty in Offshore
areas (jurisdiction of Central Government).
In non-producing basins the Exploration risk
are too high such as Vindhyans, Deccan
Syneclise etc. Companies will not work
unless major incentives are given like Tax
holidays or other incentives.
No Ring fencing of Exploration expenditure.
Thus, exploration cost will be recoverable
from all other producing assets of the same
Company. This may revive interest in
exploration in the country.
11
Major thrust required to make quality data
available to Oil Companies to decide which
Blocks to bid• DGH data centre is delayed by atleast 5-6 years.
This may be expedited.
• DGH (Government) may regularly acquire data in
less prospective basins and non- hydrocarbon
producing basins.
Funds can be made available from OIDB.
• In more prospective and oil producing basins
private sector can be asked to conduct
aspeculative surveys and drilling at their own cost
and recover investment from sale of data to be
assisted by DGH
12
• Urgent need to collect limited but reliable
shale oil and shale gas data in the country.
• ONGC just drilled 2 wells in Raniganj coal
field specifically for shale gas and
established risked GIIP of 48 TCF of shale
gas .
• We need to drill 1 or 2 wells in six key shale
oil / shale gas basins to collect minimum
reliable data for offering Blocks for shale oil
& shale gas.
• For India shale oil potential is far more
important than shale gas due to prevailing
very low price of gas.
• Key Indian shale basins like Cambay,
Krishna Godavari & Cauvery have very high
shale oil potential.
• Globally (mainly USA) shale oil production is
expected to reach 14 mill. Bbls per day by
2035.This amounts to 12% of world’s total
oil supply.
• To prospective bidders in an area all regional geological and
tectonic information should be made available ,each year.
This will cut down the number of dry wells drilled by different
bidders in a particular area.
• All non- proprietary data should be placed in public domain
after 3 years on payment of small fee for all the relinquished
areas.
• Huge amount of data is available with NOCs like ONGC & OIL
and some with private companies eg. RIL, Cairn etc.
It can be made mandatory to release non proprietary data on
payment basis to operating oil companies and for Research &
Development work to Universities and professional
organisations (after due diligence).
Old data can be released as soon required but new data for a
Block can be released after 3 years of lock-in period unless
the data holder has no objection to release it earlier on
payment basis.
15
• DGH & MOP&NG may help to establish operator
friendly procedures and policies for early approval
of activities such as budgets, extension of time
requested, Declaration of Commerciality, Field
Development Plans etc. This will permit early
completion of exploration & development activities.
Lately it is noticed that such approvals take very
long time
• To provide new impetus to exploration DGH &
MOP&NG may encourage more & more Indian and
foreign Companies to come to India.
• Encourage more State Government Companies to
play a strategic role in Oil & Gas exploration &
production specially when it comes to shale gas
and oil related activities.
16
To reverse the trend of slow down in Oil & Gas sector from
7th round i.e. 2008 onwards some steps can be taken:
• Production of unconventional gases( CBM, Shale gas etc.)
are important in curbing global warming. If not harnessed
they deplete the Ozone layer. Since gases are high-efficiency,
clean fuel their production contributes to cleaner
environment and development of much needed “Low Carbon
Economy” in the country. Therefore such Projects should be
environmentally cleared via fast track route on highest
priority, at every stage.
• Even crude oil is environmental friendly as compared to coal
and other Chemical / Industrial projects. Moreover, 80% of
crude is imported and in 5 years 55-60% natural gas will be
imported as LNG. The estimated import bill by 2030 could be
350- 400 billion USD ( US$ 2010 terms).
• Such Projects require time bound , fast track clearance.
17
• Defence and other Central and State
Government clearances on high priority.
• Sometime Companies hold on to huge areas
without relinquishment. DGH to ensure strict
relinquishment policy and re-offer relinquished
areas as soon as feasible.
• DGH may not allow Companies to hold on to
proven producing areas without putting them
on production, as soon as, geologically and
operationally feasible.
18
Strengthening of DGH
• DGH has to be revitalised and strengthened. It requires 2550% staff as its own cadre initially.
•
It can be made an independent upstream regulatory body as
per the original intention of cabinet approval of April 1993
• Oil industry and Blocks / Fields awarded have to be managed
by a technical and professional organisation like DGH
• Management Committees to be handled by DGH and not by
Ministry .Ministry makes policies ,decide procedures /
conditions and may retain powers for key approvals .The
implementation of the Policy and handling of oil industry may
be the domain of DGH.
• Advisory Council of DGH has technical
functions to perform. It was initially formed to
monitor the health of country’s largest
Bombay High field and other major fields.
• In the past it has always been chaired by
country’s top most retired geo-scientist.
• Its members should mainly be established
and reputable technical experts in the direct
field of Oil & Gas exploration, development &
production with understanding of safety /
environment issues.
Steps to be taken to enhance
domestic oil and gas production
from unconventional energy
sources
21
22
23
24
25
26
27
29
CBM Bidding Rounds
No. of Blocks Offered
No. of bids received
60
Blocks Awarded
54
50
40
27
30
20
10
16
6
14
8
10
8
10
10
7
5
0
CBM-I
CBM-II
CBM-III
CBM - IV
PARTICIPATING COMPANIES
30
26
19
20
8
10
6
0
CBM I
CBM II
CBM III
CBM IV
8 foreign
3 foreign
18 Indian
16 Indian
26 Total
19 Total
31
• The slides show that there is a major decline in
CBM activities in the country after 2006.CBM is a
major new source of gas (proven recoverable
reserves already over 11 TCF), it is extremely
environmental friendly, if not produced it depletes
ozone layer. It greatly improves environmental
conditions in highly polluted coal mining areas .
• We may award more blocks for CBM as after 2010
no CBM Blocks have been awarded. Earlier (20022004) CBM Blocks were awarded every year but
between 2004 – 2010 only 2 rounds were awarded
in 2006 & 2010.
32
• We may quickly announce Blocks for CBM
production (Methane Drainage) from coal mining
areas prior to coal production. The Blocks can be
jointly decided by MOP&NG & Coal Ministry but
implementation process to be handled by Coal
Ministry. Petroleum ministry to supervise safety
aspects.
CBM drainage from over 150-200 coal mining Blocks
if implemented can easily add 20-30 TCF of in place
reserves.
• Steps may be taken for simultaneous production of
CBM and conventional Oil & Gas in the same Block,
where it is geologically feasible.
33
Increasing Domestic Production form
Marginal Fields
• Under MOP&NG supervision a time bound policy to be
implemented immediately to award through transparent,
competitive bidding route all the onland and offshore
marginal fields of ONGC & OIL , in shortest possible time.
This step can add atleast 5 MMT of crude oil production per
year and huge quantities of natural gas.
ONGC & OIL may remain owner of the fields but operating &
development rights are given to technically competent &
experienced, small companies due to their low overhead
costs & more suitable technology.
This can usher in the 2nd revolution in Hydrocarbon
exploration in the country (1st was between 2002-2007) as
successful bidders would later invest heavily in exploration
Blocks as RIL, Cairn, Hardy Oil, Jubilant etc. did earlier.
34
Other processes & technologies helpful
in contributing to hydrocarbon sector
• Coal to Liquid- in this field India could have been in
forefront as the 1st Coal to Liquid functional pilot project
was set up in OIL at the behest of MOP&NG in 1978. Then
USA based companies were in the forefont in technology
along with South Africa (SASOL) & Germany (Lurgi). China
was nowhere at that time but today it is the world leader
with 3 commercial projects already on stream and many
more planned.
China is planning to use its 2nd largest coal reserves in the
world for this purpose. India also has 6th largest coal
reserves and is 4th largest producer of coal in the world.
2 Blocks have been awarded to Jindal Steel & Power Ltd.
and Tata for this purpose. Each having a planned
investment of over INR 10,000 Cr
35
• Underground Coal Gasification- ONGC has
invested great deal of time & money in this field
using Russian technology. However, their main
project in Gujarat is pending for over 3 years due
to lack of clearance by Coal Ministry.
• India has huge lignite deposits. Latest one was
discovered by DGH while interpreting Barmer
sesimic data of Royal Dutch Shell . The lignite zone
is 200-300 m thick containing 2-3 layers and
extends continuously over a distance of over 200
km from Barmer( where lignite is exposed) upto
Gujarat border (depth of lignite about -1000 mts)
• Huge potential exists in the Country for
underground Coal & Lignite gasification which can
create a new revolution in power generation.
36
• Heavy Oil in Gujarat & Rajasthan- Gujarat heavy
oil is well known and is being exploited by ONGC.
Rajasthan heavy oil belt was mapped by OIL in
1985-86 and discovery was made on drilling of 1st
well in 1992. What is not well known is that this
heavy oil in dolomite & limestone (Bilara
limestone) extends over several thousand sq. kms.
Only a few wells are producing from deeper Basal
sandstone and production from dolomite could not
be sustained over a long time.
This area could be a game changer in the country if
proper technology could be developed and
hydrocarbons exploited.
37
Tight sand reservoirs in Cambay Basin
Source Oilex Ltd
38
CAMBAY PROJECT- HYDROCARBONS-INPLACE IN TIGHT SANDSTONE
NSAI’s Assessment of Hydrocabons In-Place
Zone
X
Y
Total-Gross
Zone
Z
180-200
200-300
300-400
Total-Gross
Discovered In-Place Volume Estimate
Oil MMbbl
Gas BCF
667
965
1,633
654
660
1314
Undiscovered In-Place Volume Estimate
Oil MMbbl
Gas BCF
2693
2424
3791
2684
11592
2705
2406
4195
3339
12645
Total Estimate about 14 Tcf
39
• Gas Hydrates: Fuel of the future- India has
very good prospects of fairly thick gas
hydrate deposits mainly in deep water
areas of East Coast and Andaman islands.
Total prognosticated gas resource from
hydrates in the country is placed at 1,894
TCM (about 67,000 TCF). Even if merely 1%
of the resource can be produced it can
yield 670 TCF of methane.
40
• Japan has recently produced gas from hydrates in
Nankai trough deep sea area.
• India is member of international collaboration for
development of gas hydrates along with Japan,
USA, Canada & Germany, test wells were drilled
with some success in Mckenzie Delta area in
Canada.
• India cored wells using Ship Joides Resolution in
2006 along east & west coast and in Andamans.
Very thick, good quality gas hydrates zone were
established in KG region.
42