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Need for investor confidence building in hydrocarbon sector

Accelerate technology induction in E&P, says expert

An energy industry expert has raised issues such as building the confidence of investors on stability of the fiscal regime in the hydrocarbon exploration and production sector.

Amit Khera, Partner, McKinsey & Company, has also asked whether gas pricing being sufficient to boost domestic hydrocarbon production as well as the tax reforms needed for the industry.

He pointed out that steps are needed to accelerate technology induction in the E&P sector and strengthening of national oil companies to perform at the global benchmark level.

Speaking at a conference on ‘Unleashing India’s Domestic E&P Potential’ which was organized by the Federation of Indian Chambers of Commerce and Industry (FICCI) on 11 Jan 2018, he also called for the Directorate General of Hydrocarbons (DGH) to evolve into a statutory body.

Sandip Somany, Senior Vice President, FICCI, stated that E&P was a very risky investment as after putting billions of dollars to hydrocarbon prospecting, there was no certainty that the output would be oil, gas or just nothing.

Therefore, providing a transparent, predictable and stable risk and reward structure was the key to bring investments into the sector, he said.

In the national interest and in the interest of ensuring energy security, FICCI has been for long advocating offer of remunerative natural gas prices to the domestic gas explorers and producers. Such a price regime will bring in the much-required technology and risk capital to tap the unexplored resources, he said.

Another speaker, B. C. Tripathi, Co-Chair, FICCI Hydrocarbons Committee and CMD, GAIL (India) Ltd., has underlined the need for industry, government and buyers to work out a strategy for balancing imports and increasing domestic production for the country’s energy security.

While the focus on oil and gas was critical, industry should aim at complementing and supplementing the production of renewables, he added.

Responding, Petroleum and Natural Gas Minister, Dharmendra Pradhan, highlighted the government’s multi-dimensional strategy that entails augmentation of production, efficiency in resource use and operations and development of alternative fuels to meet the country’s oil and gas requirements.

He pointed out that there is now pricing and marketing freedom for gas producers in future exploration bidding rounds and the government is committed to increase the consumption of natural gas through policy measures in each micro segment of consumption.

The Minister enumerated the steps proposed by the government in the oil and gas sector.

These include the second phase of reforms, production of synthetic gas from coal which would be cheaper than natural gas and focus on development of bio-fuels by monetising the country’s bio-diversity.

Such fuels would be commercialised in the next two-and-a-half years, he said at the conference.

But he said the DGH will remain as it is with responsibilities such as implementation of New Exploration Licensing Policy (NELP), matters concerning the Production Sharing Contracts for discovered fields and exploration blocks, promotion of investment in E&P sector and monitoring of E&P activities including review of reservoir performance of producing fields.

In addition, DGH is also engaged in opening up of new unexplored areas for future exploration and development of non-conventional hydrocarbon energy sources like Coal Bed Methane(CBM) as also futuristic hydrocarbon energy resources like gas hydrates and oil shales, the Minister explained.

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