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Monday, 07 Oct 2013
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India, the most industry unfriendly country
India, the most industry unfriendly country | ProjectsToday
Ashu Sagar_AOGO | ProjectsToday  
"Ashu Sagar, Secretary General - Association of Oil & Gas Operators (AOGO), was formed on August 1, 2006 to network, exchange information on operating issues in upstream, find common solutions and if necessary approach the authorities to facilitate the changes which shall encourage exploration in India. The association represents 99 per cent of upstream operations in India."

 

Q. With the growth in automobiles, power and fertilizers, oil and gas as an energy source now represents more than 45 percent of the country's total energy consumption - but has India as a nation failed to strengthen its long term energy security?

 

A. Our import dependency is increasing every year, so it is apparent that new indigenous discoveries, developments and production are not keeping up with increasing demand.

 

Q. India has large possibilities for growth in the oil and gas sector but only half of the country's potential basins have been explored, and large blocks offshore remain untested especially in deep water. Comment.

 

A. The situation may persist. Government must decide its priority. It could be finding hydrocarbon, or securing a hypothetical revenue or ensuring that government procedures for regular decisions must apply to commercial management of high risk ventures. Today, government doesn't even let you explore in PML (Petroleum Mining Lease) areas without imposing penal conditions. Why would anyone come to India if acreage is available in more prospective locations with less onerous working conditions.

 

Q. The existing system of 'cost recovery' has been under the spotlight after CAG found faults with the way the government administered its contracts. Do you have any suggestions?

 

A. Government signed a contract. Since it participates in decisions, it should have set its rules on what drives the management of these contracts consistent with Petroleum Policy. It should have defended that position vis-à-vis CAG. They could then proceed to ask for annulment of all contracts if they felt so strongly that the contract was beyond government jurisdiction. If the contract is valid, then they went into audit that was different than what the contract specified. It is the government's exposure to scams in other areas and the stress there from that, that made it afraid to defend a position.

 

Q. There are certain sections that felt replacing costrecovery regime with royalty regime is a better option but others feel that it may not attract investments. Comment.

 

A. India is a very challenging geology. India is also rated as one of the most industry-unfriendly working environments It is very easy to make a contract less attractive. We shall have to see how the industry responds to the proposed system. Personally, I am not very positive about it, unless the problems of existing PSCs (Production Sharing Contracts) are resolved.

 

Q. Those producing oil get tax holiday, but gas producers don't, although both commodities are energy hydrocarbons and the costs and risks in finding and producing them are the same. Comment

 

.A. I wish someone could explain the rationale to me. I don't understand it either. Some gas molecules also get tax holiday and some others don't. In the international arena this amendment of theFinance Minister has caused huge damage. I am talking not only in the E&P arena but the general belief in the sanctity of commercial contracts signed with the Government of India. In real terms, the damage is perhaps like what happened with retrospective changes. Upstream is not a consumer product so the profile of the issue has been muted.

 

Q. The gas price hike helps as it improves the bottom-line, but do you feel it is enough to encourage new investment in upstream?

 


A. It is a positive step, as long the transition to PSC commitments of Free Market Price is very clearly spelled out with a time line. Without that, people will wait and watch for the next installment and further developments rather than risk capital. However, if one diagonal step is followed by two backward steps, we are unlikely to progress much.

 

Q. AOGO represents the interests of the upstream industry to Indian regulatory and legislative bodies. Tell us about the recent initiatives taken by AOGO?

 

A. We are focusing to suggest improvements in the management of existing contracts. If that doesn't happen soon, we shall sink still lower in international interest.

 

 


 

 
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