COO:
chief operating officer
Cost Petroleum:
The amount of costs recoverable from annual revenues.
Cost Recovery:
The contractor bids the Cost Recovery Factor, which is the percentage of revenues which he is entitled to take in a year to recover his exploration, development and production costs. This percentage can be up to 100 per cent. The higher the cost recovery factor that the contractor bids, the earlier the costs can be recovered; however, in such a situation, his fiscal package will be relatively unattractive as part of the bid evaluation.
CPI (M):
Communist Party of India (Marxist)
CPI:
Communist Party of India
CVC:
Central Vigilance Commission
Deepwater:
Beyond 400 metres underwater
Development Well:
A well drilled in the known extent of a field.
DG:
Director General
DGH:
Directorate General of Hydrocarbons
Discovery Area:
That part of the contract area about which, based on discovery and results obtained from a well or wells drilled in such part, the contractor is of the opinion that petroleum exists and is likely to be produced in commercial quantities. The delineation of ‘discovery area’ is inextricably linked to results obtained from wells drilled and finding of petroleum deposits recoverable at the surface, which can be discovered only through drilling of successful wells.
Discovery Well:
An exploratory well that encounters a new and previously untapped hydrocarbon deposit; a successful wildcat well.
Discovery:
The finding, during petroleum exploration operations, of a deposit of petroleum not previously known to have existed, which can be recovered at the surface in a flow measurable by conventional petroleum industry testing methods.
DMK:
Dravida Munnetra Kazhagam
DMT:
di-methyl terepthalate
DST:
drill stem test
EAC:
(Prime Minister’s) Economic Advisory Council
EBIT:
earnings before interest and tax
ECB:
External Commercial Borrowing
ECoS:
An Empowered Committee of Secretaries, consisting of Secretary, ministry of petroleum and natural gas, Finance Secretary and Law Secretary was meant to consider bid evaluation criteria, conduct negotiations with bidders, wherever necessary, and make recommendations to the Cabinet Committee on Economic Affairs on award of exploration blocks.
ED:
Enforcement Directorate
EGoM:
Empowered Group of Ministers
EIA:
Environmental Impact Assessment
FBV:
Forum for Better Visakha
FDP:
Field Development Plan
FPSO:
Floating Production Storage and Offloading. A ship that is stationed above or near an offshore oil field. Produced fluids from subsea completion wells are brought by flowlines to the vessel where they are separated and treated.
GAIL:
Gas Authority of India Limited
GCA:
Gaffney Cline Associates
GDP:
gross domestic product
GoI:
Government of India
GPS:
global positioning system
GSMA:
Gas Sale Master Agreement
GSPA:
Gas Sale Purchase Agreement
HBJ:
Hazira-Bijaipur-Jagdishpur
HDPE:
high-density polypropylene
HPCL:
Hindustan Petroleum Corporation Limited
HUF:
Hindu Undivided Family
Hydrate:
A snow-like substance that can form from water in a flowline as the temperature of natural gas falls. It is composed of ice with methane in the ice crystals.
Hydrocarbons:
Organic chemical compounds of hydrogen and carbon atoms. There are a vast number of these compounds and they form the basis of all petroleum products. They may exist as gases, liquids or solids. An example of each is methane, hexane and asphalt.
IBP:
(formerly) Indo-Burma Petroleum
IDP:
Initial Development Plan
IIT:
Indian Institute of Technology
IM:
Investment Multiple. This is essentially an index of the accumulated net cash flow to the contractor relative to the accumulated expenditure on exploration and development activities. The objective underlying the production sharing contract (PSC) is that ideally the operator would attempt to maximize simultaneously both the government revenues and his own profit by minimizing contract costs for any level of production. As part of their bid, the contractors are required to specify the Government of India’s (GoI’s) share at different IM slabs for example, less than 1.5, 1.5 to less than 2.0 etc. Generally, the contractors bid for a lower Gol share for the lower IM slabs, and the highest Gol share for IM of 3.5 and above (i.e. where net cash income is highest compared to the capital expenditure). Also, since capital expenditure in the initial years will generally be high and will decrease over time, the IM is expected to increase over time from year to year.
IMF:
International Monetary Fund
IOC:
Indian Oil Corporation
IPCC:
Intergovernmental Panel on Climate Change
IPCL:
Indian Petrochemicals Corporation Limited
IPO:
initial public offering
KG:
Krishna Godavari
L&T:
Larsen and Toubro
LDPE:
low-density polypropylene
LNG:
liquefied natural gas
LPG:
liquefied petroleum gas
Management Committee:
In order to ensure that the expenditure proposed to be incurred as well as actually incurred by the operator does not adversely affect the Government’s revenue interests, the PSC contemplates the formation of a Management Committee (MC), chaired by a Gol representative, as responsible for approving field development plans as well as annual work programmes and budgets for development and production operations. However, operational control of exploration and production (E&P) activities would vest with the Operating Committee, consisting of representatives of the contractors.
MBA:
Master in Business Administration
MC:
Management Committee
MEG:
mono-ethyl glycol
Mining Lease:
For extraction of petroleum, the contractor has to obtain a mining lease under Petroleum and Natural Gas Rules, 1959 of the central and state governments.
ML:
Mining Lease
MM:
Manoj Modi
mBtu:
million British thermal units
mscmd:
million standard cubic metres a day
MNC:
multi-national company
MoEF:
Ministry of Environment and Forests
MoPNG:
ministry of petroleum and natural gas
MoU:
Memorandum of Understanding
MP:
Member of Parliament
MW:
megawatt
NDA:
National Democratic Alliance
NELP:
New Exploration and Licensing Policy. It was announced by the ministry of petroleum and natural gas, government of India with a view to boost the exploration and production of hydrocarbons, giving both private players and the existing public sector units a level playing field. The Directorate General of Hydrocarbons was made the
nodal agency for this purpose.
NGRI:
National Geophysical Research Institute
NOC:
National Oil Company
NTPC:
National Thermal Power Corporation
OGL:
open general licence
OIL:
Oil India Limited
ONGC:
Oil and Natural Gas Corporation
OPEC:
Organisation of Petroleum Exporting Countries
OVL:
ONGC Videsh Limited
PVC:
poly-vinyl chloride
PLF:
Plant Load Factor
PM:
Prime Minister
PMO:
Prime Minister’s Office
PMT:
Panna-Mukta-Tapti
PNGRB:
Petroleum and Natural Gas Regulatory Board
Profit Petroleum:
The private contractors incur capital expenditure towards discoveries, irrespective of whether oil or gas is discovered or not. It is only when hydrocarbons are discovered and assessed to be commercially viable, that the contractor has the first rights on the revenue streams accruing from sales of oil and gas till his costs are recovered which is the ‘cost petroleum’. The balance revenue is termed as ‘profit petroleum’. It is shared between the government and the contractors, with the contractors generally getting a higher share in the initial stages since he has to recover contract costs. The government’s share of revenues becomes significant only when the production reaches substantial levels and the contractor has recovered his accumulated capital cost. Further, under NELP, government companies and private players are treated at par. The sharing of profit petroleum is linked to the pre-tax Investment Multiple of the previous year. It is biddable and evaluated as part of a fiscal package.
Prospect:
A location where both geological and economic conditions favor drilling a well.
PSC:
Production Sharing Contract. This is a contract between the government of India and a national or international oil and natural gas exploration and production (E&P) company. The E&P company bears the entire cost of exploration, drilling and production. The company is reimbursed for the expenditure from the oil or gas that is produced. After reimbursement, the oil and gas proceeds are split between the contractor and the government as per an agreed formula. In order to ensure balanced and effective partnerships with global E&P companies, the PSCs between the government and the private players were revised. These contracts were structured in such a fashion that the exploration risk that is the cost incurred in searching for oil and natural gas, without certainty of discovery, was to be borne by the private contractors.
PSU:
public sector unit
PTA:
purified terepthalic acid
PTI:
Press Trust of India
RBI:
Reserve Bank of India
RCIL:
Reliance Communications India Limited
Recovery Factor:
The percentage of oil and/or gas in place that will be produced from a reservoir.
REL:
Reliance Energy Limited
RGTIL:
Reliance Gas Transportation Infrastructure Limited
RIC:
Reliance Infocomm Limited
RIL:
Reliance Industries Limited
RNRL:
Reliance Natural Resources Limited
RO:
refining organisation
ROU:
right of use
Royalty:
Usually a fixed percentage of a specified crude or gas value per unit produced, to be paid to the host government. It is a fixed charge independent of profit or loss.
RSP:
Revolutionary Socialist Party
RSS:
Rastriya Swayamsevak Sangh
SEBI:
Securities and Exchange Board of India
Seismic Reflector:
A subsurface profile that is generated by seismic data and indicates a distinctive type of sediment geometry produced by sea-level changes; used to correlate stratigraphic sequences.
SEZ:
Special Economic Zone
Shale:
A very common sedimentary rock composed of clay-sized particles. Black shales are source rocks for petroleum.
SJM:
Swadeshi Jagaran Manch
SLP:
special leave petition
SP:
Samajwadi Party
SPA:
sale and purchase agreement
tcf:
trillion cubic feet
TCS:
Tata Consultancy Services
TRAI:
Telecom Regulatory Authority of India
UP:
Uttar Pradesh
UPA:
United Progressive Alliance
VSNL:
Videsh Sanchar Nigam Limited
ACKNOWLEDGEMENTS
This book was in the making for more than four and half years during which period I received the unstinted support and cooperation of a large number of people, some of whom chose to remain unnamed (including a few friends in ‘high places’ who trusted me enough to hold forth at length on condition of anonymity) and some whose names I may have inadvertently omitted (for which I hope they will excuse me). This book would, of course, never have been written without my co-authors Subir Ghosh and Jyotirmoy Chaudhuri. Ranjana Sengupta suggested the title of the book. Alam Srinivas generously provided me a huge amount of extremely valuable information—at one stage, he could have been a co-author of this work. The nimble fingers of Arpita Das flew over the keyboard as she copy-edited the book in record time, making invaluable suggestions as she went along. Manish Purohit was a stranger until he showed me the way to become a publisher and taught me online marketing skills.
Sucheta Dalal and Debashis Basu not merely showed me the way forward but provided important inputs for the book. From far-away Toronto, Anirudh Bhattacharyya provided perspective as well as practical support in the research and writing of the book. Closer home, Ashim Chaudhuri’s assistance in writing the chapter on the environment was timely and useful. Ayaskant Das slogged over transcribing interviews and spurred me into bringing out the book. Shishuraj Yadav painstakingly keyed in chunks of text Sreemoti Mukerjee-Roy and Bulan Lahiri diligently poured over chapters of the book to improve language and expression. Veeresh Malik’s ebullience imparted a strong dose of self-confidence at a critical juncture. Aditi Roy Ghatak and Probir Ghosh were much more than professional acquaintances. Kumaresh Chakravarti persistently motivated me.
For friendship and moral support, Kingshuk Nag, Shankar Raghuraman and Rajesh Ramachandran were ever present. Srikanth Reddy appeared almost out of nowhere as the book was being finalised to extend more than a helping hand. Ajay Vir Jakhar’s encouragement was invaluable. I am grateful to Amit Agarwal for his critical comments on the manuscript and to Krishan Chopra for explaining the nitty-gritty of an uncertain universe, of which we are a miniscule part. Mohammad Ghazali, Shankhayan Chowdhury, Anchal Gupta, Patrick S.L. Ghose and Pranati Mehra kept the office fires burning. Deepchand Yadav kept the wheels rolling while Mamuda Bibi stoked the home fires. Bibhas Kumar Ganguly and Tushar Pania of Reliance Industries Limited were particularly helpful, although the former would certainly have preferred that I agreed more with his points of view.
I have deliberately not mentioned here the names of the many individuals who have been quoted in different chapters of the book and whose deep knowledge, uncompromising integrity and unparalleled tenacity in being able to persevere against powerful odds, inspired and influenced me. But there is one exception I will make and that is because he is no longer with us. I had really wished that cancer would not consume Subir Raha, former chairman and managing director of the Oil and Natural Gas Corporation as expeditiously as it did, around the time I was hop
ing he would remain a teacher of mine for long. But that was not to be.
I am especially thankful to my family, my wife Jayashree and our children Triveni and Purnajyoti, who I hope will one day agree that the time I denied them was not wasted and that the result of that effort will remain relevant till they are old enough to understand what has been written. I am indebted to my mother Krishna, my father-in-law Narendra Kumar Bhatnagar (who read a version of the manuscript of this book), my siblings Tapati and Puragra, their spouses Hari Shankar and Sharmila and their daughters Mrinalini and Tara—all of whom told me to speak my mind freely without fear or favour but with balance and prudence.
ABOUT THE AUTHORS
Paranjoy Guha Thakurta is an independent journalist and an educator. His work experience, spanning 37 years, cuts across different media: print, radio, television and documentary cinema. He is a writer, speaker, anchor, interviewer, teacher and commentator in three languages: English, Bengali and Hindi. His main areas of interest are the working of the political economy and the media in India and the world, on which he has authored/co-authored books and directed/produced documentary films. He teaches and speaks on these subjects to students, general audiences and also trains aspiring – and working -- media professionals. He participates frequently in, and organizes, seminars/conferences, He is a regular contributor to newspapers, magazines and websites. He is featured regularly on television channels and radio programmes as an anchor as well as an analyst and commentator.
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