Madhu Narain, chief of bureau, Petrowatch, a site that tracks the oil and gas sector in India, speaks on the challenges faced by the sector.
Q: What are the key challenges being faced by the Indian oil and gas sector at the moment?
A: The most important challenge is to inspire confidence in investors who have been put off by the low prospectivity of Indian basins coupled with the unstable policies of the government. Most important aspect of the latter being the denial of the tax holiday for gas producers under the ridiculous theory that 'gas' does not fall within the definition of petroleum under the Income Tax Act. Another challenge is to simplify the multitude of procedures and permissions needed by investors who, because of them, find it daunting to do business in India. Equally important is the widespread corruption for speeding up permissions and approvals.
Q: With the 10th round of bidding for oil and gas assets coming up in January, can we expect a positive response from private companies looking to invest in the sector given the fact that there have been apprehensions in the past?
A: No, we cannot expect a positive response because the challenges listed out above still remain and it is these that keep investors away. Mere statements that India offers some of the best fiscal terms in the world will not do because other countries too offer these. Not just foreign investors, even private Indian investors are not enthusiastic about bidding in Nelp-10.
Q: There is a growing sentiment that higher gas prices will be good for the sector as a whole, especially since they will attract investment. How will this play out for the consumer?
A: Consumers will be hit hard by higher gas prices, especially in the form of higher electricity prices, if high priced gas is used for electricity generation. This will have a cascading effect on the economy. I guess that is inevitable as unless better realizations are assured investors will shy away from the sector. Given this, the solution, I feel is to cut wastages and increase efficiency in the use of energy.
Q: What are your thoughts on the proposed revenue sharing model between government and private companies?
A: It is too early to comment on this as the government has yet to accept and notify the proposal. But a change is indeed essential as the existing PSC regime has been found by industry to be inadequate and in need of radical reform. Thankfully, the exploration division of the oil ministry also accepts this.
Q: Will 2014 be a better year for the oil industry?
A: It will be a good year if the government moves to address the several challenges highlighted by various sections of the oil industry. However, if the government persists in making mere pious statements without changing anything on the ground, it will be as bleak a year as 2013.
Source: http://www.moneycontrol.com/news/features/lackinvestor-confidence-ails-oilgas-sector_1024204.html?utm_source=ref_article
Q: What are the key challenges being faced by the Indian oil and gas sector at the moment?
A: The most important challenge is to inspire confidence in investors who have been put off by the low prospectivity of Indian basins coupled with the unstable policies of the government. Most important aspect of the latter being the denial of the tax holiday for gas producers under the ridiculous theory that 'gas' does not fall within the definition of petroleum under the Income Tax Act. Another challenge is to simplify the multitude of procedures and permissions needed by investors who, because of them, find it daunting to do business in India. Equally important is the widespread corruption for speeding up permissions and approvals.
Q: With the 10th round of bidding for oil and gas assets coming up in January, can we expect a positive response from private companies looking to invest in the sector given the fact that there have been apprehensions in the past?
A: No, we cannot expect a positive response because the challenges listed out above still remain and it is these that keep investors away. Mere statements that India offers some of the best fiscal terms in the world will not do because other countries too offer these. Not just foreign investors, even private Indian investors are not enthusiastic about bidding in Nelp-10.
Q: There is a growing sentiment that higher gas prices will be good for the sector as a whole, especially since they will attract investment. How will this play out for the consumer?
A: Consumers will be hit hard by higher gas prices, especially in the form of higher electricity prices, if high priced gas is used for electricity generation. This will have a cascading effect on the economy. I guess that is inevitable as unless better realizations are assured investors will shy away from the sector. Given this, the solution, I feel is to cut wastages and increase efficiency in the use of energy.
Q: What are your thoughts on the proposed revenue sharing model between government and private companies?
A: It is too early to comment on this as the government has yet to accept and notify the proposal. But a change is indeed essential as the existing PSC regime has been found by industry to be inadequate and in need of radical reform. Thankfully, the exploration division of the oil ministry also accepts this.
Q: Will 2014 be a better year for the oil industry?
A: It will be a good year if the government moves to address the several challenges highlighted by various sections of the oil industry. However, if the government persists in making mere pious statements without changing anything on the ground, it will be as bleak a year as 2013.
Source: http://www.moneycontrol.com/news/features/lackinvestor-confidence-ails-oilgas-sector_1024204.html?utm_source=ref_article
0 comments:
Post a Comment