1. Regulatory Challenges Indian Scenario

2. Regulatory Challenges  Index Indian Oil & Gas sector Infrastructure Market state of development Government Policies Global reference India – a unique position PNGRB Act 2006- Regulatory Board, Functions Issues posing challenges

3. Indian Oil & Gas Infrastructure Area – 3.3 million square km. Sedimentary Basin – 3.14 million Square Km. Explored only 50% Refining capacity – 148 MMTPA Pipeline infrastructure  Natural Gas – 8000 km(including regional network)  Product pipelines – 10000 kms CGD networks – 19 cities with gas  0.79 million house hold connected  0.40 million vehicle on CNG * Total infrastructure is inadequate to meet the country’s requirements except oil refining

4. Market State of Developemnt Govt. Controlled Liberalized Mature Nascent OIL GAS MARKETSMARKETS MARKET OPENING

5. Government Policies Refining sector – delicensed Marketing of Petroleum Products policy  Investment of Rs 2000 crore in infrastructure allows marketing of transport fuels  FDI - 100% allowed Petroleum Products pipeline policy  Upto 300 km- not common carrier  25% extra capacity for common carrier  Crude oil pipeline excluded Gas Pipeline policy  33% extra capacity as common carrier  Open access, unbundling and affiliate code Gas utilisation policy – in offing

6. U K Experience Economic reform process (1980-1990)  Privatization of State utilities  Creation of independent Regulators to take over the responsibilities of erstwhile Ministries  Overlapping and clashing of jurisdiction of several bodies. 1986-Allowed gas sales to large customers directly by producers 1988- Ofgem request BG to leave 10% for direct sale to large customers 1991- BG agrees to reduce market share by 40% 1992- BG unbundles

7. U K Experience – Contd. 1996-Domestic sector opened to other marketers, max. penetration upto 20% Utilities Act, 2000 – brought gas and electricity regulators under single statute Regulatory Reform Act, 2001 –  Eliminates burden of excessive regulations on participants in the market by reducing the cost of regulatory compliance.  Regulators to conduct regulatory impact assessment of existing rules before new rules are added or existing one are deleted

8. European Union Experience European Union – 27 countries (2 without gas)  Each country has its own regulator in position  In most of the countries market decides the price  Only in a few of the countries regulator decides the price  In some countries Government continues to decide the price with or without consulting regulator Most of the countries have electricity and gas under one regulator and in some countries regulator controls the utilities including water

9. US Regulatory Experience Each of 50 states has its own regulator dealing with intrastate network  Federal Regulator (FERC) is for interstate pipeline network, regulates entire energy sector  Matured market with 350 distribution companies, 65 million customer, 10,000 gas supplier Regulatory agencies - part of executive branch, but not subjected to everyday political interference. Closely supervised by Congress which vets appointment, all rules presented to Congress, subjected to scrutiny through committee

10. Australia – Regulatory Experience The Commonwealth or Central Government – Regulate access to national networks The states regulate intra-state gas generation, distribution and retail Most states have multi-sector regulatory model for electricity, gas, water, transport. Central and State coordination helpful for inter connected networks– electricity & gas

11. India – a unique position– Oil discovered in 1886 in North East Oil & Gas – Central subject, yet the development remained localized in areas of oil & gas finds Actual demand picked up after Bombay High and South Bassein finds were monetized – 1986 onwards Demand continue to overshoot the supply Import of gas as LNG – 2004 at Dahej Adoption of any single model in totality will not work

12. Regulatory Board – Functions, Status Enforce retail & marketting service obligation Monitor prices & prevent restrictive trade practices Register & Authorise entities Declare pipeline as common / contract carrier Perform other functions entrusted by Central Government Protect consumer interest by fostering fair trade & competition Regulate access & transportation rate on common / contract carrier / CGD network Ensure adequate availability, and equitable distribution Functions of the Board Lay down technical standards / specifications Maintain databank of information

13. PNGRB Act 2006 Regulations Status- Seven nos. notified  Meeting of the Board – 26.11.2007  Levy of fee and another charges- 26.11.2007  Conduct of business, receiving and investigation of complaints- 30.11.2007  Appointment of consultants –17.1.2008)Authorizing entities to Lay, build, operate expand CGD network – 19.3.2008

14. PNGRB Act 2006- Contd.  Determination of network tariff for CGD – 19.3.2008  Exclusivity for CGD –19.3.2008) Draft Regulations- for public consultations  Lay, build, operate and expand Common Carrier/Contract Carrier  Access Code  Technical Specifications for CGD  Registration of entities for developing LNG terminal, storage

15. Issues posing challenges Approach to regulation- Separation of power  Separation of power breaks down when any two or three of the pillars of democracy – Executive, Legislature, Judiciary are combined Regulator to have  Legislative powers - making regulations  Executive powers – enforcement  Judicial powers – adjudicate disputes Inter institutional bargaining is essential to secure liberty in a plural democracy

16. Issues posing challenges- contd. Fundamental constitutional principles – separation of power is an issue for regulator Accountability of Regulator  To Parliament – Tabling of Regulations  To Public – Public consultation process - comments acknowledged and addressed Segments amenable to competition (commodity) – light handed regulations Segments having monopoly elements (capacity) – close regulations Natural gas availability– Increasing gas supply sources (CBM, In-situ gasification- lignite/Coal, Bio gas, Hydrogen, Gas Hydrates, Syngas, etc)

17. Issues posing challenges – contd. CNG to include ANG Fostering fair trade Free and Competitive market – regulations with least discretion and maximum transparency No monopoly Energy security- Domestic& International initiatives Price disparity – commodity and transportation  Price determination by market forces  Tariff determination by competitive bidding/regulations Technical Standards and Safety - T4S

18. Issues posing challenges – contd. Pipeline and CGD as common carrier – capacity determination Open access to pipeline and CGD Access Code – Pipeline capacity allocation, gas quality, grid connectivity Unbundling Affiliate code of conduct Exclusivity – marketing and infrastructure Trading – commodity and capacity  develop infrastructure  stabilize price

19. Examples Selection of entities in a transparent way- rules of the game pre determined by regulations  CGD authorisation  Pipeline authorisation Tariff determination Pipeline capacity determination Retail Service Obligations Market Service obligations

20. -- CGD

22. Let us begin to Resolve The Issues posing challenges