Oil and Gas businessRAJKUMAR

UNIVERSITY OF PETROLEUM & ENERGY STUDIES

"Let me tell you something that we Israelis have against Moses. He took us 40 years through the desert in order to bring us to the one spot in the Middle East that has no oil!" -Golda Meir (Israeli founder

and prime minister)

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CLASSIFICATION OF INDUSTRIES

UpstreamExploration &

Production of oil and Gas

DownstreamRefining

Processing Storage

Distribution

MidstreamTransportation

and LNG Terminals

UpstreamUpstream activity involves exploration and

productionAll the stages from exploration to production

comes under upstream activityThe discovery of the vast Bombay High field

in 1974 in the west coast offshore was the most significant event in India’s upstream sector.

DownstreamRefiningStorageProcessingTransportationDistribution etc…

Note: Downstream does not include exploration and production of crude oil and natural gas

Upstream sectorForeign companies have entered the Indian E

& P scene since the early fifties through joint venture with the government of India.

But after New exploration licensing policy (NELP) the participation of foreign companies is allowed to 100% in upstream sector.

In the past only NOC’s are in upstream sector

Downstream sectorPrivate players are allowed across the

downstream sector

WHO OWNS THE NATURAL RESOURCES Government-Owner of the natural resources So companies which want to invest in our

resources have to play by the laws enacted by the government in this regard.

CONSTITUTION OF INDIA

Who can enact laws on the subject of Oil and Gas?

Constitution of India demarcates legislative competence of state and central under seventh schedule

JURISDICTION OVER OIL AND NATURAL GAS RESOURCES Article 247

CoI:7th Schedule: Entry 53 of Union List I“Regulation and development of oilfields and mineral

oil resources; petroleum and petroleum products”CoI: 7th Schedule: Entry 25 of State List II

“Gas and Gas Works”Presidential reference, Supreme Court Opinion(Article

143(1) of COI)Natural gas- a petroleum product and hence, a central

subject

Supreme CourtThe apex court had to sit in judgment

after the Gujarat government passed Gujarat Gas (Regulation of Transmission, Supply and Distribution) Act, 2001

The object of the Act was to regulate transmission, supply and distribution of gas in the interests of general public and to promote gas industry in the state and to establish Gujarat Gas Regulatory Authority

Supreme CourtSupreme court held natural gas, including

LNG, is a Union Subject and only the Centre has the exclusive legislative competence to enact laws, states have no legislative competence to make laws on natural gas and LNG and Gujarat Gas Act, 2001 is ultra vires the Constitution.

So Jurisdiction to regulate gas clearly identified with Centre by the judgment

Supreme CourtJustice K.G. Balakrishnan, writing the

judgment, noted: ‘‘The regulation of oil fields and mineral oil resources necessarily encompasses the regulation as well as development of natural gas.’’