Boston, MA -- (SBWIRE) -- 03/25/2014 -- Q2 2014 should see some significant changes in the Indian oil and gas sector. Firstly, the government set gas price will double to US$8.4/mnBTU on April 1 creating greater incentive to invest in more costly and technically challenging gas resources. This will be supported by the opening of the NELP X licensing round, where India is due to offer 46 new blocks allowing companies to prospect for all types of hydrocarbon resources, including shale. However, also introduced for NELP X will be a change from profit sharing contracts to revenue sharing contracts. We believe this could dissuade interest from a number of major international oil companies, particularly at more technically challenging developments.

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The main trends and developments we highlight for the Indian oil and gas sector are:

- India has launched its NELP X licensing round and is expected to receive regulatory approval from Cabinet Committee for 46 blocks by February 15 2014. All blocks to be offered in the licensing round will allow contractors to prospect for all types of hydrocarbons, whether it be conventional oil and gas, shale or coal-bed methane.
- However, the terms of licensing for NELP X have been changed and could dissuade some international oil companies (IOCs) from investing. The new model changes contracts to revenue sharing agreements, rather than profit sharing agreements, meaning companies will not be allowed to recoup costs before sharing revenues with the government.
- The Rangajaran Committee's recommendation to raise gas prices from US$4.2 to US$8.4 per million British thermal unit (mnBTU) was approved by India's Prime Minister late June 2013. This will apply retroactively to production sharing contracts (PSCs) that are already signed from April 1 2014, incentivising companies to increase gas production. As a result we anticipate strong gas production growth to begin from 2016.
- We are now expecting gas production to return to growth in 2014 following a decline in recent years. Key to this change will be increased output from Reliance's M-8 well in the KG basin as well as a likely return to production of three to four of KG-D6 wells that were shut off in 2013 due to sand and water ingress. We no forecast gas production to reach 40.86bcm in 2014, rising to 62bcm in 2018.
- India increasingly looking at Canadian to support its growing demand for oil and gas imports. ONGC Videsh is reportedly scouting oil sands assets, private company Hiranandani Group is planning on investing in a LNG export terminal, while Indian Oil Corporation will begin spot imports of Canadian crude from February 2014.

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