A massive investment of USD 118 billion in oil and gas exploration and establishment of natural gas infrastructure is committed and expected in the next few years in India.

As much as USD 58 billion will be invested by 2023 in oil and gas exploration and production, while, another USD 60 billion will be put in creation of natural gas infrastructure such as pipelines, import terminals and city gas distribution networks by 2024. This doesn’t include another USD 20-25 billion proposed in development of new refineries/ petrochemical plants, Liquid fuel storage & transportation, Strategic Petroleum reserves, Port facilities & Terminals.

In the backdrop of ongoing development and expansion of refinery and petrochemical plants capacity augmentation/ expansion in India, a mega refinery and petrochemicals complex has also been proposed to be built in India at an estimated cost of US$ 70 billion.

As India has set the ambitious target of increasing the share of natural gas in its energy mix to 15 per cent by 2030, the debate for renewable and EVs majorly replacing Oil & Gas infra has largely been settled for the short term in favour of natural gas.
There`s a predictable shift to new phase of infra development, independent of USD 50/60 price, with Total, BP and Saudi Aramco making firm investment commitments with Indian partners.

Most asset building, augmentation/ upgradation or development of greenfield assets are still being built & operated by Oil & Gas companies without classifying them in critical (own & control), essential (control captive portion of capacity, external fund/investor owned) and peripheral (neither own nor control, buy in captive capacity & first right of refusal) assets. This method of self-own and operate asset creation model results in heavy & unnecessary capital outlays, development of layers of expensive, permanent & non-scalable resources to build, operate & maintain assets.

In either scenario of low or higher oil prices, Oil & Gas (Design)-Build-(Own)-Operate-Transfer (BOT) contract model deserve consideration. Specially now, since we have large infrastructure funds available to raise and channel private investment for large infrastructure projects where the investor aims to earn a stable and annuity return insulated from commodity price volatility.

Although generally the objective of BOT projects are to reduce upfront capital costs and transfer risk to the concessionaire (BOT contractor), BOT projects also offer excellent opportunities to incentivize innovation and reduce project lead time to complete, lowering project life-cycle costs and accelerating project returns.
Besides Build-Operate-Transfer, other forms may also be encountered such as BOO (Build-Own-Operate), BOOT (Build-Own-Operate-Transfer), BOLT (Build-Own-Lease-Transfer), BLT (Build-Lease-Transfer), Operate & Maintain on concession and Build for Merchant Operation. This may also include monetisation and rehire of capacity of an existing captive asset (plant, pipeline, terminal, etc.)

Despite the differing nomenclature, all of these involve project financing schemes of one sort or another, in which the Government/ Company grants a concession or offer themselves as anchor customers to private companies, who in turn undertake the responsibilities of financing, implementing and managing a particular project under a portion of return assured by an anchor customer.

The exponential gain of management and technical bandwidth by the Govt/ Oil Companies, by granting such concession or offering themselves as anchor customer, would enable them to direct capital & resources to other critical areas (like digitalisation), concentrate on & strengthen core business processes, share risks and liabilities with the concessionaire, reduce operational and manpower cost, diversify business offerings, expand to new geographies and markets, acquire latest state-of-the-art technologies and licenses.

Especially for greenfield projects, BOT contracts being based on long term economics, ensures speedier & timely execution and efficient & uninterrupted operations.
BOT or any other variant types of arrangement often cover a long-term period of service provision. Any agreement covering such a long period into the future is naturally subject to uncertainty. The BOT project must be clearly specified, including allocation of risk and clear statement of the service output requirements. The long-term nature of BOT contracts requires greater consideration and specification of contingencies in advance.

The success of the BOT will depend on risk identification (e.g. Market, demand or volume risk, Force Majeure risks, Cost overrun, Political risks, etc.) and appropriate risk allocation among the Govt/ Company, concessionaire, pure investors, and lenders.

It is critical to define modalities for arbitration, mediation, penalties, commercial responsibilities and investments, revenue split, division of roles & responsibilities and penalties, both for non-performance of concessionaire and non-payment by Company or not honouring viability commitment. Prevailing one sided contract favouring only interests of Govt/ Company makes it a risky proposition for the concessionaire/ investor. Thus, the contract’s structure and division of risk in a BOT scenario is critical and while can be complex, requiring prolonged negotiations, but also fair, given international models available for reference.

For more interaction and opportunities contact


Sanjay Kaul, FEI

Founder Univ of Petroleum Energy UPES, Univ of Tech & Mgmt, ISPe, IESD, Sanmarg, BGCL, PwC O&G, Deloitte Energy Resources