OIL & GAS
October 2007
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OI L & G A S
October 2007
Contents
Profile of Indian Oil & Gas Sector Policy & Regulation Opportunities in the Indian Oil & Gas Sector
PROFILE OF THE INDIAN OIL & GAS SECTOR
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PRO F I L E OF T H E I N D I A N O I L & GAS SECTOR
OIL & GAS October 2007
Oil & Gas sector has a long history in India
Oil struck at Makum near Margherita in Assam in 1867 First commercial oil discovery in Digboi in 1889 Systematic E&P in 1899 after Assam Oil Company formed 1947 Indias domestic oil production just 250,000 tonnes per annum 1954 IPR - petroleum to be core sector 1955 ONGC set up 1958 - First Gas & Oil pool discovered in Jwalamukhi (Punjab) and Cambay. Oil India Limited (OIL) was set up Discovery of giant Bombay High field in 1974 Western offshore highest producer 1991 Liberalized petroleum exploitation and exploration policy
PRO F I L E OF T H E I N D I A N O I L & GAS SECTOR
OIL & GAS October 2007
Oil & Gas sector has a long history in India
1991-1994 4th, 5th, 6th, 7th and 8th Rounds of exploration bidding 1999 New Exploration Licensing Policy (NELP) 2000 NELP II 2002 NELP III 2003 NELP IV 2004 NELP V 2006 NELP VI 2007 NELP VII
PRO F I L E OF T H E I N D I A N O I L & GAS SECTOR
OIL & GAS October 2007
Institutional arrangements
Ministry of Petroleum & Natural Gas Upstream: Exploration & Production ONGC Mangalore Refineries & Petrochemicals (Refining) ONGC Videsh Limited (Overseas E&P) Oil India Limited Private E&P Players: Cairn, RIL, NIKO, etc Downstream: Refining & Marketing Hindustan Petroleum (Refining & Marketing) GGSR (Refining) Indian Oil (Refining & Marketing) IBP (Marketing) Chennai Petro (Refining) Bongaigaon Refineries (Refining) Bharat Petroleum (Refining & Marketing) Kochi Refinery (Refining) Engineers India Limited Numaligarh Refineries (Refining) Gail Gas Transport & Petrochemicals Reliance India Limited (Refining & Marketing) Industry Bodies/others:
Petroleum Planning & Analysis Cell Centre for High Technology Petroleum Conservation Research Association Petro Fed Oil Industry Safety Directorate Petroleum India International
PRO F I L E OF T H E I N D I A N O I L & GAS SECTOR
OIL & GAS October 2007
India has significant oil and gas reserves
Sedimentary Area 3.14 Million Sq. Km (4% of the worlds sedimentary area) Sedimentary Basins 26 ( Exploration initiated in 15 ) Prognosticated Resources (O+OEG) 205 Billion Barrels (For 15 Basins only; needs up-gradation) Established reserves 61 Billion Barrels (as of 1.4.2006)
0.2% 13% 43% 44%
Indias Oil & Gas Reserves
n Onland 1.39 M.Km2 n Deep Water 1.35 M.Km2
n Shallow Offshore 0.4 M.Km2
PRO F I L E OF T H E I N D I A N O I L & GAS SECTOR
OIL & GAS October 2007
Sedimentary basin distribution
The sedimentary basins of India, onland and offshore up to the 200m isobath, have an areal extent of about 1.79 million sq. km. So far, 26 basins have been recognised and they have been divided into four categories based on their degree of prospectivity as presently known
PRO F I L E OF T H E I N D I A N O I L & GAS SECTOR
OIL & GAS October 2007
Just over 60% of potential in oil sector has been explored so far
Status of Exploration in India
21%
44% 15%
20%
n Initiated n Well Explored n Poorly Explored n Unexplored
PRO F I L E OF T H E I N D I A N O I L & GAS SECTOR
OIL & GAS October 2007
Extensive discoveries have been made in recent years
Pre-NELP (19932006)13 Yrs. 2D Seismic Survey (LKM) 3D Seismic Survey (SKM) Exploratory Wells (No.) PSC Blocks No. of Discoveries (Up to 15-04-2007) Investment made on Exploration (US$ MM) 24,091 5,304 167 28 25 781.65 NELP- I, II & III, IV,V (2000-06)-6 Yrs. 1,09,305 67,773 93 138 40 91451.18
PRO F I L E OF T H E I N D I A N O I L & GAS SECTOR
OIL & GAS October 2007
Exploration status by Basin and E&P operators
The total number of significant discoveries made during the past five years now stands at 97. The most noteworthy of these discoveries are located in the offshore east coast basins of Krishna-Godavari and Mahanadi-NEC basins; Western offshore and onland in the Rajasthan, Cambay and Assam-Arakan basins
Exploration status by Basin and E&P operators
2005 21 10 12 7 2 3
2000
1990
n No of E&P Operators n Prolific producing Basins
PRO F I L E OF T H E I N D I A N O I L & GAS SECTOR
OIL & GAS October 2007
Annual crude oil production (Million Metric Tonnes)
Total production of oil and oil equivalent gas (O+OEG) during the year is 64.389 MMT Contribution from Pvt./JV small, medium and discovered fields during the year is 4.552MMT of oil which accounts for about 14% of the national oil production
Annual crude oil production (MMT)
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 25.07 24.71 26.01 26.06 26.08 24.40 3.29 4.08 3.18 4.14 2.95 4.09 3.00 4.31 3.20 4.30 3.24 4.55
n ONGC
n OIL
n Pvt/JV
PRO F I L E OF T H E I N D I A N O I L & GAS SECTOR
OIL & GAS October 2007
Annual gas production (Billion Cubic Metres)
Total production of oil and oil equivalent gas (O+OEG) during the year is 64.389 MMT Contribution from Pvt./JV small, medium and discovered fields during the year is 7.357 BCM of gas, which accounts for about 23% of the national gas production
Annual gas production (BCM)
2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 24.02 24.04 24.04 24.24 23.58 22.97 1.86 1.62 1.74 1.89 3.60 4.05 5.41 6.49
2.01 6.78 2.27 7.36
n ONGC
n Oil
n Pvt/JV
PRO F I L E OF T H E I N D I A N O I L & GAS SECTOR
OIL & GAS October 2007
Annual Crude oil production (BCM) by Off & Onshore operations
Annual crude oil production ratio of off-to-onshore operations has largely remained static
Annual crude production in MMT
20.14 11.89 21.57 11.47 21.92 11.45 22.4 11.58 20.76 11.43
2005-06
2004-05
2003-04
2002-03
2001-02
n Onshore
n Offshore
PRO F I L E OF T H E I N D I A N O I L & GAS SECTOR
OIL & GAS October 2007
Annual gas production (BCM) by Off & Onshore operations
Likewise, annual gas production ratio of off to onshore operations has also largely remained static
Annual gas production (BCM)
22.74 9.46 22.8 8.96 22.98 8.98 22.67 8.72 21.86 7.86
2005-06
2004-05
2003-04
2002-03
2001-02
n Onshore
n Offshore
PRO F I L E OF T H E I N D I A N O I L & GAS SECTOR
OIL & GAS October 2007
Significant discoveries 2000 to 2007
Last seven years have seen significant discoveries of oil and gas, largely due to liberalised exploration regimes
PRO F I L E OF T H E I N D I A N O I L & GAS SECTOR
OIL & GAS October 2007
Refining activity has been steadily growing
19 refineries: 17 in Public Sector, 2 in Private Sector Capacity had grown from 62 MMT in April 1998 to 149 MMT in Jan 2007 Refining capacity expected to reach 235 MMT by April 2012 Surplus refining capacity of 86 MMT projected in 2011-12 Large export potential
April 1998 April 2001 April 2004 April 2005 April 2006 April 2007 April 2012 (Forecast) Refining capacity MMT 62.2 114.6 127.0 127.4 132.5 149.0 235.0
PRO F I L E OF T H E I N D I A N O I L & GAS SECTOR
OIL & GAS October 2007
Most of it is in public sector, with Reliance Petroleum as a major player in the private sector
In the liberalised scenario, the GoI has opened the refining sector to Joint Sector as well as to the private sector for achieving faster growth About 27 MTPA additional capacity is planned to come up under PSUs. Under joint venture, 43 MTPA capacity will be added in the next 5-6 years. This will be contributed by IOCLs tie up with Kuwait Petroleum Company for one refinery, HPCLs tie-ups with Oman Oil Company and Saudi Aramco for two refineries and BPCLs tie-ups with Oman Oil Company and Shell International for two refineries.
Playerwise details (As on 1st April 2006)
000 Tonnes
Installed capacity Public sector IOCL BPCL HPCL KRL CPCL BRPL NRL ONGC MRPL Private sector Reliance 33,000 41,350 12,000 13,000 7,500 10,500 2,350 3,000 78 9,690
Refinery crude throughput 38,522 10,298 14,229 6,939 10,362 2,356 2,133 93 12,014 33,163
Source: Company data
PRO F I L E OF T H E I N D I A N O I L & GAS SECTOR
OIL & GAS October 2007
Energy consumption mix in India
India still largely remains dependant upon coal and oil The growth in demand is projected to catapult the overall demand to 196 MMT in 2011-12 and 250 MMT in 2024-25 Growing demand-supply gap has led the Indian government to open up exploration and production to private participants through NELP and develop a more holistic strategy for acquisition of equity oil abroad
Energy consumption mix in India
0% 1% 7% 32% 8%
52%
n Coal n Nuclear n Oil
n Hydel n NG
* As on 01.04.06
PRO F I L E OF T H E I N D I A N O I L & GAS SECTOR
OIL & GAS October 2007
Growth in consumption of petroleum products has been encouraging
The consumption growth has slowed down in the last few years because of substitution of naphtha by Liquified Natural Gas According to the estimates by the Integrated Energy Policy Report, Planning Commission of India, 2006, the total energy requirement (including oil, gas, coal, nuclear and hydro energy sources) in the country by 2032 would be 1,651 million tonnes of oil equivalent (MTOE). This assumes a 8 per cent GDP growth rate through 2032
Year 1980-81 1984-85 1989-90 1996-97 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07* * Estimated Source: PPAC, Ministry of Petroleum and Natural Gas Consumption MMTPA 30.9 38.8 54.1 79.2 100.4 104.1 107.7 111.6 111.9 117.5
PRO F I L E OF T H E I N D I A N O I L & GAS SECTOR
OIL & GAS October 2007
The demand supply gap has been increasing
Oil comprises about 33 per cent of Indias primary energy consumption at present Growth in demand is projected to catapult the overall demand to 196 MMT in 2011-12 and 250 MMT in 2024-25 Likewise, demand for NG i.e. Natural Gas (at more than 120 mmscmd) in the country has far outstripped supply (about 75 mmscmd), and there has an increasing trend towards emergence of new NG demand as well as conversion from existing fuels to NG
Year Demand 2001-02 2002-03 2005-06 2011-12 2024-25 99.70 114.30 140.00 199.60 376.50 Crude oil MMT Supply 32.03 33.05 33.98 33.47 61.4 Gap 67.67 81.25 106.02 166.13 315.1
Year Demand 2001-02 2006-07 2011-12 2024-25 151.00 231.00 313.00 391.00
Natural gas (MMSCMD) Supply 81.40 94.84 158.05 170.00 Gap 69.60 136.16 154.95 221.00
PRO F I L E OF T H E I N D I A N O I L & GAS SECTOR
OIL & GAS October 2007
Alternative fuels scenario
Coal Bed Methane (CBM) Methane trapped in coal seams. 26 blocks awarded in three rounds of bidding. Production potential of over 25 MMSCMD Underground Coal Gasification (UCG) Huge potential in India to get natural gas through UCG. ONGC has signed agreement with Sckochinsky Institute of Mining, Russia to harness world class technology to tap this energy source Gas Hydrates National Gas Hydrate Programme and Steering Committee in place
PRO F I L E OF T H E I N D I A N O I L & GAS SECTOR
OIL & GAS October 2007
Alternative fuels scenario
Agreement on Collaborative Research on drilling of experimental wells with USA, Canada and Japan Road map for gas hydrates is in place Ethanol Blended Petrol Marketing of petrol with up to 5% ethanol blending being undertaken. Percentage of ethanol in petrol is proposed to be increased to 10% in future Bio-Diesel Government has already decided to introduce 5% blended bio-diesel
PRO F I L E OF T H E I N D I A N O I L & GAS SECTOR
OIL & GAS October 2007
Extensive distribution & marketing networks
Petroleum products marketing largely done by 4 PSUs: IOC, HP, BPCL, and IBP Extensive retail network over 16000 outlets, 6000 kerosene agencies and 5000 LPG distributorships Requirements of industrial units met through direct supplies National Gas Grid planned Approximate movement - railways 40%; pipelines 30%; coastal tankers 12%; balance by road
PRO F I L E OF T H E I N D I A N O I L & GAS SECTOR
OIL & GAS October 2007
Key issues confronting the sector
Absence of statutory framework in the upstream industry Incidence of cross subsidy due to social obligations Domestic reserves/production will not be sufficient Cross-border gas pipelines facing uncertainty, but attracting interest Inability to take international prices
POLICY & REGULATION
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PO L I C Y & R E G U L AT I O N
OIL & GAS October 2007
Policy regimes favourable for investments
Refinery sector delicensed in 1998 New Exploration Licensing Policy (NELP) announced by Govt. in the year 1999 Administered Pricing Mechanism (APM) dismantled from April 2002 Marketing of transport fuels (Petrol, Diesel & Aviation Fuel) is now permitted subject to meeting minimum investment of about US$ 0.44 billion in oil and gas sector
PO L I C Y & R E G U L AT I O N
OIL & GAS October 2007
Policy regimes favourable for investments
100% FDI is permitted in Exploration, Refining, Pipelines (both petroleum products & gas) & Marketing Six rounds of NELP (I to VI) completed Over 150 exploration blocks awarded under five rounds of NELP to domestic and foreign private companies Investment commitment of more than US$ 12 billion
PO L I C Y & R E G U L AT I O N
OIL & GAS October 2007
Long-term policy directions are favourable
Planning Commission report on Integrated Energy Policy in August 2006 Oil and gas are expected to be the key drivers of energy consumption growth Faster exploration of entire domestic sedimentary basins to augment domestic availability of oil and gas Improvement in oil and gas recovery levels Acquisition of equity oil and gas abroad
PO L I C Y & R E G U L AT I O N
OIL & GAS October 2007
Long-term policy directions are favourable
Exploitation of alternative fuel sources such as CBM, Gas Hydrates, Hydrogen fuel cell and blending of bio-fuels Improvement in energy efficiency and conservation Maintenance of strategic reserves in oil and petroleum
PO L I C Y & R E G U L AT I O N
OIL & GAS October 2007
New downstream regulatory regime introduced in 2006
New regulatory regime The petroleum and Natural Gas Regulatory Board Act, 2006 to regulate activities in the downstream oil and gas sector Board consisting of Chairperson and four members constituted Bench consisting of Member (Legal) and another member of the Board to decide on settlement of disputes between parties Appeals against order or decision made by Board will be considered by Appellate Tribunal established under Electricity Act, 2003 Board and Appellate Tribunal shall exercise powers and authority of a Civil Court
PO L I C Y & R E G U L AT I O N
OIL & GAS October 2007
Key functions of Regulatory Board
In the case of city or local natural gas distribution network : Decide on the period of exclusivity for building and operating the network. In the case of petroleum, petroleum products and natural gas : Ensure availability Monitor prices and transportation rates to check restrictive trade practices Secure equitable distribution Enforce retail service obligations for retail outlets and marketing service obligations for entities
PO L I C Y & R E G U L AT I O N
OIL & GAS October 2007
Key functions of Regulatory Board
Lay down technical standards including safety standards for pipelines and other infrastructure projects Affiliate code of conduct for an entity combining both pipeline and marketing activities in natural gas, which may require separation of ownership and management of above
PO L I C Y & R E G U L AT I O N
OIL & GAS October 2007
Evolution of upstream regulatory regime
The Oil Fields (Regulation and Development) Act, 1948 and the Petroleum and Natural Gas Rules, 1959 made by GoI provide regulatory framework for domestic exploration and production of Oil & Gas April 1993 Directorate General of Hydrocarbons (DGH) set up under administrative control of the MoPNG to promote sound management of domestic oil and gas resources keeping in view the environmental safety, technological and economic aspects of upstream activities September 2006 GoI designated DGH as the authority or agency under the 1948 Act to exercise statutory powers to carry out its functions
OPPORTUNITIES IN THE INDIAN OIL & GAS SECTOR
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OP P O RT U N I T I E S I N T H E I N DIAN OIL & GAS SECTOR
OIL & GAS October 2007
Various opportunities in the oil and gas sector
Oil Investments under NELP Destination India as refining hub Increased investment in fuel quality upgradations Building strategic petroleum reserve through public private partnership Acquisition of overseas oil assets Competition in the downstream (retail and institutional) segment Gas Domestic exploration of NG, development of Liquefied Natural Gas (LNG) markets Coal Bed Methane (CBM), Underground Coal Gasification, Gas Hydrates Development of National Gas Grid
OP P O RT U N I T I E S I N T H E I N DIAN OIL & GAS SECTOR
OIL AND GAS October 2007
Private & foreign investments are on the rise
Many Indian private sector players (RIL, PetroNet, Essar, etc) Under 6 rounds of NELP, 162 blocks were awarded, of which 56 blocks went to private companies & JVs International players and approx. investments in India: Cairn Energy Plc over US$ 1 billion, British Gas - over US$ 800 million, Shell - US$ 650 million, BP - US$ 444 million Other global players with India operations - Total, Exxon Mobil, Gaz De France, and Chevron
Foreign (FII) holdings in select Indian Oil & Gas companies
31 March 2001 31 March 2002 25.34 31 March 2003
31 March 2004 29.62
6.18
31 March 2005 30.93
8.13
31 March 2006 26.70%
8.5%
Reliance ONGC Gail India Essar Oil Indian Oil BPCL HPCL
24.50 0.22 16.61 16.68 0.04 15.43 12.86
21.41
0.46
0.17
16.09
14.1 22.19 0.17 10.29 10.53
17.72 22.45 1.05 15.37 20.03
21.47 70.59 1.92 14.83 22.06
23.59% 77.93% 1.95 17.5% 23.57%
22.18
0.02 14.36 13.43
OP P O RT U N I T I E S I N T H E I N DIAN OIL & GAS SECTOR
OIL AND GAS October 2007
Private/JV operations have been increasing
PEL& ML areas as on 01.06.1996 PEL& ML areas as on 01.04.2006
OI L & G A S
October 2007
DISCLAIMER
This presentation has been prepared jointly by the India Brand Equity Foundation (IBEF) and ICRA Management Consulting Services Limited, IMaCS (Authors). All rights reserved. All copyright in this presentation and related works is owned by IBEF and the Authors. The same may not be reproduced, wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this presentation), modified or in any manner communicated to any third party except with the written approval of IBEF. This presentation is for information purposes only. While due care has been taken during the compilation of this presentation to ensure that the information is accurate to the best of the Authors and IBEFs knowledge and belief, the content is not to be construed in any manner whatsoever as a substitute for professional advice. The Author and IBEF neither recommend or endorse any specific products or services that may have been mentioned in this presentation and nor do they assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed in this presentation. Neither the Author nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any reliance placed or guidance taken from any portion of this presentation.
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