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Oil gas 270111

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  • 1. OIL & GASNovember 2010 1
  • 2. OIL & GAS November 2010 Contents  Advantage India  Market overview  Industry Infrastructure  Investments  Policy and regulatory framework  Opportunities  Industry associations 2
  • 3. ADVANTAGE INDIAOil & Gas November 2010 Advantage India Investment worth US$ 563 billion is expected across the oil and gas value chain under the Eleventh Plan (2007–2012). • India is the third-highest consumer of • 100 per cent foreign direct coal (7.5 per cent share of global coal investment (FDI) is allowed in Huge capital consumption). upstream and private sector investment refining projects. plans • Over the period 2000–2009, oil and gas consumption grew at a 5 per cent CAGR • The FDI limit for public sector to reach 184 million metric tonnes refining projects has been raised Liberal FDI High demand (MMT). This is projected to reach 368 to 49 per cent. regime potential MMT by 2025. Advantage India • About 130,000 people were employed in the petroleum Enabling The Government of India (GoI) has Skilled workforce industry in 2009-10. regulation enacted various policies (such as new • The University of Petroleum and and policy exploration licensing policy [NELP] Energy Studies in Dehradun, and coal bed methane [CBM]) policy Uttarakhand, is Asia’s first and to encourage investments across the Substantial capacity industry’s value chain. only energy university. additions • Domestic gas supplies are projected to increase from 163 million metric standard cubic meters per day (MMSCMD) in 2009–10 to 285.4 MMSCMD by 2012. • Refining capacity is projected to increase from 184.4 million metric tonnes per annum (MMTPA) in 2009–10 to 241 MMTPA by 2012. Source: ―Basic statistics on Indian petroleum & natural gas 2009–10,‖ and ―Report of the Working Group on Petroleum & Natural Gas Sector for the XI Plan (2007-2012),‖ Ministry of Petroleum & Natural Gas website, http://petroleum.nic.in/, accessed 6 December 2010. 3
  • 4. OIL & GAS November 2010 Contents  Advantage India  Market overview  Industry Infrastructure  Investments  Policy and regulatory framework  Opportunities  Industry associations 4
  • 5. MARKET OVERVIEWOil & Gas November 2010 Market overview • Petroleum products and natural gas together contributed 2.8 per cent (US$ 30.8 billion) to the country’s total GDP (US$ 1089.3 billion) in 2008–09. Key segments — upstream, midstream and downstream • The upstream segment comprises exploration and production (E&P) activities. • The midstream segment is involved in storage and transportation of crude oil and natural gas. • The downstream segment is engaged in refining and production of petroleum products, and processing, storage, marketing and transportation of commodities such as crude oil and natural gas. Source: ―Basic statistics on Indian petroleum & natural gas 2009–10,‖ Ministry of Petroleum & Natural Gas website, http://petroleum.nic.in/, accessed 6 December 2010. 5
  • 6. MARKET OVERVIEWOil & Gas November 2010 Upstream segment — exploratory and development drilling 2009–10 • The total number of exploratory and Area development wells and metreage drilled in India Wells Metreage was 428 and 1019 thousand metres, respectively, Exploratory in 2009–10. Onshore 110 298 Offshore 34 128 • The national oil companies executed the bulk of Development the drilling. Onshore 236 470 Offshore 48 123 Source: “Hydrocarbon Exploration and Production Activities India 2009–2010,‖ Directorate General of Hydrocarbons website, http://dghindia.org/Publication.aspx, accessed 6 December 2010. 6
  • 7. MARKET OVERVIEWOil & Gas November 2010 Upstream segment — annual crude oil production … (1/2) • Total production of crude oil stood at 33.7 MMT Annual crude oil production (MMT) — company-wise details in 2009–10, 0.6 per cent higher than the production in 2008-09 (33.5 MMT). 2009-10 24.9 3.6 5.3 2008-09 • In 2009–10, total domestic oil consumption 25.4 3.5 4.7 stood at 160 MMT, a decrease of 0.5 per cent 2007-08 25.9 3.1 5.1 over the previous year. 2006-07 26.1 3.1 4.8 • The Oil & Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) accounted for 73.8 per 2005-06 24.4 3.2 4.6 cent and 10.6 per cent, respectively, of total domestic crude oil production in 2009–10.The 0.0 10.0 20.0 30.0 40.0 remaining share is held by private/joint venture ONGC OIL Private/JV (JV) fields. ONGC: Oil & Natural Gas Corporation; OIL: Oil India Ltd Sources: Relevant company annual reports 2008–09 and 2009–10; Ministry of Petroleum & Natural Gas website, http://petroleum.nic.in/, accessed 6 December 2010. 7
  • 8. MARKET OVERVIEWOil & Gas November 2010 Upstream segment — annual crude oil production … (2/2) • Offshore production accounted for 64.9 per cent Annual crude oil production (MMT) — offshore/onshore of domestic annual crude oil production for 21.9 2009–10.The remaining share was contributed 2009-10 11.8 by onshore production. 2008-09 22.2 11.3 2007-08 22.9 • During the Eleventh Five Year Plan period (2007– 11.2 2012), production of crude oil is expected to 2006-07 11.3 22.7 increase by 24 per cent over oil production 20.8 2005-06 during the Tenth Five Year Plan period (2002–07). 11.4 0.0 5.0 10.0 15.0 20.0 25.0 Offshore Onshore Source: Ministry of Petroleum & Natural Gas website, http://petroleum.nic.in/, accessed 6 December 2010. 8
  • 9. MARKET OVERVIEWOil & Gas November 2010 Upstream segment — annual natural gas production … (1/2) • Total production of natural gas stood at 47.5 Annual natural gas production (BCM) — company-wise details BCM in 2009-10 — 44.6 per cent more than the previous year’s production (32.9 BCM). 2009–10 23.1 2.4 22.0 2008–09 22.5 2.3 8.1 • The demand for domestic gas was estimated at 226 MMSCMD in 2009–10, whereas gas supply 2007–08 22.3 2.3 7.7 was 163 MMSCMD. 2006–07 22.4 2.3 7.0 • ONGC accounted for 48.6 per cent (23.1 BCM) 2005–06 22.6 2.3 7.4 of total natural gas production during the year. 0 10 20 30 40 50 • Private/JV fields accounted for 46.3 per cent of ONGC OIL Private/JV total natural gas production This was mainly due to commencement of gas production at Reliance’s KG basin. Source: ―Basic statistics on Indian petroleum & natural gas 2009–10,‖ Ministry of Petroleum & Natural Gas website, http://petroleum.nic.in/, accessed 6 December • Total production of natural gas is expected to 2010. reach 255.3 BCM by the end of the Eleventh Plan period. 9
  • 10. MARKET OVERVIEWOil & Gas November 2010 Upstream segment — annual natural gas production … (2/2) • In 2009–10, offshore gas production accounted Annual natural gas production (BCM) — offshore/onshore for 81.7 per cent of total annual gas production 38.8 in India.The remaining share was contributed by 2009–10 8.7 onshore production. 24.1 2008–09 8.8 • Offshore production grew at the rate of 14.4 per 2007–08 9.1 23.3 cent CAGR over the period 2005–10. 22.5 2006–07 9.3 2005–06 22.6 9.6 0.0 10.0 20.0 30.0 40.0 50.0 Offshore Onshore Sources: ―Basic statistics on Indian petroleum & natural gas 2009–10,‖ and ―Report of the Working Group on Petroleum & Natural Gas Sector for the XI Plan (2007- 2012),‖ Ministry of Petroleum & Natural Gas website, http://petroleum.nic.in/, accessed 6 December 2010. 10
  • 11. MARKET OVERVIEWOil & Gas November 2010 Midstream segment — crude pipeline capacity • As on 1 April 2010, the total length and Existing crude pipelines in India (as on 1 April 2010) capacity of the crude oil pipelines stood at Capacity Length 6,235 kms and 92.6 MMTPA respectively. Name of the pipeline (MMTPA) (km) OIL - Duliajan-Digboi-Bongaigaon-Barauni 8.4 1,193 • ONGC holds 47.3 per cent of the crude IOCL - Salaya-Mathura-Panipat Pipeline 21 1,870 pipeline capacity in India with a 673 kms long pipeline network. IOCL - Haldia-Barauni/Paradip Barauni 11 1,302 IOCL - Mundra-panipat 8.4 1,194 • IOCL holds 43.6 per cent of the crude ONGC-Mumbai High-Uran 15.63 204 pipeline capacity in India with its 4,366 kms ONGC-Heera-Uran 11.5 81 long network of crude pipelines. ONGC-Kalol-Nawagam-Koyali 8.54 129.31 ONGC-MHN-NGM 2.26 77 • Remaining share of the crude pipeline capacity is held by OIL which owns the ONGC-CTF , Ank to Koyali (AKCL) 2 94.8 1,193 km long Duliajan-Digboi-Bongaigaon- ONGC-Lakwa-Moran 1.5 18 Barauni pipeline having a capacity of 8.4 ONGC-Geleki-Jorhat 1.5 48.47 MMTPA. ONGC-NRM to CPCL 0.74 6 ONGC-KSP-WGGS to TPK refinery 0.08 13.5 ONGC-GMAA EPT to S. Yanam unloading 0.09 4 terminal Total 92.64 6,235 Sources: ―Basic statistics on Indian petroleum & natural gas 2008–09,‖ Ministry of Petroleum & Natural Gas website, http://petroleum.nic.in/, accessed 6 December 2010. 11
  • 12. MARKET OVERVIEWOil & Gas November 2010 Downstream segment — refining … (1/2) • India has 20 refineries — 17 in the public sector and Annual refinery crude throughput three in the private sector. Refinery crude Year throughput • The country’s refining capacity increased to 184.4 (MMT) MMTPA in April 2010 from 178 MMTPA in the 2009–2010 160.03 previous year. 2008–09 160.77 • Its total refinery crude throughput in 2009–10 was 2007–08 156.10 160 MMT, 0.5 per cent lower than the volume in 2006–07 146.55 2008–09 (160.8 MMT). 2005–06 130.10 2004–05 127.41 Source: ―Basic statistics on Indian petroleum & natural gas 2009–10,‖ Ministry of Petroleum & Natural Gas website, http://petroleum.nic.in/, accessed 6 December 2010. 12
  • 13. MARKET OVERVIEWOil & Gas November 2010 Downstream segment — refining … (2/2) • The GoI has opened the refining industry to Refining capacity details (as on 1 April 2010) private sector investment to increase Installed Pro-rata capacity domestic refining capacity. Public sector capacity utilisation (per (MMT) cent) • Reliance Industries has emerged as the Indian Oil Corporation Limited 48.85 102.0 largest domestic refiner and has overtaken (IOCL) Indian oil Corporation (IOCL) after the Hindustan Petroleum 13.8 121.2 commissioning of the former’s Reliance Corporation Limited (HPCL) Petroleum Ltd (SEZ) (RPL [SEZ]) refinery in Chennai Petroleum Corporation 10.5 96.2 2008, which has increased the company’s Limited (CPCL) total refining capacity to 62 MMT. Numaligarh Refinery Limited 3 87.3 (NRL) ONGC 0.066 70.5 Source: ―Basic statistics on Indian petroleum & natural gas 2008–09,‖ Ministry of Petroleum & Natural Gas website, Mangalore Refinery and 11.82 129 http://petroleum.nic.in/, accessed 6 December 2010. Petrochemicals Limited (MRPL) Installed Pro-rata capacity Private sector capacity utilisation (per (MMTPA) cent) RIL 62 104.3* Essar 10.5 128.6 *does not contain the RPL (SEZ) capacity utilisation 13
  • 14. MARKET OVERVIEWOil & Gas November 2010 Downstream segment — production of petroleum products • The production of petroleum products was Production of petroleum products (MMT) 151.9 MMT (including 2.2 MMT of LPG 100.0 production from natural gas) in 2009–10, a 80.3 79.4 decrease of 0.5 per cent over last year’s 80.0 production (152.7 MMT) 60.0 40.2 40.4 40.0 • Petroleum products derived from crude oil 30.0 29.9 include: 20.0 • Light distillates — LPG, mogas, naphtha, 0.0 natural gas liquids (NGL) 2008-09 2009-10 • Middle distillates — kerosene • Heavy ends — furnace and lube oils, Light distillates Middle distillates Heavy ends bitumen, petroleum coke, paraffin wax • Production of petroleum products is expected to reach 904.8 MMT by the end of the Eleventh Plan period. Source: ―Basic statistics on Indian petroleum & natural gas 2009–10,‖ Ministry of Petroleum & Natural Gas website, http://petroleum.nic.in/, accessed 6 December 2010. 14
  • 15. MARKET OVERVIEWOil & Gas November 2010 Downstream segment — marketing, retail and distribution • Total sales of petroleum products by Existing pipeline network in India (as on 1 April 2010) companies was 138.2 MMT in 2009–10, which Capacity was 3.6 per cent higher than in the previous Length (km) Throughput (MMTPA) year (133.4 MMT). Pipeline (as on 1 (MMT) (as on 1 April April 2010) (2009–10) 2010) • IOC had the maximum retail outlets in the country at 51.1 per cent, followed by HPCL at Product 65.90 10,615.8 52.1 25 per cent and BPCL at 23.8 per cent. The LPG 3.90 2,252 3.5 remaining outlets were owned by private Crude 92.64 6,235.08 72.64 players. Total 162.44 19,103 128.24 • The total number of retail outlets of public sector oil marketing companies (OMCs) increased to 36,462 in April 2010 from 34,948 in 2009. • The number of LPG distributors in India totaled 9,686 as on 1 April 2010. Source: ―Basic statistics on Indian petroleum & natural gas 2009–10,‖ Ministry of Petroleum & Natural Gas website, http://petroleum.nic.in/, accessed 6 December 2010. 15
  • 16. MARKET OVERVIEWOil & Gas November 2010 Consumption pattern — energy consumption mix • India is largely dependent on coal and oil for its Energy consumption mix in India (2009) energy needs, and this dependency has been increasing over the years. Energy source Unit Consumption Coal MTOE 245.8 • The country’s consumption of coal increased Oil MMT 148.5 to 245.82 million tonnes of oil equivalent (MTOE) in 2009, an increase of 6.5 per cent Natural gas MTOE 46.7 over the previous year (230.9 MTOE), Hydroelectricity MTOE 24 underscoring the importance of coal as a primary source of energy. Nuclear energy MTOE 3.8 Projected energy consumption mix in India (2030) Source: ―BP Statistical Review of World Energy June 2010,‖ BP. Product Unit World India Oil MTOE 5775 435 Gas MTOE 4125 224 Coal MTOE 3597 816 Source: ―Draft report of the expert committee on Integrated Energy Policy,‖ Planning Commission 2005. 16
  • 17. MARKET OVERVIEWOil & Gas November 2010 EXIM scenario • The total value of gross crude and Import trend in oil and gas sector petroleum imports was estimated at 7.0 US$ 87.2 billion (INR 4,184.8 billion) in 2009-10 78.2 1.9 2009–10. 13.4 2008-09 72.6 2.0 • The following are the volumes of 2007-08 12.7 56.8 1.5 imports in 2009–10: 8.6 • Crude oil —159.3 MMT 2006-07 45.6 1.2 • LNG — 8.8 MMT 5.8 2005-06 35.8 0.7 • Petroleum products — 14.7 MMT Import value (US$ billion) 0.0 20.0 40.0 60.0 80.0 100.0 • India’s primary exports in this sector Crude Oil Petroleum products LNG include petroleum products. • The total value of its export of petroleum products was estimated at US$ 30 billion (INR 1,440.4 billion) in 2009–10. Source: ―Basic statistics on Indian petroleum & natural gas 2009–10,‖ Ministry of Petroleum & Natural Gas website, http://petroleum.nic.in/, accessed 6 December 2010. 17
  • 18. MARKET OVERVIEWOil & Gas November 2010 Key players – Indian … (1/2) Turnover in 2009–10 Company Sector Operations Remarks US$ billion (INR billion) Exploration and production • IOC accounts for a market share of nearly (E&P), refining, distribution and 46 per cent in domestic petroleum products, 54 (2593.6) marketing through pipelines, IOC Public 34 per cent of the national refining capacity downstream petroleum, and 54 per cent of downstream sector natural gas marketing, bio-fuels product pipeline capacity. and wind power projects • ONGC has the largest share of hydrocarbon acreage in India. E&P and downstream business • The company operates 15 major fields that 22.1 (1,061.7) (through its subsidiary — ONGC Public contribute about 60 per cent of India’s oil Mangalore Refinery and production. Petrochemicals [MRPL]) • It also has the maximum number of exploration licenses. Refining, aviation fuelling and • HPCL has a strong presence in lubricants in HPCL Public 23.6 (1,131.6) marketing of petroleum India, and owns brands such as HP Cruise, products HP Lal Ghoda and HP Racer 4. • BPCL was the first public sector oil company to implement enterprise resource planning Refining, aviation fuelling and (ERP) solutions in the country. BPCL Public 27.9 (1,337.5) marketing of petroleum • The company has set up one of the biggest products centres of excellence in Asia to provide online support to end users. • OIL is primarily engaged in the development OIL Public 1.6 (79) E&P of small and medium-sized fields. 18
  • 19. MARKET OVERVIEWOil & Gas November 2010 Key players — Indian … (2/2) Turnover in 2009–10 Company Sector Operations Remarks US$ billion (INR billion) • GAIL has pioneered the development of Indias gas transmission E&P, gas processing, GAIL infrastructure and currently owns about 7,850 km of natural gas transmission, (India) Public 5.6 (270.4) pipelines. It has transmission capacity of over 150 mmscmd. distribution, marketing Limited • The company owns north India’s only gas-based integrated and petrochemicals petrochemicals complex. • RIL is credited with the first discovery of gas in the Krishna-Godavari (KG) basin in 2008, and is capable of producing 40 per cent of India’s current oil and gas output. E&P, petroleum refining • The company made its second discovery in May 2008 and third one in 44.1 RIL Private and marketing and December 2009. (2,117.3) petrochemicals • Production of natural gas at the KG basin commenced in June 2009. • RIL currently has 13 blocks in its international E&P portfolio. • The company has the largest grassroots refinery in the Asia-Pacific region at Jamnagar in Gujarat. Essar Oil E&P, refining and Private 8.8 (424) • Essar has the largest CBM acreage in India (2,700 sq kms). Limited marketing Adani Gas • Adani has set up a gas distribution network at Ahmedabad and Private 5.4 (258.9) Natural gas distribution * Vadodara in Gujarat and Faridabad in Haryana Petronet LNG re-gasification • Petronet has set up India’s first LNG re-gasification terminal at Dahej Private 2.2 (106) LNG terminal in Gujarat, which currently has a capacity of 10 MMTPA. *Revenue figures pertain to parent company revenues Source: ―Basic statistics on Indian petroleum & natural gas 2009-10.‖ Ministry of Petroleum & Natural Gas website, http://petroleum.nic.in/, accessed 6 December 2010.; relevant company annual reports. 19
  • 20. MARKET OVERVIEWOil & Gas November 2010 Key players — international Turnover Company Sector (2009–10) Operations Remarks US$ billion • Cairn operates the largest producing oil field in the Indian private sector. Cairn Exploration, • The company has drilled about 81 wells (including six Energy India Private 0.34 production and crude horizontal and tested wells in 2009 , achieving a Pty Ltd pipeline production rate of more than 11,500 barrels of oil per day (bopd). Fuel retailing; supply of crude, petroleum • Shell has an LNG re-gasification terminal at Hazira in 278.2 products and Gujarat, which has a capacity of 3.7 MMTPA. Shell# Private (year ending chemicals; technology • The company has established Shell Technology India February 2010) support to oil and gas in Bangalore, for technical support services for Shell’s companies; lubricant operations in India and worldwide. and LNG production • The BG Group has a 65.12 per cent stake in Gujarat 16.1 E&P, transmission and Gas Company Limited, India’s largest private sector BG Group# Private (year ending distribution natural gas distribution company, in terms of its sales December 2009) volume. 239.3 • Castrol India, a part of the BP Group, is the second- (year ending Automotive lubricants, largest player in the Indian lubricant industry and the BP# Private December 2009) E&P and solar power market leader in the retail automotive lubricant segment. #Revenue figures pertain to group revenues Sources: Relevant company annual reports. 20
  • 21. MARKET OVERVIEWOil & Gas November 2010 Key trends — alternative fuels … (1/3) Coal bed methane (CBM) • CBM is an eco-friendly natural gas (methane), which is adsorbed in coal and lignite seams. Coal is the main source of CBM production, which is conducted by simple depressurisation and dewatering processes. • Exploration and production of CBM activities furthers the quest to reduce the greenhouse effect and earn carbon credits. • The GoI approved the CBM Policy in July 1997. • The first commercial production of CBM was initiated in July 2007 at about 72,000 cubic metres per day. Four rounds of bidding have been completed till date: • CBM i (2001) — 7 blocks offered • CBM ii (2003) — 9 blocks offered • CBM iii (2006) — 10 blocks offered • CBM iv (2009) — 10 blocks offered • India is the fourth-largest coal producer in the world with the third-largest proven coal reserves. With about 4.6 TCM of CBM resources, the country has significant prospects for commercial recovery of CBM. Source: Directofourth- General of Hydrocarbons website, www.dghindia.org/, accessed 09 November 2010. 21
  • 22. MARKET OVERVIEWOil & Gas November 2010 Key trends — alternative fuels … (2/3) Underground coal gasification (UCG) • The technique of underground coal gasification converts unminable underground coal or lignite into combustible gases by gasifying the coal in situ. The technology was first widely used in the US in the 1800s and in India, in Kolkata and Mumbai, in the early 1900s. UCG is currently the only feasible technology available to harness energy from deep unminable coal seams, both economically and in an environmentally clean manner. This process reduces capital investment and operating costs as well as the cost of output gases by 25 to 50 per cent compared to surface gasification. 22
  • 23. MARKET OVERVIEWOil & Gas November 2010 Key trends — alternative fuels … (3/3) Gas hydrates • The GoI has initiated the National Gas Hydrate Programme (NGHP) to map gas hydrates for use as an alternate source of energy by extracting methane from solids below the seabed in the deep ocean and the permafrost regions of the world. • NGHP is a consortium of national E&P companies and research institutions. Biofuels • Biofuels (bioethanol and biodiesel) are fuels that are produced as an alternate source of energy from domestic renewable resources. • Biofuels have lower emissions compared to petroleum or diesel. • In India, biodiesel is produced from plants (renewable resources) such as jatropha and has the potential to reduce the country’s dependence on oil imports. • Bioethanol is mainly produced from sugar or starch containing materials such as sugarcane and cellulosic material. • The GoI has signed an agreement with the US to develop a joint clean energy research and development centre with second generation biofuels as one of its priority areas. Sources: Directorate General of Hydrocarbons 2007–08 annual report, website, www.dghindia.org/CBMRounds.aspx?tab=0, accessed 6 December 2010, ―Status report on underground coal gasification,‖ August 2007, Government of India; ―National Policy on Biofuels,‖ Ministry of New and Renewable Energy website, www.mnre.gov.in/policy/biofuel-policy.pdf, accessed 17 November 2010. 23
  • 24. MARKET OVERVIEWOil & Gas November 2010 Growth drivers … (1/2) Abundant raw material Industry-wise utilisation of natural gas in India 35,000 32,111 • India has large reserves of coal, crude oil and 30,000 Million cubic metres natural gas. 25,000 22,191 18,978 20,000 15,135 Growing demand for natural gas 15,000 11,892 10,541 10,000 • Utilisation of natural gas in different industries 5,000 has increased over the years. 0 2007-08 2008-09 2009-10 Energy purposes Non-energy purposes Source: ―Basic statistics on Indian petroleum & natural gas 2009– 10,‖ http://petroleum.nic.in/, accessed 6 December 2010. 24
  • 25. MARKET OVERVIEWOil & Gas November 2010 Growth drivers … (2/2) • Natural gas is an important input in various industries for the following: • Energy: • Power generation • Industrial and domestic fuel • Tea plantations • Captive use or LPG shrinkage • Non-energy: • Fertiliser industry • Petrochemicals • CNG 25
  • 26. OIL & GAS November 2010 Contents  Advantage India  Market overview  Industry Infrastructure  Investments  Policy and regulatory framework  Opportunities  Industry associations 26
  • 27. INDUSTRY INFRASTRUCTUREOil & Gas November 2010 Industry infrastructure Name of SEZ and Area Developer/ State Sector Details status (hectares) Promoter • Dedicated pipeline-cum-road corridor (proposed) 1.Petrochemicals • Water and power available ONGC, Mangalore SEZ Ltd and petroleum • Non-processing zone to have Karnataka 588 KIADB, (Notified) 2. Multi-product housing, offices, educational and IL&FS, KCCI (proposed) health facilities • Proposed units — OMPL, ISPRL, MRPL refinery • Target companies from upstream Gujarat Gujarat and downstream businesses Hydro- Hydrocarbons and • Proposed residential Gujarat 140 Oil and gas carbons and Power SEZ Ltd accommodation, educational, Power SEZ (Formal approval) healthcare and recreational Ltd facilities Nagarjuna Oil Corporation • Establishment of a 6 MMTPA Nagarjuna Oil Ltd, petroleum refinery at an estimated Petrochemicals Corporation Ltd Tamil Nadu 104.01 Nagarjuna cost of about US$ 1 billion and petroleum (Formal approval) Fertilisers & • Project expected to be Chemicals commissioned by mid-2011 Ltd Sources: Relevant SEZ official websites Karnataka Industrial Development Board (KIADB), Karnataka Chamber of Commerce and Industry (KCCI), ONGC Mangalore Petrochemicals Ltd (OMPL), Indian Strategic Petroleum Reserves Limited (ISPRL) 27
  • 28. OIL & GAS November 2010 Contents  Advantage India  Market overview  Industry Infrastructure  Investments  Policy and regulatory framework  Opportunities  Industry associations 28
  • 29. INVESTMENTSOil & Gas November 2010 Investments — FDI • India’s petroleum and natural gas sectors attracted FDI equity worth US$ 525 million between April 2010 and September 2010. • Cumulative FDI in the petroleum and natural gas sectors has been estimated at US$ 3.2 billion between April 2000 and September 2010. Country-wise FDI (April 2000–September 2010) Cumulative FDI FDI (total value) Period: April 2000 to September 2010 Country Focus area(s) (US$ million) Sector Amount of FDI Singapore 11,329 Oil refinery and transportation (US$ million) Petroleum and natural gas 3,191 Mauritius 51,089 Oil refinery and fuel UK 6,212 Oil refinery, oil exploration and fuel Source: ―Factsheet on FDI,‖ Department of Industrial Policy and Promotion (DIPP) website, www.dipp.nic.in, accessed 6 December, 2010. Cyprus 4,314 Oil refinery, oil exploration and fuel US 9,002 Oil refinery and fuel Source: ―Basic statistics on Indian petroleum & natural gas 2009–10.‖ Ministry of Petroleum & Natural Gas website, http://petroleum.nic.in/, accessed 6 December 2010. 29
  • 30. INVESTMENTSOil & Gas November 2010 Investments — M&A … (1/2) • Inbound deals: M&A scenario — details • ONGC signed a Memorandum of Period : January 2009 to August 2010 Understanding (MoU) with Arrow Energy (Australia) for cooperation in CBM Deal type No of deals Deal value production in 2009. (US$ million) Inbound 7 27 • Vedanta Resources signed an agreement to Outbound 4 3,065 buy 51 to 60 per cent of Cairn India’s oil and gas assets for US$ 9.6 billion.Vedanta Domestic 8 3826 seeks to acquire a 31 to 40 per cent stake directly and the remaining 20 per cent Sources: Bloomberg, Thomson One Banker; company websites through its subsidiary, Sesa Goa. • Domestic deals: • 2009: IOCL has bought a 5 per cent stake in OIL for US$ 232.9 million. • 2010: Reliance Power Ltd has acquired Reliance Natural Resources Ltd for US$ 1,529 million. 30
  • 31. INVESTMENTSOil & Gas November 2010 Investments — M&A … (2/2) • Outbound deals: • Reliance Eagleford Upstream LP, a subsidiary of Reliance India Ltd (RIL), has entered a JV with Pioneer Natural Resources Company. It will acquire a 45 per cent stake in Pioneer’s Eagle Ford Shale acreage for a consideration of US$ 1.3 billion. • Reliance Marcellus LLC, a subsidiary of Reliance India Ltd (RIL), has formed a JV with Atlas Energy, Inc The former has acquired a 40 per cent interest in Atlas’ Marcellus Shale acreage for US$ 1.7 billion. • An international consortium, comprising Indian national oil companies, has acquired a 40 per cent stake in Empresa Mixta in Venezuela. The members and their stakes include ONGC Videsh Limited (OVL) —11.0 per cent, IOCL — 3.5 per cent, OIL — 3.5 per cent, Repsol YPF — 11 per cent and PETRONAS — 11 per cent. The total project cost is US$ 19 billion. • Through its subsidiary, Reliance Marcellus II, LLC, Reliance Industries has formed a 60:40 JV with Carrizo Oil & Gas, Inc of the US. Reliance plans to acquire a 20 per cent interest in Carrizo’s 52,600 net acres in Pennsylvania’s shale acreages for US$ 65 million through the agreement. The company will also acquire a 100 per cent stake in these acreages from an affiliate of Avista Capital Partners for US$ 327 million. 31
  • 32. INVESTMENTSOil & Gas November 2010 Increasing demand • Between 2005 and 2010, India’s consumption and *Crude oil — demand-supply trend import of crude oil increased steadily, while 200.0 production remained largely stagnant due to the 143.6 159.3 148.5 country’s low oil discovery rate. 150.0 132.9 132.8 Value (MMT) 119.6 120.4 121.7 99.4 111.5 100.0 • Imports are currently meeting the high demand for crude oil as a source of energy. They 50.0 32.2 34.0 34.1 33.5 33.7 accounted for 82.5 per cent of total crude oil supply in 2009–10. 0.0 2005-06 2006-07 2007-08 2008-09 2009-10 *Demand projections Production Consumption Imports Product Unit 2014–15 2019–20 2024–25 Petroleum MMT 226 288 368 products Natural gas MMSCMD 329 358 391 *Sources: ―Basic statistics on Indian petroleum & natural gas 2009-10," Ministry of Petroleum & Natural Gas website, http://petroleum.nic.in/, accessed 6 December 2010; ―BP Statistical Review of World Energy, June 2010,‖ BP; ―India Hydrocarbon Vision 2025,‖ Government of India 32
  • 33. OIL & GAS November 2010 Contents  Advantage India  Market overview  Industry Infrastructure  Investments  Policy and regulatory framework  Opportunities  Industry associations 33
  • 34. POLICY AND REGULATORY FRAMEWORKOil & Gas November 2010 Policy and regulatory framework … (1/4) FDI policy Sector/Activity FDI Cap/Equity Entry route Other conditions Subject to the sectoral regulations of the Ministry E&P 100% Automatic of Petroleum & Natural Gas 49% for public sector undertakings Foreign Investment (PSUs) without involving any Promotion Board Refining divestment or dilution of domestic (FIPB) for PSUs and Subject to sectoral policy equity in existing PSUs; 100% for automatic route for private companies private companies Source: ―Petroleum and natural gas sector FDI,‖ Ministry of Petroleum & Natural Gas website, http://petroleum.nic.in/, accessed 6 December 2010. 34
  • 35. POLICY AND REGULATORY FRAMEWORKOil & Gas November 2010 Policy and regulatory framework … (2/4) • Oil Field (Regulation and Development) Act, 1948 • Oil and Natural Gas Commission Act, 1959 • Petroleum and Minerals Pipelines Act, 1962 — acquisition of user’s rights by the GoI on land demarcated for laying pipelines for the transport of petroleum and other minerals from one area to another • Oil Industry (Development) Act, 1974 • Coal Bed Methane Policy, 1997 — to encourage exploration and production of CBM gas as a new eco-friendly source of energy 35
  • 36. POLICY AND REGULATORY FRAMEWORKOil & Gas November 2010 Policy and regulatory framework … (3/4) • Freight Subsidy (for far-flung areas) Scheme, 2002 — to compensate public sector OMCs on the freight incurred to distribute subsidized products in far-flung areas • Auto Fuel Policy 2003 — to provide a roadmap to comply with various vehicular emission norms and corresponding fuel quality upgrading requirements over a period of time • National Biofuel Policy, 2002 — to promote biofuel usage, the GoI has provided concessional excise duty of 16 per cent on bioethanol and exempted biodiesel from excise duty. • Petroleum and Natural Gas Regulatory Board (PNGRB) Act, 2006 — to regulate refining, processing, storage, transportation, distribution, marketing and sale of petroleum, petroleum products and natural gas • New Exploration Licensing Policy (NELP), 1999 — to provide a contract framework for E&P of hydrocarbons; licenses for exploration only awarded through a competitive bidding system; eight rounds of bidding completed so far Source: Ministry of Petroleum & Natural Gas 2007–08 annual report. 36
  • 37. POLICY AND REGULATORY FRAMEWORKOil & Gas November 2010 Policy and regulatory framework … (4/4) Government of India initiatives • The Eleventh Plan outlay for the oil and gas sector has been fixed at US$ 47.7 billion (INR 2,290.7 billion), about 121 per cent more than the allocation for the Tenth Plan. • Thrust areas for E&P in the plan: • Increasing domestic production by attracting investments in the upstream sector • Increasing production at ONGC’s assets, including its maturing fields • Providing exploration coverage of 80 per cent during the period • Establishing a national knowledge hub during the period • Improvement of gas availability: • Intensifying domestic E&P activities • Exploiting new sources of energy such as CBM • Conducting underground coal gasification • Implementing the National Gas Hydrate Programme (NGHP) to evaluate hydrate resources • The GoI has formulated a regulatory framework for the safe usage of LPG and CNG as an automotive fuel. Source: Ministry of Petroleum & Natural Gas 2007–08 annual report. 37
  • 38. POLICY AND REGULATORY FRAMEWORKOil & Gas November 2010 New Exploration Licensing Policy (NELP) … (1/2) • The GoI formulated the NELP in 1997–98 to provide an equal platform to both public and private sector companies for exploration and production of hydrocarbons. • The NELP was conceptualised to increase domestic production and to attract inward investments. • The introduction of this policy has had a catalytic effect on the liberalisation of the oil and gas sector by opening up the E&P segment for investments. • Under the NELP, acreages are offered to participating companies through open competitive bidding. Chronology of events: • 1998 — 48 exploration blocks offered in the first round • 2000 — second round of the NELP launched and 25 exploration blocks offered • 2002 — third round of the NELP launched and 27 exploration blocks offered • 2003 — fourth round of the NELP launched and 24 exploration blocks offered 38
  • 39. POLICY AND REGULATORY FRAMEWORKOil & Gas November 2010 New Exploration Licensing Policy (NELP) … (2/2) • 2005 — fifth round of the NELP launched and 20 exploration blocks offered • 2006 — sixth round of the NELP launched and 55 exploration blocks offered • 2007 — seventh round of the NELP launched and 57 exploration blocks offered • 2009 — eighth round of the NELP launched and 70 exploration blocks offered • 2010 — ninth round of the NELP launched on 15 October 2010 — bid closing date 18 March 2011 Sources: ―Chronology of E&P events in India,‖ Directorate General of Hydrocarbons website, http://www.dghindia.org/EandPGovernanceInIndia.aspx, accessed 5 January 2010; ―Press note on launch of NELP – VIII,‖ 9 April, 2009, Ministry of Petroleum & Natural Gas website www.petrolrum.nic.in; NELP-IX website, http://www.indianelpix.com/, accessed 15 November 2010; ―India-US Agreement for Setting up Joint Clean Energy Research and Development Centre,‖ 9 November 2010, Press Information Bureau, Government of India website, http://www.pib.nic.in/newsite/erelease.aspx?relid=0, accessed 16 November 2010. 39
  • 40. POLICY AND REGULATORY FRAMEWORKOil & Gas November 2010 Highlights of the CBM Policy • Blocks are awarded through an open international competitive bidding system. • The GoI has no participating interest. • No upfront payment is required. • Exemption from payment of customs duty on imports is required for CBM operations. • Companies have the freedom to sell gas in the domestic market. • Companies are provided a seven-year tax holiday. Source: Directorate General of Hydrocarbons 2007–08 annual report. 40
  • 41. POLICY AND REGULATORY FRAMEWORKOil & Gas November 2010 PNGRB — key functions For petroleum, petroleum products and natural gas: • Ensures the availability of resources at all times • Monitors prices and transportation rates to check restrictive trade practices • Ensures equitable distribution • Enforces retail service obligations for retail outlets and marketing service obligations for entities • Maintains information data bank of activities relating to petroleum, petroleum products and natural gas • Lays down technical standards for related activities in this sector Source: ―About PNGRB,‖ PNGRB website, www.pngrb.gov.in, accessed 11 November 2010. 41
  • 42. OIL & GAS November 2010 Contents  Advantage India  Market overview  Industry Infrastructure  Investments  Policy and regulatory framework  Opportunities  Industry associations 42
  • 43. OPPORTUNITIESOil & Gas November 2010 Opportunities in the upstream segment … (1/2) • India has significant potential to discover new oil and gas basins since 78 per cent of the country’s sedimentary area is yet to be explored. Recent large-scale oil and gas discoveries in the Krishna Godavari and Rajasthan basins have amply demonstrated this potential. Exploration and development of new • The GoI has enacted favourable regulatory policies and provided several fiscal incentives to promote fields the development of the domestic upstream segment. As a result, the NELP has received an encouraging response so far. A total of 246 blocks were awarded under the eight bidding rounds (from 2001 to November 2010) and 68 oil and gas discoveries have been made so far in the NELP blocks. • In India, drilling activities are moving towards the deep sea, as most areas nominated under the NELP are under the deep sea. In the eight rounds of NELP bidding, a total of 80 deep sea blocks were awarded. Consequently, this has opened up opportunities for global upstream companies to carry out deepwater exploration, either independently or in partnerships, with domestic players. • The GoI has also opened up avenues for the exploration and development of CBM fields. Up till Development of 2010, 31 CBM blocks have been awarded over four rounds of CBM bidding. unconventional • Methane hydrates are expected to be an important source of energy in the future, especially after resources the discovery of methane hydrate reserves in the Krishna, Godavari and Andaman basins. India has recently set up the National Gas Hydrate Program (NGHP) to harness the potential of this source. • Furthermore, the development of shale gas in the country is likely to gain importance with the technological advancements taking place. India has signed an MoU with the US for shale gas cooperation, including resource assessment and technical studies for shale gas exploration in the country, as well as for training Indian personnel in the shale gas domain. Sources: Ministry of Petroleum & Natural Gas website, www.petroleum.nic.in; ―India-US MOU on Shale Gas,‖ Ministry of Petroleum & Natural Gas, 8 November 2010, Press Information Bureau, Government of India website, http://www.pib.nic.in/newsite/erelease.aspx?relid=0, accessed 17 November 2010. 43
  • 44. OPPORTUNITIESOil & Gas November 2010 Opportunities in the upstream segment … (2/2) • There are promising opportunities for companies specialising in the deployment of secondary and Mature oil- tertiary forms of enhanced oil recovery (EOR) techniques, since the majority of the country’s producing basins producing basins have matured or have begun to mature. • The demand for skilled human resources is set to increase since the segment is witnessing Increasing demand substantial capacity augmentation across the value chain. for skilled labour • This is a ready platform for global petroleum institutes to establish their presence in India. • E&P spend in the country has doubled from about US$ 2.5 billion in 2004–05 to about US$ 5 billion in 2007–08. Overall E&P spend is expected to be in the range of US$ 90–110 billion in the next 7–10 Growing demand years. for oilfield services (OFS) and • This is will create a sustained demand for OFS, e.g., drilling rigs, offshore support vessels, tubular equipment goods, and seismic services and equipment for constructing process platforms, pipelines and collecting stations, as well as other surface facilities for transportation of oil and gas from wells to delivery points. Source: Ministry of Petroleum & Natural Gas; ONGC website, www.ongcindia.com, accessed 16 November 2010. 44
  • 45. OPPORTUNITIESOil & Gas November 2010 Opportunities in the midstream segment • The country’s gas pipeline coverage has increased substantially and has significant potential for further expansion. India currently has a trunk gas pipelines network of 9,900 km with a transmission capacity of 292 MMSCMD. • Domestic gas supplies are expected to increase significantly from the new domestic gas fields and Expansion of gas LNG capacity. To monetise the increased gas supplies, the GoI is aggressively promoting setting up transmission of gas transmission infrastructure across the country by encouraging the participation of players pipelines from the private and public sectors. For example, GAIL (India) Ltd is planning to lay 6,663 km of gas pipelines by 2012–13 at an estimated costs of US$ 6.3 billion (INR 303 billion), which will provide ample opportunities for gas transmission, engineering, engineering procurement construction (EPC) and pipeline-manufacturing companies. • Between 2004 and 2010, LNG imports’ share in the total domestic gas supply of the country has improved significantly from 1 per cent to 20 per cent due to brownfield and greenfield expansions. Augmentation of • India is expected to witness significant expansion in its LNG re-gasification capacity in the near to LNG capacity medium term, which is expected to increase the share of LNG in its domestic gas supply to 32 per cent in 2015. This is expected to create opportunities for players specialising in operating LNG terminals, engineering and provision of EPC services. Source: Ministry of Petroleum & Natural Gas website, www.petroleum.nic.in, accessed 6 December 2010; Welspun Corp website, www.welspun.com, accessed 17 November 2010. 45
  • 46. OPPORTUNITIESOil & Gas November 2010 Opportunities in the downstream segment … (1/2) • The successful development of CGD networks in Delhi and Mumbai, coupled with the support provided by the GoI, is likely to give a boost to this segment in the scenario of increasing gas availability. PNGRB Emphasis on city gas projects may result in CGD coverage growing from 41 cities at present to 250 cities by 2020, which distribution (CGD) would entail an investment of about US$ 8–9 billion. networks • Therefore, this segment offers promising opportunities to both global and domestic players in the field of CGD infrastructure development, including gas distribution pipelines, CNG stations and manufacturing of CNG kits. • Domestic refiners are aggressively increasing their refining capacity by expanding their existing facilities and building new grassroot refineries. Indian refiners are expected to increase their capacity by 62 MMTPA by 2010–2012. With significant capacity additions planned, India is expected to become a global refining hub. • Opportunities for players to construct new refineries, either independently or in collaboration, are due to the following reasons: Augmentation of • India offers low construction and operation costs to set up new refineries in the country. refining capacity • The country’s favourable location and vast coastline provides its refiners with a strategic freight advantage. • Developed countries are expected to increasingly rely on imported petroleum products as stringent environmental norms and high capital costs limit refining capacity, construction and/or expansion in these countries. This presents an opportunity for Indian refiners to increase their exports. • India has favourable regulatory policies, such as relaxation of FDI limits and tax rebates for new refineries, to promote capacity enhancement in this segment. Source: Ministry of Petroleum & Natural Gas website, www.petroleum.nic.in, accessed 6 December 2010; PNGRB website, www.pngrb.gov.in, accessed 11 November 2010. 46
  • 47. OPPORTUNITIESOil & Gas November 2010 Opportunities in the downstream segment … (2/2) • The demand for transportation and cooking fuel is expected to increase significantly in the future. This is expected to drive the demand for new transportation fuels and LPG marketing stations. • The GoI has projected an investment of US$ 12.7 billion (INR 608 billion) for the development of marketing infrastructure for petroleum products for 2007–2012. Consequently, this creates opportunity for the following: Expansion of • Enhanced role of private players in domestic distribution of petroleum products petroleum product • Manufacturing and distribution of LPG cylinders, kits, valves, regulators, etc., as well as distribution manufacturing of new LPG pipelines, tankers and bottling facilities networks • Collaboration between private and foreign players with domestic oil marketing companies in areas including the expansion of retail networks and logistics support • International experience could be leveraged in building non fuel retailing business (convenience stores) and brand building activities such as quality assurance, loyalty cards, conducting surveys and soliciting customer feedbacks. Source: Ministry of Petroleum & Natural Gas website, www.petroleum.nic.in, accessed 6 December 2010 47
  • 48. OIL & GAS November 2010 Contents  Advantage India  Market overview  Industry Infrastructure  Investments  Policy and regulatory framework  Opportunities  Industry associations 48
  • 49. INDUSTRY ASSOCIATIONSOil & Gas November 2010 Industry associations Name Address Contact person Telephone E-mail Mr T S 91-11- Oil Industry Balasubramanian, 301, World Trade Centre, Babar 23413298 Development Board Financial Adviser oidb@hotmail.com Road, New Delhi –110001 91-11- (OIDB) and Chief Accounts 23414692 Officer Petroleum 91-11- Sanrakshan Bhavan, 10 Bhikaji Cama Mr Arun Kumar, Conservation Research 26198799 pcra@pcra.org Place, New Delhi – 110066 ED Association (PCRA) Ext.301 Ministry of Power, 4th floor, SEWA 91-11- Bureau of Energy Dr Ajay Mathur, dg-bee@nic.in, Bhawan, RK Puram, New Delhi – 26178316, 91- Efficiency (BEE) Director General amathur@beenet.in 110066 11- 26179699 Ministry of Petroleum & Natural Gas, Oil Industry Safety 7th floor, ―New Delhi House‖, 27 91-11- Mr J B Verma, ED verma.jb@gov.in Directorate Barakhamba Road, New Delhi – 23316798 110001 Ministry of Petroleum & Natural Gas, 91-11- Petroleum Planning and 2nd floor, Core-8, SCOPE Complex, 7 Dr Basudev 24362501, 91- - Analysis Cell (PPAC) Institutional Area, Lodhi Road, New Mohanty, Director 11- 24361380 Delhi – 110003 Directorate General of Ministry of Petroleum & Natural Gas, Mr S K Srivastava, 0120 - dg@dghindia.org Hydrocarbons C-139, Sector 63, Noida – 201301 Director General 4029401 49
  • 50. NOTEOil & Gas November 2010 Note Wherever applicable, numbers in the report have been rounded off to the nearest whole number. Exchange rate used: US$ 1= INR 48 50
  • 51. OIL & GAS November 2010 DISCLAIMER India Brand Equity Foundation (―IBEF‖) engaged Ernst & presentation to ensure that the information is accurate to Young Pvt Ltd to prepare this presentation and the same the best of Ernst & Young and IBEF’s knowledge and belief, has been prepared by Ernst & Young in consultation with the content is not to be construed in any manner IBEF. whatsoever as a substitute for professional advice. All rights reserved. All copyright in this presentation and Ernst & Young and IBEF neither recommend nor endorse related works is solely and exclusively owned by IBEF. The any specific products or services that may have been same may not be reproduced, wholly or in part in any mentioned in this presentation and nor do they assume material form (including photocopying or storing it in any any liability or responsibility for the outcome of decisions medium by electronic means and whether or not taken as a result of any reliance placed on this transiently or incidentally to some other use of this presentation. presentation), modified or in any manner communicated to any third party except with the written approval of Neither Ernst & Young nor IBEF shall be liable for any IBEF. direct or indirect damages that may arise due to any act or omission on the part of the user due to any reliance This presentation is for information purposes only. While placed or guidance taken from any portion of this due care has been taken during the compilation of this presentation. 51