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- 1. INDIAN ECONOMY ASSIGNMENT SubmittedBy: SYED MUSTAFA HASHMI ENROLLMENT NUMBER: 01112488820 COURSE: B.COM (hons.) 4th sem. SUBMITTED TO: MEETA Ma’am
- 2. 2 Oil And GasIndustry Oil and gas sector is among the eight core industries in India and plays a major role in influencingdecision makingforall the other important sections of the economy. India’s economicgrowth is closely related to its energy demand, therefore, the need for oil and gas is projected to grow more, thereby making the sector quite conducivefor investment. The Government has adopted several policies to fulfil the increasing demand.It has allowed 100% Foreign Direct Investment (FDI) in many segments of the sector, includingnaturalgas,petroleum products and refineries among others.Today,it attracts both domesticand foreign investment as attested by the presence of Reliance Industries Ltd (RIL) and Cairn India. According to IEA (India Energy Outlook2021), primaryenergy demand is expected to nearlydouble to 1,123 million tonnes ofoil equivalent, as the country's gross domesticproduct (GDP) is expected to increase to USD 8.6 trillion by2040. Market Size India is expected to be one of the largest contributors to non-OECD petroleum consumption growth globally.Crude Oil import rose sharplyto US$ 101.4 billion in 2019-20 from US$ 70.72 billion in 2016- 17.
- 3. 3 As ofSeptember 01, 2021, the sector’s total installedprovisional refinery capacitystood at 246.90 MMT and IOC emerged as the largest domesticrefiner, with a capacity of 69.7 MMT. In FY20, crude oil production in India stood at 32.2 MMT. Crude oil production stood at 4.9 MMT in FY22 (April-May2021) and was 30.5 MMT for FY21. In FY20, crude oil import increased to 4.54 mbpd from 4.53 mbpd in FY19. Natural Gas consumption is forecast to reach 143.08 million tonnes (MT)by 2040. India’s LNG import stood at 33.68 bcm during FY20. According to the International EnergyAgency (IEA), consumption of natural gas in India is expected to grow by 25 billion cubicmetres (bcm), registeringan average annual growth of 9% until 2024. According to the International EnergyAgency (IEA), India’s medium- term outlookfornatural gas consumptionremains solid due to rising infrastructure and supportiveenvironment policies.Industrial consumers are expected to account for ~40% of India’s net demand growth. The demand is also expected to be driven by sectors such as residential,transport and energy. India’s consumptionofpetroleum products grew 4.5% to 213.69 MMT duringFY20 from 213.22 MMT in FY19. The total value of petroleum products exported from the countryincreased to US$ 35.8 billion in FY20 from US$ 34.9 billion in FY19.Export of petroleum products from India increased from 60.54 MMT in FY16 to 65.7 MMT in FY20. Exports of petroleum products from India reached 56.8 MMT in FY21 from 60.5 MMT in FY16. As of June 31, 2021, Gas AuthorityofIndia Ltd. (GAIL) had the largest share (57.56% or 18,834 kms) of the country’s natural gas pipeline network (32,718 kms). Investments According to the data released by Department for Promotion of Industryand Internal Trade Policy (DPIIT), FDI inflows in India’s petroleum and natural gas sector stood at US$ 7.96 billion between April 2000 and June 2021.
- 4. 4 Followingare someof the majorinvestments and developmentsin the oil and gas sector: In November 2021, Oil and Natural Gas Corp.Ltd (ONGC) announced that it invested up to Rs. 6,000 crore (US$ ~800 million)in the petrochemicals arm—ONGC Petro Additions Ltd.(OPaL)—to meet its equityrequirements. In November 2021, Indian Oil,Bharat Petroleum Corporation Limited and Hindustan Petroleum CorporationLimited haveannounced the launch of Model Retail Outlet Scheme and a Digital Customer Feedback Programme called Darpan@petrolpump.Three oil PSUs have joined hands to launch Model Retail Outlets to enhance service standards and amenitiesacross theirnetworks,which serve over 6 crore consumers every day. In September 2021, Indraprastha Gas Limited (IGL) signed a memorandum ofunderstandingwith South Delhi Municipal Corporation(SDMC) to build waste to energy plant in Delhi to fuel vehicles. India aims to commercialise 50% of its SPR (strategic petroleum reserves) to raise funds and build additionalstorage tanks to offset high oil prices. In July 2021, IndianOil Petronas Pvt. Ltd. announced its plan to establish a new brand for auto fuels retailingin India to further expand its business operations in the country. In July 2021, Indian Oil Corporation (IOC)announced to establish India’s first green hydrogen plant at Mathura refineryto introduce green hydrogen activities and projects in oil and gas sector in the country. In July 2021, Oil & Natural Gas Corporation(ONGC)announced to spend Rs. 300 billion (US$4.03 billion)in FY22 to boost the oil & gas output. To expand beyond the natural gas business,in July 2021, GAIL (India) Ltd. announced to invest ~Rs. 5,000 crore (US$ 670.18 million)to establish a portfolio ofrenewable energy targetinga capacity of at
- 5. 5 least 1 gigawattsand build plants forboth compressed biogas and ethanol. In July 2021, Bharat Petroleum CorporationLtd.(BPCL) announced plan to establish its first-generation ethanol productionplant in Telangana at an estimated investment ofRs. 1,000 crore (US$ 134.04 million). In July 2021, ONGC, an upstream oil company,and NTPC announced plan to expand the offshore wind energy development in India and accelerate presence in the renewable energy space. In June 2021, ONGC Videsh is in the process to raise US$ 525 million in overseas foreign moneyloans from a mixture of home and overseas lenders to repaybonds maturingin the subsequent months. According to government data,India's natural gas production increased by 22.7% YoY in April 2021, as Reliance Industries Ltd. and its partner, BP plc, increased production in the KG-D6 block on the east coast. In February2021, Petronet LNG announced its plans to increase in its Dahej terminal's capacityby 29% to 22.5 million tonnes per annum (mtpa)to meet the risingdemand. Key Indian oil retailers such as Bharat Petroleum and Hindustan Petroleum have announced plansto increase the capacityof their outlets in rural areas in 2021. In February2021, ONGC announced that byMay 2021, it would increase natural gas output from a KG basin blockto 2.5-3 million standard cubicmeters per day. In February2021, the government launched key oil & gas projects in Assam, such as INDMAX Unit at Indian Oil’s Bongaigaon Refinery,Oil India Limited's secondarytank farm at Madhuban,Dibrugarh and a ‘Gas CompressorStation’at Hebeda Village, Makum and Tinsukia remotelyfrom Dhemaji in Assam. In February2021, the government launched key oil and gas projects such as the Ramanathapuram – Thoothukudi natural gas pipeline and
- 6. 6 Gasoline Desulphurisation Unitat Chennai Petroleum Corporation Limited,Manali. In February2021, IndianOil Corp.Ltd. signed a ‘statement of intent’ with Greenstat Hydrogen India Pvt. Ltd. to establish a centre of excellence for Hydrogen value chain and other related technologies such as hydrogen storage, fuel cells, etc. Foreign investors will haveopportunities to invest in projects worth US$ 300 billion in India as the countrylooks to cut reliance on oil import by 10% by 2022 according to Mr. Dharmendra Pradhan, Minister of Petroleum and Natural Gas,Government of India. Government Initiatives Some of the majorinitiatives taken bythe Government ofIndia to promote oil and gas sector are: In November 2021, India announcedthat it will release 5 million barrels of crude oil from its strategic petroleum reserves in a concerted effort to bring down global crude oil prices. This is roughly equivalent to a day’s consumption in the country. In November 2021, the government has set up a committee to work out measures needed to make natural gas available to power plants at reasonablystable prices. In October 2021, the Union MinistryofPetroleum & Natural Gas approved a revised project cost of Rs. 28,026 crore (US$ 3.8 billion)to increase refining capacity–forthe ongoingNumaligarh Refinery Expansion Project–from 3 mmtpa to 9 mmtpa In September 2021, Bharat Petroleum CorporationLtd.(BPCL) announced its plan to invest over Rs. 1 lakh crore (US$ 13.66 billion), over a period of five years, to enhance petrochemical capacityand improverefiningefficiency, gas proliferation,upstream oil & gas explorationand production and augment the (fuel)marketing infrastructure In September 2021, Indian government approved oil and gas projects worth Rs. 1 lakh crore (US$ 13.46 billion)in Northeast India.These projects are expected to be completed by 2025.
- 7. 7 In September2021, India and the US agreed to expand theirenergy collaboration byfocusingon emerging fuels.This was followed by a ministerial conference of the US-India Strategic Clean Energy Partnership (SCEP). In July 2021, the Department for Promotion ofIndustryand Internal Trade (DPIIT) approved an order allowing100% foreign direct investments (FDIs) under automaticroute for oil and gas PSUs. In July 2021, the Minister for Road Transport and Highways,Mr. Nitin Gadkari inauguratedIndia’s first liquefied natural gas (LNG) facility plant in Nagpur,Maharashtra. In July 2021, India diversified procurement forcrude by announcingits first shipment from Guyana scheduled next month.This movealso indicates a future roadmap forextended alliance with Guyana in the oil & gas sector. In June 2021, the government announced that it will auction unmonetised large oil and gas fields of state-owned ONGC and OIL to boost hydrocarbon production. In February2021, Prime Minister Mr. Narendra Modi announced that the Government ofIndia plans to invest ~Rs. 7.5 trillion (US$102.49 billion)on oil and gas infrastructure in the next five years. In Union Budget 2021, the government allocated funds worth Rs. 12,480 crore (US$ 1.71 billion)fordirect benefit transfer of LPG (liquefied petroleum gas)and Rs. 1,078 crore (US$ 147.31 million)to feedstock subsidyto BCPL/Assam Gas Cracker Complex. In Union Budget 2021, the Finance Minister announced to provide 1 crore more LPG connections under Pradhan Mantri Ujjwala Yojana (PMUY) scheme. The Ministryof Petroleum and Natural Gas released a draft LNG policy that aims to increase the country's LNG re-gasification capacityfrom 42.5 million tonnes per annum (mtpa)to 70 mtpa by 2030 and 100 mtpa by 2040. The Ministryof Petroleum and Natural Gas released an ‘Ethanol Procurement Policy’ on a long-term basis under the ‘Ethanol Blended
- 8. 8 Petrol (EBP) Programme’(October 11, 2019), which covers modalities for long-term ethanol procurement,proposedmechanisms forlong- term procurement contracts,pricing methodologyand other topics. As per Union Budget 2019-20, Indian Scheme ‘Kayakave Kailasa’,the Ministryof Petroleum & Natural Gas has enabled SC/ST entrepreneurs in providingbulkLPG transportation.State run energy firms, Bharat Petroleum, Hindustan Petroleum and Indian Oil Corporation,plan to spend US$ 20 billion on refineryexpansions to add units by2022. The Government is planningto set up around 5,000 compressed biogas (CBG) plants by2023. The Government is planningto invest US$ 2.86 billion in the upstream oil and gas production to double natural gas productionto 60 bcm and drill more than 120 exploration wells by2022. Road Ahead Energy demand of India is anticipatedto grow faster than energy demand of all majoreconomies on the back of continuous robust economic growth. India’s energy demand is expected to double to 1,516 Mtoe by 2035 from 753.7 Mtoe in 2017. Moreover, the country’s share in global primaryenergy consumptionis projected to increase by two-fold by 2035. Crude oil consumption is expected to grow at a CAGR of 3.60% to 500 million tonnes by2040 from 221.56 million tonnes in 2017. India’s oil demand is projected to rise at the fastest pace in the world to reach 10 million barrels per dayby 2030, from 5.05 million barrel per day in 2020. Natural Gas consumption is forecast to increase at a CAGR of 4.18% to 143.08 million tonnes by2040 from 58.10 million tonnes in 2018. Diesel demand in India is expected to double to 163 MT by 2029-30, with diesel and gasoline covering58% of India’s oil demand by2045 As per preliminarydata ofgasoline sales,fuel consumption in India registered growth in June 2021 and is expected to further recover by
- 9. 9 end-2021. Gasoline salesbystate refiners stood at 2.12 million tonnes in June 2021, registeringan increase of 5.7% YoY. India is set to expand India’s natural gas grid to 34,500 kms by adding another 17,000 km gas pipeline.The regasification capacityofthe existing42 MMT per annum will be expanded to 61 MMT per year by the year 2022. Problem Faced By Oil And Gas Industry Reducingcosts to remain competitive Producingcrude oil and refined products at a lower cost to stay competitiveon the market is one of the industry’s majorchallenges. Optimizingproductionsystems and environmentalutilities on currentlyoperatingsites is therefore a priorityfor the oil industry. This maximizes production efficiency,reduces the costs of extraction and refiningand thereby offsets the explorationcosts. > Improving performance to ensure the valorization ofassets To sustain theirsupplyofcrude oil or gas, oil companies are lookingto extend the life of mature sites but are also compelledto seeknew sources of oil or gas for which extraction,transport and refiningare much more complex and costly. For that,they aim to achieve100% reliabilityoftheirplants : no unplanned shutdowns,increased throughput ,secure industrial assets. > Improving the Environmental footprintto meet increasingly stringent standard The oil and gas industryis a majorconsumer of water and energy resources and is therefore subject to increasinglystringent environmentalstandards.This constrainsthem to rethinkextraction, production and distributionmethods in order to obtain or maintain theirlicence to operate. They also haveto provide guarantees and ensure transparencyin the environmentalmanagement oftheiractivities. In the Beijingarea in China for example, where water shortages are becoming more frequent and where tacklingair pollution is a major
- 10. 10 central government commitment,environmentalstandardsare particularlystrict.The standards governingwastewater discharges in particularare currentlythe most demandingin the world. This is a majorcompliance challenge for the industrial groups in the region,in particularforSinopec. It is the largest refiningcompanyin Asia and operates the Beijing Yanshan petrochemicalcomplex,one of the largest refined petroleum products productionsites in the country. Government initiatives towardsoil And Gas industries Some of the majorinitiatives taken bythe Government ofIndia to promote oil and gas sector are: In November2021, India announcedthat it will release 5 million barrels of crude oil from its strategic petroleum reserves in a concerted effort to bring down global crude oil prices. This is roughly equivalent to a day’s consumption in the country. In November 2021, the government has set up a committee to work out measures needed to make natural gas available to power plants at reasonablystable prices. In October 2021, the Union MinistryofPetroleum & Natural Gas approved a revised project cost of Rs. 28,026 crore (US$ 3.8 billion)to increase refining capacity–forthe ongoingNumaligarh Refinery Expansion Project–from 3 mmtpa to 9 mmtpa In September 2021, Bharat Petroleum CorporationLtd.(BPCL) announced its plan to invest over Rs. 1 lakh crore (US$ 13.66 billion), over a period of five years, to enhance petrochemical capacityand improverefiningefficiency, gas proliferation,upstream oil & gas explorationand production and augment the (fuel)marketing infrastructure In September 2021, Indian government approved oil and gas projects worth Rs. 1 lakh crore (US$ 13.46 billion)in Northeast India.These projects are expected to be completed by 2025. In September 2021, India and the US agreed to expand theirenergy collaboration byfocusingon emerging fuels.This was followed by a
- 11. 11 ministerial conference ofthe US-India Strategic Clean Energy Partnership (SCEP). In July 2021, the Department for Promotion ofIndustryand Internal Trade (DPIIT) approved an order allowing100% foreign direct investments (FDIs) under automaticroute for oil and gas PSUs. In July 2021, the Minister for Road Transport and Highways,Mr. Nitin Gadkari inauguratedIndia’s first liquefied natural gas (LNG) facility plant in Nagpur,Maharashtra. In July 2021, India diversified procurement for crude by announcingits first shipment from Guyana scheduled next month.This movealso indicates a future roadmap forextended alliance with Guyana in the oil & gas sector. In June 2021, the government announced that it will auction unmonetised large oil and gas fields of state-owned ONGC and OIL to boost hydrocarbon production. In February2021, Prime Minister Mr. Narendra Modi announced that the Government ofIndia plans to invest ~Rs. 7.5 trillion (US$102.49 billion)on oil and gas infrastructure in the next five years. In Union Budget 2021, the government allocated funds worth Rs. 12,480 crore (US$ 1.71 billion)fordirect benefit transfer of LPG (liquefied petroleum gas)and Rs. 1,078 crore (US$ 147.31 million)to feedstock subsidyto BCPL/Assam Gas Cracker Complex. In Union Budget 2021, the Finance Minister announced to provide 1 crore more LPG connections under Pradhan Mantri Ujjwala Yojana (PMUY) scheme. The Ministryof Petroleum and Natural Gas released a draft LNG policy that aims to increase the country's LNG re-gasification capacityfrom 42.5 million tonnes per annum (mtpa)to 70 mtpa by 2030 and 100 mtpa by 2040. The Ministryof Petroleum and Natural Gas released an ‘Ethanol Procurement Policy’ on a long-term basis under the ‘Ethanol Blended Petrol (EBP) Programme’ (October 11, 2019), which covers modalities
- 12. 12 for long-term ethanolprocurement,proposedmechanisms forlong- term procurement contracts,pricing methodologyand other topics. As per Union Budget 2019-20, Indian Scheme ‘Kayakave Kailasa’,the Ministryof Petroleum & Natural Gas has enabled SC/ST entrepreneurs in providingbulkLPG transportation.State run energy firms, Bharat Petroleum, Hindustan Petroleum and Indian Oil Corporation,plan to spend US$ 20 billion on refineryexpansions to add units by2022. The Government is planningto set up around 5,000 compressed biogas (CBG) plants by2023. The Government is planningto invest US$ 2.86 billion in the upstream oil and gas production to double natural gas productionto 60 bcm and drill more than 120 exploration wells by2022.