oil & gas industry

1. Click to edit Master title styleIndian Oil and Gas Industry
October 2006

2. www.imacs.in
© IMaCS 2006
Printed 17-Dec-20
Page 2
Contents
Market Overview
Government regulations & policy
Business opportunities and Advantage India

3. www.imacs.in
© IMaCS 2006
Printed 17-Dec-20
Page 3
Indian Oil and Gas Industry - Prime mover of
the Indian economy
 Oil and Gas Industry Size is estimated at USD 110 bn (about
15% of Indian GDP)
 Contributes to about 64% of gross revenues of Government
(both Central and State together) through Taxes and Duties
 Total Contribution to Government exchequer in 2004-05 = USD
27 bn
 Contributes to about 45% of India’s primary energy
consumption
 Constitutes 30.87% of India’s imports in 2005-06
 Accounts for 11.21% of India’s exports in 2005-06
 India is the Sixth largest crude consumer in the world
 India is the Ninth largest crude importer in the world
 India’s has the sixth largest refining capacity - 2.56 million
barrels per day representing 2.99% of world capacity
 India is the Fifth largest
energy consumer in the world
 Primary Energy Consumption
(2005) – 387.3 MMTOE
 Oil and gas accounts for 44%
of India’s primary energy
consumption
 Compounded Annual Growth
rate of Energy Consumption
(1996-2005) – 3.62%
 Energy-GDP Elasticity = 0.58
Source: Integrated Energy Policy; BP Statistical Review 2006, Ministry of Commerce,
MoP&NG, Stg Comm Report, FICCI Report, ABN AMRO , IMaCS Analysis
India’s GDP would fall by 1.5% for every USD 10 increase in the price of oil per barrel

4. www.imacs.in
© IMaCS 2006
Printed 17-Dec-20
Page 4
Crude Oil (MMT)
107 135
172
368
32 35 34 61
0
100
200
300
400
2001-02 2006-07 2011-12 2024-25
Year
Oil Demand Production
Supply has failed to keep pace with demand
Natural Gas (MMSCMD)
151
231
313
391
81 95
158 170
0
100
200
300
400
500
2001-02 2006-07 2011-12 2024-25
Year
Demand Supply
Source: DGH Presentation
 Yawning Demand-Supply Gap : Need to
 Intensify exploration efforts to convert the remaining prognosticated hydrocarbon reserves to
established reserves
 Increase recovery factor of producing fields
 Tie up crude oil and gas imports – setting up of LNG Regasification terminals/ laying of transnational
pipelines
 Scout for equity oil and gas from abroad
 Explore new technologies like coal gasification, coal to oil conversion, gas hydrates exploration, coal
bed methane extraction etc.

5. www.imacs.in
© IMaCS 2006
Printed 17-Dec-20
Page 5
Intensive Exploration & Production a must ….
 Sedimentary Area – 3.14 million sq km
 Only 19% of the area extensively explored
 Domestic Hydrocarbon Scenario (as on 1.04.2006):
Prognosticated Resources (Oil + Oil
Equivalent Gas)
28-32 BMT
Established Geological reserves (O + OEG) 8.2 BMT
O + OEG already produced 1.42 BMT
Balance Recoverable Reserves (O + OEG) 1.85 BMT
Current Oil Production 32.19 MMT
Current Gas Production 88.22 MMSCMD
Source: DGH / MoP&NG

6. www.imacs.in
© IMaCS 2006
Printed 17-Dec-20
Page 6
Exploratory measures initiated by Government….
New Exploration Licensing Policy Coal Bed Methane Policy
 110 Production Sharing
contracts in 5 New Exploration
Licensing Policy (NELP) rounds
 30 discoveries with hydrocarbon
in-place reserves of over 600
MMT in last 3-4 years
 Investment commitment of about
USD 5 bn in exploration phases
under NELP
 Perception of prospectivity of
Indian sedimentary basins
reflected in NELP VI response
Exploratory
Measures
 16 Blocks already awarded
with production potential of 25
MMSCMD under Coal Bed
Methane (CBM) I & II rounds
 Significant commercial finds in
blocks held by RIL and ONGC
 First commercial production of
CBM by 2007-08
 54 Bids received for 10 CBM
blocks offered in the third
round
 Award of blocks in near future

7. www.imacs.in
© IMaCS 2006
Printed 17-Dec-20
Page 7
GSPC RIL
OILHOEC
ONGC
Cairn
British
Gas
Government’s exploratory measures bearing fruits..
Major Upstream Players Major Discoveries
Year Discovery Operator
2000 Gas – Gulf of Cambay Cairn
2001 Oil & Gas Krishna Godavari
Deep waters
Cairn
2002 Gas KG Basin Deep waters
(World’s biggest discovery for
the year)
RIL
2003 Oil in Barmer-Sanchor basin
(Rajasthan)
Cairn
2004 Gas in Mahanadi basin shallow
waters
RIL
2005 Gas in KG Basin shallow waters GSPC
2005 Oil in KG Basin shallow waters RIL
Source: DGH

8. www.imacs.in
© IMaCS 2006
Printed 17-Dec-20
Page 8
Oil Refining Capacity … from shortage to surplus
Refinery Capacity in MMT
Refineries No June 06 2006-07 2011-12
IOC Group 10 60.2 60.2 72.2
BPC Group 3 22.5 22.5 30.5
HPC 2 13.0 16.2 25.2
ONGC/
MRPL
2 9.8 9.8 9.8
RIL 1 33.0 33.0 60.0
Essar 12.0 12.0
18 138.5 153.7 210.0
Refinery Throughput 127 MMT (2005)
 Imported Crude – 78%
 Domestic Crude – 22%
Source: MoP&NG, BP Statistical Review 2006
Refining Capacity more than doubled
between 1998 and 2006
Refining Capacity (MMT)
863
328
270 226
129 127 116 114
0
200
400
600
800
1000
USA
China
Russia
Japan
S.Korea
IndiaG
erm
any
Italy
MMT

9. www.imacs.in
© IMaCS 2006
Printed 17-Dec-20
Page 9
Petroleum product exports - a major
Foreign Exchange earner
Consumption 2005-06 (MMT) Exports
Product MMT %
Diesel 40.2 35.9%
Petrol 8.6 7.7%
LPG 10.3 9.2%
Kerosene 9.4 8.4%
FO/LSHS 12.7 11.4%
Naphtha 12.2 10.9%
Bitumen, ATF,
Lubes, Solvents
18.5 16.5%
111.9 100%
 Sector with vast export potential
 Exports increased by about 65% from
2004-05 to 2005-06
Source: MoP&NG, Ministry of Commerce & Industry
6.99
11.5
0
2
4
6
8
10
12
14
2004-05 2005-06
USDbn

10. www.imacs.in
© IMaCS 2006
Printed 17-Dec-20
Page 10
Inland Petroleum transportation – gradual shift
from railways to pipelines
Source: MoP&NG, Infraline, IMaCS analysis
Mode of Transportation
India
43%
42%
11%
4%
Rail Pipeline Coastal Road
USA
58%
34%
5% 3%
Rail Pipeline Coastal Road
 Share of pipeline transportation in India much lower as compared to USA, inspite of its
advantages
 Total POL pipeline length currently under operation in India – 12,204 kms
 POL pipelines under implementation – 5,561 kms (Investment of USD 1.5 bn)

11. www.imacs.in
© IMaCS 2006
Printed 17-Dec-20
Page 11
Presence of both State and Private players in
the Indian oil market…
Marketing Infrastructure – Oil Marketing Companies
Source: MoP&NG
Company Retail
Outlets
LPG
Distributors
SKO
Dealers
IOC 11,739 4,856 3,564
HPCL 7,313 2,202 1,648
BPCL 7,318 2,123 1,014
IBP 3,468 89 381
29,838 9,270 6,607
Marketing Infrastructure Others
Company Retail
Outlets
ONGC 1
NRL 58
RIL 1,218
Shell 12
Essar 516
Controlled Pricing
Market Determined
Pricing
Administered Pricing

12. www.imacs.in
© IMaCS 2006
Printed 17-Dec-20
Page 12
Massive Investments planned in gas pipelines…
Total Investment required
in the proposed projects
is about USD 15-20 bn
Transnational Gas pipelines planned
 Iran-Pakistan-India pipeline
 Myanmar-India Pipeline
 Turkmenistan-Afghanistan-
Pakistan-India pipeline
Source: MoP&NG, Infraline, IMaCS Research

13. www.imacs.in
© IMaCS 2006
Printed 17-Dec-20
Page 13
Contents
Market Overview
Government regulations & policy
Business opportunities and Advantage India

14. www.imacs.in
© IMaCS 2006
Printed 17-Dec-20
Page 14
Government regulations have evolved over time in tune with
domestic compulsions and international hydrocarbon scenario….
1947-1962 1962-1970 1970-1990 1990-2000 Post 2000
Upstream
Downstream
Setting up of
Public Sector
Upstream Oil
Companies –
ONGC (1956)
and OIL (1959)
Free
Investment
Multinationals
like Shell,
Caltex, and
Esso
conducting
operations
Dismantling of
APM (2002)
Passing of
Petroleum and
Natural Gas
Regulatory
Board Act, 2006
Nationalization
of foreign
Companies
(1970)
Strict
Government
controls
Increasing
Government
participation
Formation of
national oil
refining
companies
Coexistence of
Public and
Private Sectors
Liberalised
FDI regime
Delicensing of
Refinery sector
(MRPL – 1996)
Open marketing
of many
products
Selective
private
participation
Government,
the only player
Offer of
exploration
blocks to
international
oil companies
(1979
onwards)
Setting up of
regulator –
DGH (1993)
Introduction of
NELP
Implementation
and award of
NELP blocks
CBM policy

15. www.imacs.in
© IMaCS 2006
Printed 17-Dec-20
Page 15
Policy initiatives to attract Foreign Direct Investment…
 Upto 100% FDI through automatic route
 Through incorporated/ unincorporated Joint Ventures or directly
 Upto 100% FDI if set up as a private Indian company
 Upto 26% in case of state owned companies
 Upto 100% FDI through automatic route
 Upto 100% FDI through automatic route
 Upto 100% FDI allowed
 Approval required from Foreign Investment Promotion Board.
Exploration
& Production
Refining
Marketing
Product
Pipelines
Natural Gas/
LNG pipelines

16. www.imacs.in
© IMaCS 2006
Printed 17-Dec-20
Page 16
Contents
Market Overview
Government regulations & policy
Business opportunities and Advantage India

17. www.imacs.in
© IMaCS 2006
Printed 17-Dec-20
Page 17
India offers significant advantages for the domestic
and global oil and gas majors…
 Strategic location
 Nearness to the premier crude oil and gas supply market (Middle East)
 Geographical Proximity to the major petroleum product importers – China and Japan
 Well Developed Maritime infrastructure
 Government policies conducive to the growth of the sector – tax holidays, Special Economic Zones for
Petroleum products
 Availability of experienced manpower at lesser costs –Cost advantage
59
12 162
21
0
100
200
Market Size (in billion US$)
Gas 12 21
Oil 59 162
2006-07 2024-25
 Existence of hi-tech indigenous EPC Companies – lower
construction periods
 Large domestic market
 Anchor customer of the various petroleum products
 Possibility of achieving economies of scale
Source: IMaCS Research
71
183

18. www.imacs.in
© IMaCS 2006
Printed 17-Dec-20
Page 18
Significant Business Opportunities exist
for foreign players…
 NELP rounds and Open acreage system (Opportunities for providers of
services – platforms, rigs, Offshore vessels etc.)
 Redevelopment of existing fields to improve recovery factor
 Offer of CBM blocks through Competitive bidding route.
 Natural gas hydrate programme
 Underground coal gasification
 Coal to oil conversion
 Refining – Expansion of existing capacities, setting up of new refineries,
acquiring stakes in these refineries
 Ethanol and Biodiesel production – cultivation of Sugarcane and Jatropha
 Petroleum marketing – setting up of retail outlets, new product pipelines.
 LNG imports
 Setting up of LNG Regasification terminals.
 Offshore Transshipment (Single Buoy Mooring)
 Laying of cross country gas grid and transnational gas pipelines
 City Gas Distribution including laying of CGD and CNG networks
Upstream
Midstream/
Downstream

19. www.imacs.in
© IMaCS 2006
Printed 17-Dec-20
Page 19
Key Players in the Indian Oil and Gas Sector
Company Fortune
500 Rank
Profile
153
 India’s largest company by sales (Turnover of USD 37 bn)
 India’s flagship Downstream company - Along with subsidiaries accounts for 47%
of Petroleum market share among Public Sector Oil Companies, 41% of National
refining capacity and 51% downstream pipeline capacity
 Operates the largest and widest network of petrol and diesel stations in the
country
342
 India’s largest private sector company on all major financial parameters
 Presence in Upstream, midstream and downstream segment
368
 PSU engaged in refining and marketing of petroleum products
 Has two subsidiary companies – Kochi Refineries Ltd. And Numaligarh Refineries
Limited
 Refining Capacity – 22.5 MT (16.25% of India’s refining capacity)

20. www.imacs.in
© IMaCS 2006
Printed 17-Dec-20
Page 20
Key Players in the Indian Oil and Gas Sector
Company Fortune
500 Rank
Profile
378
 Another mega Public sector company with focus on refining and marketing
 Turnover of about US$ 17 Billion
 Accounts for about 10% of India’s total refining capacity
402
 India’s Flagship E & P Company
 Accounts for 77% of crude oil and 81% of natural gas produced in India
 Venturing into downstream refining and marketing
All the five Indian companies in the Fortune 500 list are from the oil and gas industry

21. www.imacs.in
© IMaCS 2006
Printed 17-Dec-20
Page 21
Global majors present in India
 71% stakeholder in Castrol, India’s major lubricant company
 Plans to develop a 2.5 MTPA LNG Terminal at Kakinada
 Participated in the CBM III and NELP VI bidding rounds – expected to win
some blocks
 One of the bidders for strategic sale of HPCL
 Presence in both upstream and downstream
 Stakeholders in Tapti gas fields and Panna/Mukta oil and gas fields,
Cambay basin block
 Interests in city gas distribution through participation in Gujarat Gas Limited
and Mahanagar Gas Limited
 Leverages its distribution assets to operate Broadband service, Iqara
 Among the top FDI investors in India (Hazira port and LNG terminal project
– milestone for FDI in the sector)
 Interests in both upstream and downstream (LNG, Lubricants, LPG,
Bitumen, retail fuels and even solar energy)

22. www.imacs.in
© IMaCS 2006
Printed 17-Dec-20
Page 22
Global majors present in India
 Owns 10% stakeholder in Petronet LNG Limited, a JV promoted by Indian
public sector companies to set up LNG terminals to import LNG
 5% stakeholder in Reliance Petroleum Limited’s proposed new refinery at
Jamnagar
 Possibility of increasing the stake to 29%
 Wholly owned subsidiary TotalFinaElf, a major player in lubricants market
 Another 100% subsidiary ElfGas India Ltd owns and operates LPG Import
Terminal at Mangalore
 50% stakeholder in LPG Import terminal at Visakhapatnam

23. www.imacs.in
© IMaCS 2006
Printed 17-Dec-20
Page 23
The India Brand Equity Foundation is a public-private partnership between the Ministry of
Commerce & Industry, Government of India and the Confederation of Indian Industry. The
Foundation’s primary objective is to build positive economic perceptions of India globally
India Brand Equity Foundation
c/o Confederation of Indian Industry
249-F Sector 18, Udyog Vihar Phase IV
Gurgaon 122015, Haryana, INDIA
Tel +91 124 401 4087, 4060 - 67
Fax +91 124 401 3873
Email ajay.khanna@ciionline.org
Web www.ibef.org

24. www.imacs.in
© IMaCS 2006
Printed 17-Dec-20
Page 24
ICRA Management Consulting Services Limited
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
Author’s and IBEF’s 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.