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Naples, FloridaJune 14, 2006
Independent Petroleum Association of America“Mid-Year Meeting and Executive Conference”
India and the Global Energy MarketAn Overview
Presented byJuli A. MacDonald
2Filename/RPS Number
Road Map
India’s Energy Situation
Indian Initiatives to Address its Energy Situation
Strategic Significance of India’s Actions
Commercial Opportunities in India
3
India is a nation of a billion people and gross domestic product of 720 Billion USD in 2005 that still relies on traditional fuels such as wood and waste for about 40% of its primary energy supply.
India’s Energy Situation
600,000
500,000
400,000
300,000
200,000
100,000
1972
1974
1976
1978
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
Coal Oil Gas Hydro Comb. Renew & Waste
India Total Primary Energy Supply* (Ktoe)
(1972-2002)
800
900
1000
1100
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
250
350
450
550
India Population (Millions) and GDP (Billions 2000 USD)
(1990-2003)
CAGR (Pop): 1.89%
(GDP): 5.57%
Population GDP
Source: Population & GDP—EIA International Energy Annual 2003; Primary Energy Supply—IEA Energy Statistics 2004
India and the Global Energy Market
4
Demand for hydrocarbons increase as the Indian economy modernizes and adds capacity.
India and the Global Energy Market India’s Energy Situation
0
2
4
6
8
10
12
14
60
75
90
105
120
135
100
115
130
145
160
175
190
205
0
200
400
600
800
India Installed Electric Capacity (Million Kilowatts) 1990-2003
India Industrial Production Index (1993=100) 1993-2004
India China
Korea Malaysia
16% 35%
29% 31%
Share of Manufacturing in Total Economic Output 2005
India “Golden Quadrilateral” Interstate Highway (Scheduled 2007)
India Vehicle Sales (Thousand Sales) 1990-2004
India Hydrocarbon Consumption (1015 BTU) 1990-2003
Coal
Oil
Gas
Source: Consumption & Electric Capacity—EIA International Energy Annual 2003; Vehicle Sales-Government of India Ministry of Roads and Transport; Industrial Production Indiex—India Info Online (www. indiainfoline.com) -
Industrial Production
Manufacturing Only
5
0
0.25
0.5
0.75
1
2005
Petrol Diesel Kerosene LPG*
India’s energy efficiency per dollar of GDP is below Western standards. Domestic fuel subsidies are falling but price controls limit efficiency gains at the expense of India’s state-owned refiners.
India’s Energy Situation
0
10,000
20,000
30,000
40,000
50,000
60,000
70,000
1990
1992
1994
1996
1998
2000
2002
India China United States Japan
Energy Intensity per GDP (BTU / year 2000 USD) 1990-2003
50
150
250
350
450
550
650
750
2000
2001
2002
2003
2004
Kerosene LPG
2.5
Combined Loss: 51 Million
USD/Day
Annual Fuel Subsidies (Million Rupees) 2000-2004
Reported Loss per Liter (year 2000 USD) 2005
Note: * LPG loss reported as per cylinder, not liter. Source: Energy Intensity—International Energy Agency International Energy Outlook 2005; Fuel Subsidies—Government of IndiaMinistry of Petroleum; Reported Loss—”Burnout: Oil Cos Lose $51m per day” Economic Times (May 18, 2006)
India and the Global Energy Market
6
Moderate increases in India’s domestic production of hydrocarbons have not kept pace with increased consumption.
0
1
2
3
4
5
6
7
8
9
10
1990
1992
1994
1996
1998
2000
2002
550
850
1150
1450
1750
2050
2350
0
5
10
15
20
25
30
35
1990
1992
1994
1996
1998
2000
2002
2004
0
0.2
0.4
0.6
0.8
1
1.2
ReservesProduction Consumption
India Oil Reserves and Production & Consumption (Billion Barrels and Thousand
Barrels /Day)1990-2003
India Natural Gas Reserves and Production & Consumption (Trillion
Cubic Feet) 1990-2004
Source: EIA International Energy Annual 2003; Reserves estimates from Oil & Gas Journal
India and the Global Energy Market India’s Energy Situation
7
The Indian Government is pursuing a multi-pronged strategy to address its energy security concerns.
Attract foreign investment to increase domestic production
Pursue internal and external measures to become a regional supplier of refined products
Promote oil diplomacy as part of national foreign policy agenda
Reconfigure state-owned companies to pursue oil diplomacy objectives
Secure supply through investments in oil and gas projects around the world
India and the Global Energy Market Indian Initiatives to Address its Energy Situation
8
India seeks to attract private investors to increase domestic production of oil and natural gas.
Company Name Company
Nationality# of Fields Active in
# of Fields Operating
Birckbeck Investment
Mauritius 1
Cairn Energy UK 11 5
ENI S.P.A Italy 2 2
ENPRO Finance US 2 2
Geoglobal Resources
Canada 4 1
Hardy E&P UK 13
Jubilant Enterprises
US 4 1
Mosbacher US 1 1
Nikko Resources Canada 3 1
OAO Gazprom Russia 1 1
Energy Focus US 1 1
Reliance India 31 29
India inducted the New Exploration Licensing Policy (NELP) in 1999 to attract greater private investment in the exploration & production of oil and natural gas
Awarding NELP blocks to technically capable companies that offer the best terms for production sharing agreements
Allowing 100% foreign ownership and offering new tax incentives to investors
Attracting private investors to develop oil and gas resources (see Table)
Paying off for investors--Cairn Energy and Niklko Resources both reported major discoveries from early investments
48
India and the Global Energy Market Indian Initiatives to Address its Energy Situation
Source: NELP investor data compiled from India’s Directorate General of Hydrocarbon’s website: http://www.dghindia.org/index.htm
Investors in India’s Oil and Gas Sector Through NELP
9
India seeks to increase competition in its domestic retail markets for refined products and to establish itself as a regional supplier of refined products.
State-Owned Companies State-Owned Companies
Operate 17 of India’s 18 refineries
Will add 3,200 new retail locations in 2006. Already own 29,300 locations (94% of the market)
ONGC likely to invest in Algeria’s Sonatrach refinery
Saudi Arabia may acquire stakes in Visakh and Paradip facilities
Operate 17 of India’s 18 refineries
Will add 3,200 new retail locations in 2006. Already own 29,300 locations (94% of the market)
ONGC likely to invest in Algeria’s Sonatrach refinery
Saudi Arabia may acquire stakes in Visakh and Paradip facilities
1
1.2
1.4
1.6
1.8
2
2.2
1990
1992
1994
1996
1998
2000
2002
2004
2006
India Crude Oil Distillation Capacity (Million Barrels / Day) 1990-2006
269,700 b/d of refined product exports in 2002
Introducing competition in domestic retail market
Increasing domestic refining capacity to supply regional markets through private and state-funded investments
Pursuing interests in refining projects in Algeria, Yemen, and Saudi Arabia
Indian Initiatives to Address its Energy Situation India and the Global Energy Market
Source: Distillation Capacity—EIA Compilation of Oil & Gas Journal Reports; Reliance—Reuters News (May 2006); State-Owned—India Ministry of Petroleum and Natural Gas http://petroleum.nic.in/
Reliance IndustriesReliance Industries
Jamnagar Refinery: 680,000 b/d capacity in the process of adding 580,000 b/d new capacity.
Added 600 new domestic retail locations to existing 1,300 locations
Ras Issa Refinery (Yemen): 60,000 b/d refinery on Red Sea
Jamnagar Refinery: 680,000 b/d capacity in the process of adding 580,000 b/d new capacity.
Added 600 new domestic retail locations to existing 1,300 locations
Ras Issa Refinery (Yemen): 60,000 b/d refinery on Red Sea
10
Active oil diplomacy is a central component of India’s energy security policy and an instrument of Indian national power.
“Oil diplomacy is currently seen as a major tool for ensuring India’s energy security along with acquisition of equity oil & gas overseas.” Government of India Expert Committee on Integrated Energy Policy Draft Report (December 2005)
India and the Global Energy Market Indian Initiatives to Address its Energy Situation
Source: OIL Videsh—The Economic Times (November 28, 2005); Oil Diplomacy—Financial Express (March 12, 2005)
National champions pursue oil diplomacy with major producers and Asian consumers– ONGC’s international subsidiary state-owned ONGC Videsh actively investing worldwide
– Indian government created a new international subsidiary for the state-owned company OIL in December 2005
Energy diplomacy features MOUs/high-level agreements with major suppliers and consumers and multilateral approaches– MOUs signed with Iran, Indonesia, Myanmar, Nigeria, Saudi Arabia, Russia, and Nigeria
– Energy agreement with China (December 2005) to promote cooperation in the market
– Promoter of Asian grid for energy flows
– Convener of multilateral fora to discuss Asian energy markets and contracts
11
Indian companies are investing globally to explore and develop oil and natural gas assets.
ONGC Videsh
Ltd.
OIL Videsh
Ltd.
Reliance Industries
India Overseas E&P Assets 2006
India and the Global Energy Market Indian Initiatives to Address its Energy Situation
Source: Company Websites
12
India’s activities conflict with United States and European interests in some regions.
Asian Market Power Asian Market Power
Vocal advocate of bundling market power of Asian consumers to increase their influence with Middle East suppliers and avoid paying premium
As Middle East importance grows as source of supply in long-term, competition for access to Middle East crude represents potential source of tension between East and West
Vocal advocate of bundling market power of Asian consumers to increase their influence with Middle East suppliers and avoid paying premium
As Middle East importance grows as source of supply in long-term, competition for access to Middle East crude represents potential source of tension between East and West
India Investment in U.S. Designated “Pariah” States
Cuba, Sudan, Iran, Myanmar
10
7 2812
23
Middle East Oil Exports by Region (Million Barrels /Day) 2002 & 2030
Asia
North America
Europe
Asia
North America
Europe
Investments in Pariah States Investments in Pariah States
Indian companies investing in states subject to U.S. sanctions
Attractive due to lack of competition from major international oil companies
India’s foreign policy interests at odds with the United States’ in some regions
Indian companies investing in states subject to U.S. sanctions
Attractive due to lack of competition from major international oil companies
India’s foreign policy interests at odds with the United States’ in some regions
India and the Global Energy Market Strategic Significance of India’s Actions
Source: Investments—Company Websites; Exports by Region-- International Energy Agency, World Energy Outlook 2004.
13
In contrast to China’s perceived mercantilist approach, Indian companies tend to rely on rather than distrust international markets.
“To the extent that India owns that oil abroad, whether it is brought to India or sold in the international market, the value remains the same. Thus obtaining equity oil abroad should be mainly looked upon as a commercial investment decision.” Government of India Expert Committee on Integrated Energy Policy Draft Report (December 2005)
Strategic Significance of India’s ActionsIndia and the Global Energy Market
India’s initiatives are market-oriented and official positions suggest comfort with the market
Actions suggest faith in contracts and current system – New futures market in Mumbai to provide instruments to hedge price risks– Oil diplomacy often contract based (e.g., in Saudi Arabia)
Approach to overseas investments based on commercial interests– Policy-makers stress bottom line and set profit requirement– Recommended target of 66% of overseas projects financed with private capital– Recommend policy of securitization of overseas assets to private investors to ensure
investments are commercially sound
14
India’s market-orientation presents opportunities for foreign companies in Indian market.
Investors, Enhanced Oil Recovery, Offshore Investors, Enhanced Oil Recovery, Offshore
India seeks bidders for its domestic industry.
– Investor Road Show stopped in London, Houston, Dubai, Perth, and Calgary in early 2006.
Indian companies seek to improve average oil recovery rate of 25%.
India seeks to develop its offshore resources.
India seeks bidders for its domestic industry.
– Investor Road Show stopped in London, Houston, Dubai, Perth, and Calgary in early 2006.
Indian companies seek to improve average oil recovery rate of 25%.
India seeks to develop its offshore resources.
NELP VI NELP VI
PFC Energy rated India a bright prospect for E&P
– Creation of a new petroleum and natural gas regulatory board
– Promising gas and petroleum discoveries.
– Attracting interest of companies such as British Gas, Shell, and Premiere Oil
PFC Energy rated India a bright prospect for E&P
– Creation of a new petroleum and natural gas regulatory board
– Promising gas and petroleum discoveries.
– Attracting interest of companies such as British Gas, Shell, and Premiere Oil
Cairn Energy operates Rajasthan exploration
discovered 380-700 million recoverable
barrels in 2005.
Reliance operates exploration (Niko Resources partner) of Krishna-Godavari discovered 14 trillion cubic feet natural gas in 2002
Recent Major Oil and Gas Discoveries
Commercial OpportunitiesIndia and the Global Energy Market
Source: Company Interest—Lloyd’s List (April 11, 2006); Discoveries—India’s Directorate General of Hydrocarbon’s website http://www.dghindia.org; Oil Recovery—Lloyd’s List (October 22, 2004); Offshore—Oil&Gas Journal (January 16, 2006)
Oil
Natural Gas
15Filename/RPS Number
Back-up
16
Operators of NELP Issued Blocks
India seeks to attract private investors to enhance domestic production of oil and natural gas.
Company Name
NELP Round (# of Blocks)
-Sole/Consortium- Operate (#)
State Partner
I II III IV V
Birckbeck Investment
0/1 N
Cairn Energy 1/0 0/2 0/8 5 Y
ENI S.P.A 0/2 2 Y
ENPRO Finance 0/2 2 Y
Geoglobal Resources
0/1 0/2 1/1 1 Y
Hardy E&P 0/2 0/10 0/1 Y
Jubilant Enterprises 0/1 0/2 0/1 1 Y
Mossbacher 0/1 1 Y
Nikko Resources 0/2 1/1 1 N
OAO Gazprom 0/1 1 Y
Phoenix Overseas 0/1 1 N
Reliance 9/2 2/2 0/10 0/1 3/2 29 N
India inducted the New Exploration Licensing Policy (NELP) in 1999 to attract greater private investment in the exploration & production of oil and natural gas
53 48State-Owned Companies
Private Companies
India and the Global Energy Market Indian Initiatives to Address its Energy Situation
Source: NELP investor data compiled from India’s Directorate General of Hydrocarbon’s website: http://www.dghindia.org/index.htm
17
Indian companies operate overseas in the exploration and development of oil and natural gas assets.
Myanmar: ONGC exploration (Daewoo Operator)—4 TCF Natural Gas discovered 2004
Sakhalin 1: ONGC development (Exxon Operator)—250,000 b/d in 2006
Vietnam: ONGC exploration (British Gas Operator))—2 TCF Natural Gas discovered 2000
Iran: ONGC operates Farsi Offshore exploration—540MMbbls estimated
Syria: ONGC development (Al Farat
Operator)—220,000 b/d in 2005
Qatar: ONGC operates Najwat Najem exploration
Iraq: ONGC operates exploration in Block 8
Libya: ONGC exploration (TPAO Operates) NC188-89
Sudan: ONGC development (CNPC
Operates)—3 MM barrels/day
Ivory Coast: ONGC exploration
(Sinopec Operates)
Cuba: ONGC exploration (Repsol Operates) 6 Blocks
Venezuela: ONGC development
(PdVSA Operates) San Cristobal
Yemen: Reliance development (CalValley Operates) Block 9
Oman: Reliance operates exploration Block 18
Libya: IOC & OIL operate exploration of
Sirte Basin block
ONGC Videsh
Ltd.
OIL Videsh
Ltd.
Reliance Industries
India Overseas E&P Assets 2006
India and the Global Energy Market Indian Initiatives to Address its Energy Situation
Source: Company Websites