Focused Energy Report –

Volume XXXXV

Monthly Report – June 2016

Energy Desk

GAIL (India) Ltd.

1

Table of Contents

Energy Prices 3 I.

Under-Recoveries on Petroleum Products 3 II.

Country Analysis – Turkmenistan 4 III.

A. Energy Mix ........................................................................................................................................................................................................................ 4

B. SWOT Analysis................................................................................................................................................................................................................. 4

C. Oil and Gas Resources ................................................................................................................................................................................................. 5

1. Oil Reserves ................................................................................................................................................................................................................ 5

2. Gas Reserves ............................................................................................................................................................................................................... 5

D. Refining .............................................................................................................................................................................................................................. 6

E. Gas Geopolitics ............................................................................................................................................................................................................... 6

1. Gas Export ................................................................................................................................................................................................................... 6

Company Analysis - OIL India Limited (OIL) 7 IV.

A. Overview ............................................................................................................................................................................................................................ 7

1. OIL’s Core Purpose .................................................................................................................................................................................................. 7

B. SWOT Analysis................................................................................................................................................................................................................. 7

C. Strategy .............................................................................................................................................................................................................................. 8

1. Oil and Gas E&P ........................................................................................................................................................................................................ 8

2. Shale Gas resources................................................................................................................................................................................................. 9

3. LNG ................................................................................................................................................................................................................................. 9

4. Overseas Operation .............................................................................................................................................................................................. 10

D. Market Position ............................................................................................................................................................................................................ 11

1. Upstream .................................................................................................................................................................................................................. 11

2. Downstream ............................................................................................................................................................................................................ 11

E. Financial Data ............................................................................................................................................................................................................... 12

LNG Industry 2015 13 V.

A. Supply Side .................................................................................................................................................................................................................... 13

B. Demand side ................................................................................................................................................................................................................. 14

C. Spot and Short-Term Imports ............................................................................................................................................................................... 14

D. LNG Tankers .................................................................................................................................................................................................................. 14

E. FSRU Fleet ...................................................................................................................................................................................................................... 15

F. Liquefaction Plants ..................................................................................................................................................................................................... 15

G. Regasification Plants .................................................................................................................................................................................................. 15

H. India .................................................................................................................................................................................................................................. 15

Oil Prices at New 2016 Highs – What’s next 17 VI.

A. Weaker dollar price .................................................................................................................................................................................................... 17

B. Oil Production .............................................................................................................................................................................................................. 17

C. Disruption in supplies ............................................................................................................................................................................................... 18

D. OPEC’s Bleeding Economy ...................................................................................................................................................................................... 19

E. Conclusion...................................................................................................................................................................................................................... 19

2

Executive Summary

The Focused Energy Report for the month of June 2016 reviews the Energy Prices taking in consideration the

comparison with last month. There’s increase of around 6.9 % in the WTI oil prices, the prices of natural gas

Henry Hub have increased by 5 % and around 3.2 % increase is there for crude oil prices of Brent. Improving

economic data, growing supply disruptions, and falling U.S. crude oil production and rig counts contributed

to the price increase.

The next discussion in the report is about “Turkmenistan”. Turkmenistan has substantial oil and gas reserves,

with 600mn barrels (bbl) of proven crude oil reserves and 7.5 trillion cubic metres (tcm) of proven gas

reserves according to the EIA. The hydrocarbons industry is the backbone industry of the Turkmen economy.

Oil and natural gas form the basis of energy mix of Turkmenistan. The country has several of the world's

largest gas fields, mostly located in the Amu Darya basin in the southeast, the Murgab Basin in the south and

the South Caspian basin in the western section of the country towards the Caspian Sea. The company's

upstream acreage is concentrated in the north east of India. It has three refineries with a combined capacity

of 237,000 barrels per day.

An analysis of its Energy Mix, SWOT Analysis, Oil and Gas Resources, Refining, Gas Geopolitics and Gas Export

is covered.

In the next section company “Oil India Ltd. (OIL)” is analysed. OIL’s Core Purpose is being "The fastest

growing energy company with a global presence providing value to the stakeholders. OIL's strategic focus is

very much on the upstream segment. It has also been stepping up its activities in the gas sector, particularly

in the north east. It is also interested in diversifying into city gas. It also operates a 1,432km crude oil pipeline

network in the north east, which transports oil produced by OIL and ONGC.

The analysis covers OIL’s Core Purpose, SWOT Analysis, Strategy, Oil and Gas E&P, Shale Gas resources, LNG,

Overseas Operation, Market Position, Upstream, Downstream and Financial Data.

In this section there is a discussion about “LNG Industry 2015”. Driven by new volumes from Australia and

Indonesia, and despite production issues in several exporting countries, global LNG trade has grown by 2.5%

in 2015, with total quantities reaching an all-time high of 245.2 MT over the year. Key LNG Figures for 2015

are: 68.4 million tons traded on a spot or short-term basis or 28% of total trade, 72% of global LNG

demand in Asia, 32% of global LNG volumes supplied from Qatar, 41% of global LNG volumes supplied from

Asia-Pacific, 308 MTPA Total Nameplate Liquefaction Capacity, 777 MTPA Total Regasification Capacity,

34 Importing and 19 exporting countries. India joined the ranks of re-exporting countries.

The analysis covers Supply Side, Demand side, Spot and Short-Term Imports, LNG Tankers, FSRU Fleet,

Liquefaction Plants, Regasification Plants and Indian LNG market.

In the last section an analysis on “Oil Prices at New 2016 Highs – What’s Next “is covered. Crude oil was at

a 13-year record low $26 on February 11, 2016 and has soared more than 84 per cent since. Is this recent

price on sustainable basis or was a reaction on some speculation? , Oil price depends on following

dimensions: Supply and demand, Political events and Economic growth.

Considering these factors, recent upward trend of Oil prices are analysed based upon following reasons:

Weaker dollar price, Oil Production, Disruption in supplies and OPEC’s Bleeding Economy.

3

ENERGY PRICES I.

WTI Crude Oil ($/barrel) BRENT Crude Oil ($/barrel) Natural Gas ($/mmbtu)

Particulars Mar. 2016 (Final) Apr. 2016 (Estimated)

JCC Crude Oil ($/b) 32.17 36.96

Average International FOB Price & Exchange rate:

UNDER-RECOVERIES ON PETROLEUM PRODUCTS II.

(A) Product-wise Under-recovery of Public Sector Oil Marketing Companies(OMCs):

* Under (Over) Recovery is for Mumbai market, ** Cash Subsidy is for Delhi market

(B) The details of the under recovery/DBTL Subsidy during 2014-15 & 2015-16:

Price on 1st May 2016 Price on 1

st June 2016 Change % Change

Brent crude oil 48.13 49.69 1.56 3.2%

WTI crude oil 45.92 49.1 3.18 6.9%

Henry Hub Natural Gas 2.18 2.29 0.11 5.0%

Particulars Unit 31-May-16

Next Pricing Fortnight

for

16st

June 2016

Crude Oil(Indian Basket)

- In US Dollar

- In Indian Rupees

($/bbl)

(Rs/bbl)

46.88

3150.67

46.88

3153.62

Exchange Rate (Rs/$) 67.20 67.27

Product Unit Under/Over-recovery

(eff. 1st June 16)

Cash Transfer under

DBTL (eff. 1st June 16)

PDS Kerosene* (Rs/litre) 11.73

Cash Compensation on Domestic LPG by

Govt. to consumers** (Rs./Cylinder)

86.77

Cash Compensation on Domestic LPG by

OMCs towards

'Uncompensated Costs' to consumers**

(Rs/Cylinder) 42.55

Product 2015-16

(Rs./Crore)

2014-15

(Rs./Crore)

Diesel 0 10,935

PDS Kerosene 11,496 24,799

Domestic LPG 18 36,580

DBTL Subsidy (Direct Benefit transfer for LPG) 16,056 3,971

4

20%

80%

Energy Mix 2014: Turkmenistan

Oil

Natural Gas

COUNTRY ANALYSIS – TURKMENISTAN III.

Turkmenistan is a country in Central Asia, bordered by Kazakhstan to the northwest, Uzbekistan to the north and

east, Afghanistan to the southeast, Iran to the south and southwest, and the Caspian Sea to the west.

Turkmenistan has substantial oil and gas reserves, with 600mn barrels (bbl) of proven crude oil reserves and 7.5

trillion cubic metres (tcm) of proven gas reserves according to the EIA. The hydrocarbons industry is the

backbone industry of the Turkmen economy.

A. Energy Mix

Oil and natural gas form the basis of energy mix of Turkmenistan. Natural Gas constitutes 80% and rest is oil.

B. SWOT Analysis

Strengths

Both oil and gas productions are set for increases

over the forecast period, with substantial reserves

to develop, notably on the gas-side.

Strong interest from foreign players and state

actors will sustain investment in Turkmenistan's

gas sector, with China and the EU keen to gain

further access to its substantial gas resources.

The east-west Interconnector pipeline was

reportedly completed in May 2015.

Opportunities

Continued interest in the Southern Corridor by the

EU, support for the TAPI project and continued

investment in midstream infrastructure to deliver

volumes to China will lead to a number of

opportunities for Turkmenistan to raise its profile

in the region and attract further foreign investment

as it seeks to diversify its gas export markets.

Foreign companies are actively exploring the

Caspian and targeting liquids. New exploration and

planned investment in production offer upside

potential to our conservative oil production

forecast.

Weaknesses

While producing fields are showing signs of

depletion with major fields in production for over

20 years, the nature of untapped resources will

require significant processing substantially raising

development costs.

Increasing dependence on China for gas exports,

with Russia and Iran reducing their imports.

Disputed jurisdiction over resources in the

Caspian Sea has strained relations with Azerbaijan

and hampered development of highly prospective

acreage in the area.

A strong state presence with limits on foreign

participation in the onshore gas sector,

contributes to challenging business environment

despite Turkmenistan's strong gas potential.

Threats

Tensions between states bordering the Caspian

Sea make exploration and production in the

Caspian problematic, leaving potentially resource-

rich deposits undeveloped.

Growing dependence on the Chinese market for

gas exports and trade revenues as the Russian

export market disappears and Iran reduces

imports. Given the country's strong dependence

on China, the slowdown in the Chinese economy

and potentially in gas demand over the coming

years is a rising threat to the country's future gas

export potential.

Continued corruption and regulatory delays could

lead to western company exits such as the one

rumoured to be planned by Germany's RWE.

5

C. Oil and Gas Resources

1. Oil Reserves

According to the

EIA, Turkmenistan

has an estimated

600 million bbl of

proven oil reserves

as of end 2015.

However,

Turkmenistan claims

much higher

probable and

possible oil reserves

of more than 2bn

bbl, plus 6bn bbl of

undiscovered

reserves potential.

Most of

Turkmenistan's oil

reserves are located

in the South Caspian

basin and the

onshore Garashyzlyk area in the west of the country. Most of production originates from fields at Koturdepe,

Nebut Dag and Cheleken near the Caspian Sea, which together stand for almost all of the country's proven oil

reserves.

2. Gas Reserves

Turkmenistan has proven natural gas reserves of 7.5tcm as of late 2015, making it the sixth largest natural gas

reserve holder in the world according to the Oil and Gas Journal. The country has some of the world's largest

fields, including 10 with more than 100bcm of reserves. Most of the country's proven gas reserves are located in

the Amu Darya basin in the south east, the Murgab basin, and the South Caspian basin in the west. Turkmenistan

produced an estimated 65.13 bn cubic metres (bcm) of gas in 2015, a 12% reduction from 2014 owing to a drop

in gas exports from Russia. It is among the top 15 gas producers in the world.

Major Upstream Projects

Name Field Name Companies Completion

Date Status

Est.Peak

Oil/Liquids

Range

(b/d)

Est.Peak

Gas

Output

(bcm)

Type

of

Project

Nebit Dag

Block Burun

Turkmenneft (10%),

Eni S.p.A (90%) 1999 Production 11,300

Oil

South

Yolotan Galkynysh Turkmengaz,Petrofac 2013 Production

25 Gas

Bagtyyarrlyk

Bagtyyarrlyk,

Saman-

Depe, Altyn

Asyr

China National

Petroleum

Corporation

(CNPC)

Development 17 Gas

Dauletabad,

Amu-Darya

Basin

Dauletabad Turkmengaz (100%) 1982 Production

Gas

Most of Turkmenistan's oil is extracted by the national oil company Turkmennebit, from fields at Koturdepe,

Nebit Dag and Cheleken near the Caspian Sea. Most of these fields were developed before the 1960s. All oil

production in Turkmenistan comes from the Caspian area, with more than 75% coming from offshore fields near

6

the coast, and about 25% from offshore fields. The country currently limits investment opportunities for

international companies to offshore oil and gas developments, with the exception of a production sharing

agreement (PSA) with China for the Bagtyiarlyk onshore natural gas project. In 2009, the government signed

several PSAs with foreign companies, notably Russia's Itera and Germany's RWE Dea for offshore fields in the

Caspian. Dragon Oil, Eni and Petronas are also important producers, but these remain mostly limited to offshore

fields. Most of the production growth in recent years came from Dragon Oil's offshore block (Cheleken) and Eni's

Nebit Dag field in the onshore western area.

The country has several of the world's largest gas fields, mostly located in the Amu Darya basin in the southeast,

the Murgab Basin in the south and the South Caspian basin in the western section of the country towards the

Caspian Sea. The most significant recent discovery is the Osman-South Yolotan field, now known as Galkynyksh.

It is the world's second largest gas field and production started in 2013. Consultant GCA has recommended the

gradual development of Galkynyksh through an annual increase in production of 10bcm a year, with maximum

production capacity at the field estimated at 70bcm.

D. Refining

Turkmenistan has three refineries with a combined capacity of 237,000 barrels per day. Two Soviet era plants are

located at the Caspian Sea port of Turkmenbashi (116,477b/d) and Türkmenabat in the eastern Lebap Province

on the Uzbek border (120,493b/d). Originally designed to process Russian crudes, the collapse of the Soviet

Union in 1991 forced a change of feedstock, with the refineries switching to domestic crudes for feedstock.

According to the Oil and Gas Journal, Turkmenistan has let an USD800mn contract to a consortium of

engineering firms led by Tokyo Engineering Corp for the construction of a gas chemical complex in

Turkmenbashi. The complex is due to come online in 2018 and is expected to produce ethylene and high density

polyethylene. A further two refineries are planned by 2030 in the eastern regions of Mary and Akhai. In total, the

three greenfield refineries would have a combined capacity of 240,000b/d. The official did not specify whether

the three new refineries would also be state-owned.

E. Gas Geopolitics

Disputes with Russia have encouraged Turkmenistan to diversify its capacity to export beyond the traditional

destinations for gas. China has become the primary importer of Turkmenistan's gas since 2011 with the

completion of the Central Asia-China Gas pipeline.

The relationship between Ashgabat and Beijing continues to flourish, with growing commitments for gas exports

and accompanying midstream infrastructure. The Central Asia-China Pipeline has been the foundation of ever

increasing commitments to deliver gas volumes from Turkmenistan to China, with the latest agreement signed in

2012 calling for Ashgabat to deliver 65bcm a year in gas to Beijing by 2030. This was an increase from the

original 2007 target of 30bcm, which was further increased to 40bcm in 2008. Volumes continue to increase, with

the December 2012 completion of a second East-West Pipeline with a capacity of 30bcm a year. Despite the EU's

interest in Turkmenistan, China remains the country's largest partner in developing its gas resources. In

November 2014, the BBC reported that Chinese president Xi Jinping would set up a USD40bn (GBP25bn) Silk

Road Fund. Part of that money will go to infrastructure projects in Central Asia. The publication also reported

that China had spent USD8bn on the first phase of the Galkynysh project alone. To avoid dependency on China,

Turkmenistan is pushing ahead with the TAPI pipeline, which would carry gas through Afghanistan and Pakistan

to India.

1. Gas Export

Among the Caspian and Central Asian countries, Turkmenistan has become a leading natural gas exporter.

Traditionally, Russia was the country's main market for gas exports. However, with falling exports to Russia, China

became the primary importer of Turkmenistan's gas in 2011 through the Central Asia-China Gas Pipeline.

Turkmenistan's gas export-driven economy might come under severe pressure in 2016 due to the termination of

exports to Russia and the reduced need for gas in Iran. The country will become increasingly dependent on China

for revenues over the medium term, while rapidly stepping up efforts to create new export links to other major

demand markets.

7

GOI 68%

Others 15%

DII 8%

FII 9%

Shareholding Pattern

COMPANY ANALYSIS - OIL INDIA LIMITED (OIL) IV.

A. Overview

Oil India Ltd (OIL) was taken into full state ownership in 1983,

having previously - as Oil India Private Ltd - been part-owned by

the former Burmah Oil. The company's upstream acreage is

concentrated in the north east of India, where it has been active

since 1959, although it has also expanded domestically and

internationally. At home, it has moved into 11 Indian states since

1999 and now has assets onshore and offshore, including Orissa,

Andaman, Rajasthan, Uttar Pradesh, Brahmaputra and offshore

Saurashtra. In 2005, the company received governmental approval

to expand its activities internationally. It now holds exploration

assets in Africa (Gabon, Libya, Sudan and Nigeria), the Middle East

(Yemen and Iran), Myanmar and East Timor.

1. OIL’s Core Purpose

"The fastest growing energy company with a global presence providing value to the stakeholders"

OIL's Vision

Oil India is the fastest growing Energy Company with highest profitability.

Oil India delights the customers with quality products and services at competitive prices.

Oil India is a Learning Organization, nurturing initiatives, innovations and aspirations with best practices.

Oil India is a team, committed to honesty, integrity, transparency and mutual trust creating employee

pride.

Oil India is fully committed to safety, health and environment.

Oil India is a responsible corporate citizen deeply committed to socio-economic development in its areas

of operations.

B. SWOT Analysis

Strengths

OIL has built up a very large portfolio of Indian

exploration acreage, covering onshore, shallow

water and deepwater territories. It acts as

operator for an increasing number of blocks

acquired under the NELP licensing programme.

The international portfolio provides scope for

exploration success and medium-term production

growth throughout the Middle East/Africa region.

OIL operates a 1,432km crude oil pipeline

network in the north east, which transports oil to

refineries at Numaligarh, Guwahati, Bonaigaon

and Barauni.

It also operates a 660km products pipeline.

Opportunities

India continues to have significant untapped oil

and gas potential.

OIL has considerable scope for international

expansion.

Strong domestic energy demand growth should

help volume and earnings to rise steadily.

Weaknesses

It is under state control, OIL has limited financial

or operational freedom.

The structure and ownership of the company

imposes cost and efficiency disadvantages.

With the scale of the existing asset base and

expansion plans, there will be ongoing high-level

investment.

Threats

The rising investment requirement of asset

upgrading, diversification and international

expansion could undermine fiscal strength.

Changes in national energy policy can have a

major impact on profitability

8

C. Strategy

OIL's strategic focus is very much on the upstream segment. It has also been stepping up its activities in the gas

sector, particularly in the north east. It is also interested in diversifying into city gas.

1. Oil and Gas E&P

The company is studying potential shale oil and gas resources in several of its holdings in the states of Arunachal

Pradesh and Assam in north east India. The company has received approval from the government to seek

possible shale resources following a proposal from the Ministry of Petroleum and Natural Gas. Currently, the

company holds five potential blocks which are estimated to hold shale resources, with two in Arunachal Pradesh

and three in Assam. Arunachal Pradesh has been estimated to hold up to 14bn tonnes of shale resources. The

company has already identified the presence of shale in the region but not significant enough to garner

investment. However, the Disang Shales in the 120sq km Deomali tract could prove to be a major discovery,

according to the company's officials.

9

A key plank of group strategy is to produce 4mn tonnes per annum (tpa) of crude oil on a sustainable basis,

representing an average 109,589 barrels per day (b/d), from its existing fields in the north east region. Gas sales

are targeted at 4bcm per annum and OIL is examining shale gas prospects as a potential source for further

reserves and production growth. The company is banking on success through its involvement in NELP projects to

deliver the domestic volumes needed to reach its target.

OIL aims to use surplus cash to acquire stakes in fresh exploration and production acreage across India, while the

company has also been stepping up its activities in the gas sector, particularly in the north east, where it has

launched the North East Frontier (NEF) project. It has carried out seismic surveys in Manbhum, Pasighat and

other Trust Belt areas. It is also interested in diversifying into city gas.

OIL is keen to complete work commitments as quickly as possible with the hope of delivering commercial

quantities of reserves and starting production from these assets. The international strategy is relatively low risk,

based on known prospective regions. Further asset deals may include producing properties in order to help

stimulate near-term growth and provide cash flow for exploration commitments. The move to acquire producing

assets signals a shift in the company's strategy - similar to one pursued by other Asian state-controlled players,

particularly Chinese companies, and competition for the assets is therefore likely to be considerable.

2. Shale Gas resources

OIL and ONGC have pledged to seek the support of foreign multinationals in their pursuit of new shale sources.

Oil India will take guidance from US firm Carrizo Oil & Gas as it pursues leads in Rajasthan and Assam.

ONGC and OIL have secured rights for unconventional exploration on 176 existing licences. The two companies

possess petroleum exploration rights on nearly 356 blocks, of which 176 are likely to have shale oil and gas

reserves. OIL is eyeing unconventional resources such as shale oil and shale gas at home and abroad, reports the

Economic Times, citing a company executive.

The government of India has granted approval to a policy that will enable state-owned companies to begin

exploration activities for shale oil and gas on acreage already awarded to them. This comes as the country is

seeking substitutes for expensive oil imports. Until now, the government has not had a framework for even initial

investigations, which has resulted in pushing the country backwards in the global race for shale resources. India

is expected to have reserves of as much as 96trn cubic feet of recoverable shale gas reserves, which will meet its

gas demand for nearly 26 years, according to the US Energy Information Administration.

3. LNG

In late 2012, OIL said it was planning to set up two liquefied natural gas (LNG) terminals in India. The company

had plans to set up one LNG terminal on India's east coast and the other on the west coast. Each of the terminals

will have a capacity of 5mn tonnes per year and will help the company to diversify its business into the sale of

LNG.

10

4. Overseas Operation

In 2014, OIL, along with OVL, has concluded the deal with Videocon Mauritius Energy Limited to acquire the

entire stakes in Videocon Mozambique Rovuma 1 Limited. Videocon owns a 10% participating stake in the

Rovuma Area 1 Offshore Block in Mozambique (Area 1). The concession houses a major gas discovery providing

LNG export potential. Reserves are estimated at a minimum of 35trn cubic feet of gas.

OIL expects to receive the first cargo of LNG from Mozambique's offshore Area 1 Block in Q120, reports Reuters.

The company also stated that the Carabobo basin asset in Venezuela was producing 16,000b/d and the rate is

expected to increase to 90,000 b/d by 2017. OIL holds a 3.5% stake in the block.

The company in December 2014 signed a Production Sharing Contract (PSC) with Myanmar Oil & Gas Enterprise

(MOGE) for two offshore blocks M4 and YEB. An OIL-led consortium won these blocks under Myanmar offshore

bidding round 2013 which was launched on April 11, 2013. In this Bidding Round, total 30 blocks were on offer.

OIL is the operator with 60% of both the blocks. Other consortium partners are Mercator Petroleum (25%),

Oilmax Energy (10%), and Oil Star Management Services (Local Company of Myanmar, 5%).

OIL has signed a memorandum of understanding (MoU) with Russia's Zarubezhneft, a specialist in exploration,

development and operation of oil and gas fields. Both parties intend to work together in the areas of joint search

and evaluation of hydrocarbon E&P, technological association and any other areas of common interest.

In late 2015, OIL, along with Oil Corporation Limited, signed a MoU with the Russian oil and gas major Rosneft.

The companies will cooperate in the exploration and production of hydrocarbons in Taas-Yuryakh

Neftegazodobycha asset, which is one of the largest oil assets in Eastern Siberia. OIL established its footprint in

Russia in 2014 by acquiring 50% participating interest in Licence 61 located in the Tomsk region of Russia.

11

D. Market Position

1. Upstream

The company's upstream acreage is concentrated in the north east of India, where it has been active since 1959,

although it has also expanded domestically and internationally. At home, it has moved into 11 Indian states since

1999 and now has assets onshore and offshore, including Orissa, Andaman, Rajasthan, Uttar Pradesh,

Brahmaputra and offshore Saurashtra. In 2005, the company received governmental approval to expand its

activities internationally. It now holds exploration assets in Africa (Gabon, Libya, Sudan and Nigeria), the Middle

East (Yemen and Iran) and East Timor.

2. Downstream

In the downstream segment, the company has a 26% stake in the Numaligarh refinery. It also operates a 1,432km

crude oil pipeline network in the north east, which transports oil produced by OIL and ONGC to supply refineries

at Numaligarh, Guwahati, Bonaigaon and Barauni, as well as a branch line to the Digboi refinery and a 660km

products pipeline. The network includes 10 crude oil pumping stations and 17 repeater stations spread across

the eastern India states of Assam, West Bengal and Bihar. LPG production is carried out at its plant in Duliajan in

Assam.

OIL holds 165,865sq km of acreage in India and overseas, comprising 76 blocks. The Indian portfolio includes 11

NELP blocks as operator, one as joint operator, 18 non-operated blocks and three held by JVs that include OIL.

During the year, the company made six new hydrocarbon discoveries in Upper Assam basin.

12

97.5 96.1 99.5 98.6

25.1 29.8 35.9 34.7

565.69 572.45

473.33

402.81

30.39 43.75 40.22 36.54

0

100

200

300

400

500

600

FY14/15(INR-bn) FY13/14(INR-bn) FY12/13(INR-bn) FY11/12(INR-bn)

Financial Data: GAIL vs OIL

OIL Sales OIL Net Profit GAIL Sales GAIL Net Profit

OIL secured participatory interest in 27 NELP blocks at the end of NELP IX bidding round. Of the 27 blocks, it has

the right of operatorship/joint operatorship in 12 blocks and as non-operator in 15 blocks at the close of the

bidding round which ended on March 31, 2015.

E. Financial Data

During the

2014/15 fiscal

year, OIL

crude oil

production

was 3.44mn

tonnes, down

from 3.50mn

tonnes the

previous year.

Crude oil sales

were 3.39mn

tonnes. For

natural gas,

production

rose y-o-y

from 2.63bcm

to 2.72bcm. Sales of gas rose year-on-year from 2.09bcm to 2.18bcm. Profit after tax in FY14/15 was INR 2,510

crore, down 15.8% from the INR2,981 crore the previous year. In 2014-2015 there were 12 oil and gas

discoveries; 11 from Upper Assam Basin and one from the OIL-operated NELP-VI block in Krishna-Godavari Basin

(onshore).

During Q1-Q3 FY 2015/16 ended December 31, 2015 the company reported net income from operations of

INR7,755 crore, up from INR7,035 crore during the corresponding period last year. Net profit for the period

stood at INR1,860 crore, compared to INR1,958 crore during the corresponding period last year.

Crude oil production during Q216 was 0.818mn tonnes, compared with 0.879mn tonnes a year earlier. Gas

production rose to 702mn cubic metres from 694mn cu m during Q215.

Operational Data FY14/15 FY13/14 FY12/13 FY11/12

Oil/Liquids Production 68,800b/d 74,020b/d 76,940b/d 75,200b/d

Gas Production 2.7bcm 2.6bcm 2.6bcm 2.4bcm

FY14/15(INR-

bn)

FY13/14(INR-

bn)

FY12/13(INR-

bn)

FY11/12(INR-

bn)

OIL

Sales 97.5 96.1 99.5 98.6

Net Profit 25.1 29.8 35.9 34.7

% Share of PAT of

Sales 26% 31% 36% 35%

GAIL

Sales 565.69 572.45 473.33 402.81

Net Profit 30.39 43.75 40.22 36.54

% Share of PAT of

Sales 5% 8% 8% 9%

13

Quantity/Region Asia Europe America Middle East

2014 180.1 32.44 22.53 4.1

2015 177.07 37.57 20.73 9.82

% Change -1.7% 15.8% -8.0% 139.5%

Quantities (in 10^6 T) received in 2015 & 2014 from the Exporting Countries

LNG INDUSTRY 2015 V.

Driven by new volumes from Australia and Indonesia, and despite production issues in several exporting

countries, global LNG trade has grown by 2.5% in 2015, with total quantities reaching an all-time high of 245.2

MT over the year.

Most of the growth was absorbed by the Middle-East and by Europe, where net imports recovered thanks in part

to a 31% decrease in re-exports. In a global context of lower energy prices and sluggish economic growth, the

LNG industry is holding its breath for the impact of an export wave from the United States.

A. Supply Side

19 countries produced LNG in 2015. Four new trains were commissioned (QCLNG Train 1 and 2 and GLNG Train 1

in Australia, Donggi-Senoro in Indonesia). Boosted by additional volumes from Australia (+5.8 MT), Indonesia

and Papua New Guinea which operated for the first year at full capacity (+3.8 MT), LNG supply from the Pacific

Basin increased by more than 10 MT, attaining for the first time the 100 MT mark in 2015.

Contrasting with the situation in the Pacific Basin, supply from the Atlantic Basin declined by 1.1 MT, reaching

51.4 MT. Algeria’s LNG output was down by 4.6% despite the recent capacity additions, supply from Trinidad

decreased by 1.3 MT due to feedgas issues and Angola and Egypt did not produce any LNG during the year

respectively due to technical problems and lack of feedgas. Despite improved performance in Qatar (+2 MT),

supply from the Middle East declined overall by 3.3 MT following issues in other countries, particularly in Yemen

were production was stopped in April due to political uncertainty.

14

B. Demand side

Asian Demand Down, Offset by Increased Imports from the Middle East, North Africa And Europe. By the end of

the year, overall LNG demand in Asia was down by 1.7% (- 3 MT), mainly due to lower imports in Japan (-4.2 MT)

and in South Korea (-4.2 MT). These decreases can be attributed to a combination of factors including slow

economic growth, energy conservation, mild weather conditions and growing fuel substitution. In China, LNG

imports continued to grow by more than 5% (+1 MT) and reached 20 MT.

The global share of Asian imports declined from 75% in 2014 to 72% last year. LNG demand also decreased in

Latin America, by 2.5 MT. In Brazil, imports were down by 0.6 MT mostly because of higher hydropower

production. Mexico also purchased less LNG (-1.6 MT) because of increased pipeline imports from the United

States. The Middle East showed an opposite trend and was the main driver behind the demand growth in 2015.

LNG imports into the region more than doubled, reaching almost 10 MT at year-end thanks to new importers

Egypt and Jordan. European net imports grew by 15.8% (5.1 MT), almost half of which (2.4 MT) can be attributed

to a lower number of reloads from the region (3.6 MT in 2015 vs 6 MT in 2014). Higher deliveries from Qatar into

the UK (+1.8 MT) also contributed to this increase. In all, total European imports in 2015 (37.6 MT) returned to

slightly above their level of 2005 (36 MT).

C. Spot and Short-Term Imports

Despite the growth in LNG supply for the past year, the overall share of spot and short-term imports remained

stable at around 28%, or 68.4 MT, as the market was affected by the interruption of Yemen production and the

effects on arbitrage trade from declining location differentials. Argentina and Brazil who traditionally import from

the spot and short term market purchased less volumes than in the previous year and additional spot and short-

term deliveries east of Suez into Egypt, Jordan, India and Pakistan (+7.1 MT) were not sufficient to offset the

declines in Japan (-5.3 MT) and in South Korea (-2.8 MT). With a market characterized by price elasticity of

demand, India recorded the sharpest increase in spot and short-term imports (+3 MT) as a result of declining

prices.

Qatar remained the main supplier of spot and short-term quantities (20.3 MT), followed by Nigeria (12.7 MT) and

Australia (6 MT). It is noteworthy that the narrowing of regional price differentials translated into a 31% decrease

in international re-exports, from 6.4 MT to 4.4 MT. India, Singapore and the UK joined the ranks of re-exporting

countries and 10 countries re-exported cargoes in 2015, compared to 8 in 2014. On the importing side, Egypt,

Jordan and Pakistan received re-exported cargoes for the first time. 21 countries received re-exports, compared

to 19 in 2014. The lower appetite for spot and short-term volumes in Asia (-4.9 MT) and Latin America (-1.7 MT)

was partially offset by strong growth in spot and short-term deliveries to the Middle-East (+4.1 MT). In Europe,

the increase in net spot and short-term imports into Europe (+0.9 MT) is mainly attributable to the drop in

European re-exports.

D. LNG Tankers

The total LNG tanker fleet consisted of 449 vessels at

the start of 2016. It included 23 FSRUs and 28 vessels of

less than 50,000 cubic meters. Total shipping capacity at

the end of 2015 stood at 64.6 million cubic meters. Total

operational capacity (without lay-ups and vessels

awaiting conversion) amounted to 63.3 million cubic

meters.

Quantity/Region Asia Europe America Middle East

2014 51.62 3.01 12.67 2.28

2015 46.77 3.93 11.31 6.39

% Change -9.4% 30.4% -10.7% 180.3%

Spot & Short Term Quantities (in 10^6 T) received in 2015 & 2014 from the Exporting Countries

LNG Tankers

2015 Unit

Capacity (Million

m3)

FSRU fleet 23 3.47

LNG tanker 426 61.13

Total 449 64.6

15

33 ships were delivered during the year, including 3 FSRUs and 4 ships of less than 50 000 cubic meters. The

average capacity of vessels delivered (excluding ships under 50000 cubic meters) amounted to 164 141 cubic

meters.

E. FSRU Fleet

The total FSRU fleet consisted of 23 units at the start of 2016. Total FSRU cargo capacity at the end of 2015 stood

at 3.47 million cubic meters. In 2015, 33 new orders were placed, including 3 FSRUs and 1 bunkering vessel,

compared with 77 new orders placed in 2014. At the end of 2015, the orderbook comprised of 158 vessels, 144

of which were above 50,000 cubic meters. 52 vessels were scheduled for delivery in 2016. The order book

comprised of 8 FSRUs. Three of these vessels were scheduled for 2016 delivery, with the remainder in 2017.

F. Liquefaction Plants

In 2015, global liquefaction capacity increased by around 14.4 MTPA to reach a total nameplate capacity of 308

MTPA at year-end. Three projects started up in 2015: GLNG (3.9 MTPA) and QCLNG (8.5 MTPA) in Australia,

Donggi-Senoro in Indonesia (2 MTPA). Production gains were partially offset by plant shut-downs in Angola and

Egypt and force majeure events in Yemen. Five FIDs were taken during the year, 4 of which in the United States

(Sabine Pass Train 5, Corpus Christi Trains 1 & 2, Freeport Train 3) and 1 in Cameroon (GoFLNG.) At the end of

the year, approximately 140 MTPA of new liquefaction capacity were under construction, 62 MTPA of which were

located in the United States and 50 MTPA in Australia. In 2016, around 42 MTPA of new liquefaction capacity are

expected to come online, 28 MTPA of which will be located in Australia.

G. Regasification Plants

In 2015, global regasification capacity continued

to grow, reaching 777 MTPA at year-end. Three

onshore terminals (1 in Indonesia and 2 in Japan)

and 4 offshore terminals (2 in Egypt, 1 in Jordan,

1 in Pakistan) started operating in 2015,

representing a combined 23.5 MTPA additional capacity. Three new markets imported LNG, all of which through

offshore terminals: Egypt (Ain-Sokhna BW and Ain-Sokhna Höegh), Jordan (Aqaba) and Pakistan (Port Qasim). In

addition, in December, Poland brought a commissioning cargo to its onshore terminal in Swinouscjie. The

terminal is expected to start commercial operations in 2016. One expansion project was completed during the

year (GNL Quintero, in Chile). At the end of the year, 15 new onshore terminals were reported to be under

construction, 8 of which in China. Five expansion projects were also underway (2 in China, 1 in India, 1 in Thailand

and 1 in Greece). Total regasification capacity under construction at year-end reached 71.9 MTPA, of which 71%

or 51.7 MTPA located in Asia. In addition, 5 FSRU-based projects were under consideration in Chile, Colombia,

Ghana, Puerto Rico and Uruguay.

H. India

Indian imports remained in line with their 2014 level; around 14.6 MT. India joined the ranks of re-exporting

countries. In case of spot and short term 9700 thousand tonnes were imported, an increase by 30% roughly in

comparison to last year (2014- 7470).

Quantities (in 10^6 T) received in 2015 by India from the Exporting Countries

Equ. Guin Nigeria Norway

Trinidad&

Tobago Abu Dhabi Oman Qatar Yemen Australia

India 0.77 2 0.03 0.23 0.11 0.57 8.92 0.3 0.87

Indonesia Malaysia Papua New Guinea Peru

Re-exports

received

Re-exports

loaded Net Imports

India 0.3 0.12 0.07 0.06 0.44 -0.2 14.6

Liquefaction

Plants

Regasification

Plants

Total Nameplate

Capacity/ (MTPA) 308 777

Under construction at

year-end(MTPA) 42 71.9

16

India imported 62 percent of its LNG from Qatar; the other major ones are Nigeria (14 %) and Australia (6 %).

4277

2002

874 579 566

302 299 227 123 70 59 51 34 0

50010001500200025003000350040004500

Spot And Short-term Volumes (103 T) received in 2015- India

Qatar 62%

Nigeria 14%

Australia 6%

Equ. Guin. 5%

Oman 4%

Yemen 2%

Indonesia 2% Trinidad&

Tobago 2%

Malaysia 1%

Abu Dhabi 1%

Papua New Guinea 1%

Peru 0% Norway

0%

Other 3%

Over all LNG Import India (%)- 2015

17

OIL PRICES AT NEW 2016 HIGHS – WHAT’S NEXT VI.

Crude oil was at a 13-year record low $26 on February 11, 2016 and has soared more than 84 per cent since. Is

this recent price on sustainable basis or was a reaction on some speculation?

In general, Oil price depends on following dimensions:

Supply and demand: if supply is outstripping demand, prices will fall and if there is a shortage of oil,

prices will rise.

Political events: a war, rebellion or political uncertainty affecting major oil producers may prevent those

countries from producing and selling, reducing the supply of oil.

Economic growth: if demand is expected to grow faster than production, excess supply will be soaked

up and shortages will arise.

Considering these factors, recent upward trend of Oil prices could be due to following reasons:

A. Weaker dollar price

The international market price of crude oil is valued in US dollars. Therefore, when the oil price falls or rises, value

of the dollar against a range of currencies is also looked upon. This is how the effect of Dollar index on crude Oil

Price can be explained. Let’s say Dubai Fateh 32 API benchmark oil in local currency is at 200 UAE Dirham per

barrel and 50 USD/barrel in international market. Now, if USD strengthens, it will mean one dollar should be able

to buy more than what it earlier bought - which means that what is locally priced at 200 Dirham should now be

available at say 45 USD. Thus the price of crude goes down. This is the relation Dollar value and crude oil share -

one strengthens other weakens .The same trend is evident in the following Graph also, showing long term Oil

price trend vis a vis Dollar strength. In present scenario, oil

prices rose in tandem

with the decision of

the Federal Reserve

to keep its federal

funds rate unchanged,

prompting the dollar

to fall. This is first time

that Federa Reserve

didn’t change the rates

for consecutive third

time. The last hike was

way back in December.

Subsequent to the

decision, the Brent

crude futures hit a new high of $47.19 per barrel. Brent spiked nearly twenty percent in April, the largest monthly

gain in 2016. WTI too hit a 2016 high at $45.33. Brent was trading at just $26 a barrel at the start of

2016. Alongside, the Federal Reserve also stopped referring to risky world financial conditions, thus implying

improved market status. As such the Federal Reserve is expecting the world economies to pick up and use more

oil to produce and for exchanges. Similarly, the World Bank also raised its forecast of crude oil prices to $41 per

barrel in 2016 from its earlier estimate of $37 per barrel. (Both levels are already surpassed)

B. Oil Production

In the recent, US overproduction has come down; post 2010-2015 shale oil booms in the US. Domestic crude oil

production reached a record high of 9.3 million barrels per day. Since then, US oil production has dropped -

nearly 6 percent in the last year alone. The present drop in production is the lowest since September 2014 as

output stands at 8.8 million barrels per day, shaking off about 113,000 barrels per day. (Fig-1)

18

Figure 1 Figure 2

Few fracking companies relying on $70/barrel oil were able to weather cheap oil for a long time. Some have

maintained production at a loss. However, on a unsustainable business model. So far, 60 oil and gas companies

in the US have declared themselves bankrupt because Shale wells have depleted. Common depletion rate is 45

percent a year for fracked wells (vs. around 10 percent for classic wells). This means that after one year a fracked

well produces on average 55% of what it did on day 1. And for 12 million dollars investment, new wells are not

cheap. Figure 2.2 explains sudden decline in number of Oil rigs in past few months.

The existing wells are rapidly producing less and less and what used to be US oversupply flooding the market is

no more. Naturally, the imports are rising again to offset the falling production thus pushing up the price of oil,

as of late.

C. Disruption in supplies

Figure 3 is an elaborative

chart by Goldman Sachs

that shows the on-going

as well as predicted

Supply disruption in major

Oil producing countries.

Figure 3

In a gist Supply disruptions are

not limited to any particular

region of world, as shown in

Figure 4, sourced from eia

website, however rising

disruptions from OPEC countries

is evident since January.

Figure 4

19

D. OPEC’s Bleeding Economy

OPEC countries are hurting because of high budget deficits. OPEC countries have used their oil dominance and

relying on oil to fund everything. Now the same over reliance is hurting them badly due to low prices

OPEC

member

Fiscal break-even

price

Fiscal deficit (%

GDP)

Million barrels per

day

Spare capacity (%

unused)

Algeria $96.10 -13.90% 1.11 2.63%

Angola $110.00 -3.50% 1.79 2.22%

Iran $87.20 -2.90% 2.88 20.83%

Iraq $81.00 -23.10% 4.2 6.94%

Kuwait $49.10 1.20% 2.73 1.42%

Libya $269.00 -79.10% 0.43 20.00%

Nigeria $122.70 -2.80% 1.9 6.77%

Qatar $55.50 4.50% 0.67 5.71%

Saudi Arabia $105.60 -21.60% 10.25 17.13%

UAE $72.60 -5.50% 2.89 2.04%

Venezuela $117.50 -24.40% 2.38 3.21%

In the table above clearly shows debilitated conditions of various OPEC countries. Country like Venezuela running

a fiscal deficit of above 24% of GDP is so badly hit that it has declared a 2 day work week being unable to

generate enough electricity. Earlier OPEC gathered in Doha, Qatar on April, 16 to come to an agreement on

production cuts with Russia. A prospective cut in production soared the oil prices with a rally of 5 percent. But

the meeting ended in a stalemate and limit production by OPEC couldn’t be achieved. Now OPEC has planned a

meeting on June 2 and this meeting gains significance for a possible cut in production.

E. Conclusion

All above data shows that the present Oil Price cycle is headed north. Historically, Oil price cycles do not end

well. The big ones, like this, overshoot the mark and result in a supply shortage. With OPEC now producing flat

out, the Oil demand is fast catching up with the supply. The supply–Demand rebalancing is certainly on the card

predictably by Q2-2017 at around annual production/consumption of $98 mbbl/day as projected in the

following chart.

20

After the end of 2016, when oil supply and demand are back in balance, all significant supply outages (i.e.

Canadian fire, Nigerian militants, ISIS attacks in the Middle East, etc.) will send crude oil prices more upside.

All projections by major agencies are giving target of $/bbl 45-50 for 2016 and 65-70 for 2017. This is not a good

news for the fourth largest crude oil importer of the world i.e. India. but all these future projection should keep in

mind that rebound of crude above $/bbl 50 will bring shale oil production to its previous level and supply will

again outstrip the demand, and If June 2, meeting fails and Saudis increase production to meet rising summer

domestic demand, to preserve market share in its oil wars with Iran and Iraq, then a major meltdown in crude

price is expected. Energy desk is expecting crude not to go beyond $/bbl 65 till 2017.

Note:

The data and information in the report is sourced from websites and documents available in public

domain and doesn’t purport to be official view of government or any organization. Sincere efforts have

been made to present correct data; however, errors and omissions, if any, are regretted and the same may

please be brought to the notice of Energy Desk for necessary corrective action.