oil gas 270111

1

OIL & GASNovember 2010

2

Contents

Advantage India

Market overview

Industry Infrastructure

Investments

Policy and regulatory framework

Opportunities

Industry associations

OIL & GAS November 2010

3

Advantage India

Advantage

India

Huge capital

investment

plans

Investment worth US$ 563 billion is expected across the oil and gas value chain under the Eleventh Plan (2007–2012).

High demand

potential

• India is the third-highest consumer of

coal (7.5 per cent share of global coal

consumption).

• Over the period 2000–2009, oil and gas

consumption grew at a 5 per cent CAGR

to reach 184 million metric tonnes

(MMT). This is projected to reach 368

MMT by 2025.

Enabling

regulation

and policy

The Government of India (GoI) has

enacted various policies (such as new

exploration licensing policy [NELP]

and coal bed methane [CBM]) policy

to encourage investments across the

industry’s value chain.Substantial capacity

additions

Skilled workforce

• About 130,000 people were

employed in the petroleum

industry in 2009-10.

• The University of Petroleum and

Energy Studies in Dehradun,

Uttarakhand, is Asia’s first and

only energy university.

Liberal FDI

regime

• 100 per cent foreign direct

investment (FDI) is allowed in

upstream and private sector

refining projects.

• The FDI limit for public sector

refining projects has been raised

to 49 per cent.

• Domestic gas supplies are projected to increase from 163 million metric standard cubic meters per day (MMSCMD) in 2009–10 to 285.4

MMSCMD by 2012.

• Refining capacity is projected to increase from 184.4 million metric tonnes per annum (MMTPA) in 2009–10 to 241 MMTPA by 2012.

Source: ―Basic statistics on Indian petroleum & natural gas 2009–10,‖ and ―Report of the Working Group on Petroleum & Natural Gas Sector for

the XI Plan (2007-2012),‖ Ministry of Petroleum & Natural Gas website, http://petroleum.nic.in/, accessed 6 December 2010.

Oil & Gas November 2010

ADVANTAGE INDIA

http://petroleum.nic.in/


4

Contents

Advantage India

Market overview


Investments


Opportunities



5

Market overview

• Petroleum products and natural gas together contributed 2.8 per cent (US$ 30.8 billion) to the country’s total GDP (US$ 1089.3 billion) in 2008–09.

Source: ―Basic statistics on Indian petroleum & natural gas 2009–10,‖ Ministry of Petroleum & Natural Gas website, http://petroleum.nic.in/,

accessed 6 December 2010.

• The upstream segment comprises exploration and production (E&P) activities.

• The midstream segment is involved in storage and transportation of crude oil and natural gas.

• The downstream segment is engaged in refining and production of petroleum products, and processing, storage, marketing and transportation of commodities such as crude oil and natural gas.

Key segments — upstream, midstream and downstream


MARKET OVERVIEW


6

Upstream segment — exploratory and development drilling

• The total number of exploratory and development wells and metreage drilled in India was 428 and 1019 thousand metres, respectively, in 2009–10.

• The national oil companies executed the bulk of the drilling.

Area2009–10

Wells Metreage

Exploratory

Onshore 110 298

Offshore 34 128

Development

Onshore 236 470

Offshore 48 123

Source: “Hydrocarbon Exploration and Production Activities India 2009–2010,‖ Directorate General of Hydrocarbons website,

http://dghindia.org/Publication.aspx, accessed 6 December 2010.

MARKET OVERVIEW


http://dghindia.org/Publication.aspx

7

Upstream segment — annual crude oil production … (1/2)

• Total production of crude oil stood at 33.7 MMT in 2009–10, 0.6 per cent higher than the production in 2008-09 (33.5 MMT).

• In 2009–10, total domestic oil consumption stood at 160 MMT, a decrease of 0.5 per cent over the previous year.

• The Oil & Natural Gas Corporation (ONGC) and Oil India Ltd (OIL) accounted for 73.8 per cent and 10.6 per cent, respectively, of total domestic crude oil production in 2009–10. The remaining share is held by private/joint venture (JV) fields.

Sources: Relevant company annual reports 2008–09 and

2009–10; Ministry of Petroleum & Natural Gas website,

http://petroleum.nic.in/, accessed 6 December 2010.

ONGC: Oil & Natural Gas Corporation; OIL: Oil India Ltd

Annual crude oil production (MMT) — company-wise details

MARKET OVERVIEW

24.4

26.1

25.9

25.4

24.9

3.2

3.1

3.1

3.5

3.6

4.6

4.8

5.1

4.7

5.3

0.0 10.0 20.0 30.0 40.0

2005-06

2006-07

2007-08

2008-09

2009-10

ONGC OIL Private/JV




8

Upstream segment — annual crude oil production … (2/2)

• Offshore production accounted for 64.9 per cent of domestic annual crude oil production for 2009–10. The remaining share was contributed by onshore production.

• During the Eleventh Five Year Plan period (2007–2012), production of crude oil is expected to increase by 24 per cent over oil production during the Tenth Five Year Plan period (2002–07).

Source: Ministry of Petroleum & Natural Gas website,


Annual crude oil production (MMT) — offshore/onshore

MARKET OVERVIEW

11.4

11.3

11.2

11.3

11.8

20.8

22.7

22.9

22.2

21.9

0.0 5.0 10.0 15.0 20.0 25.0

2005-06

2006-07

2007-08

2008-09

2009-10

Offshore Onshore




9

Upstream segment — annual natural gas production … (1/2)

• Total production of natural gas stood at 47.5 BCM in 2009-10 — 44.6 per cent more than the previous year’s production (32.9 BCM).

• The demand for domestic gas was estimated at 226 MMSCMD in 2009–10, whereas gas supply was 163 MMSCMD.

• ONGC accounted for 48.6 per cent (23.1 BCM) of total natural gas production during the year.

• Private/JV fields accounted for 46.3 per cent of total natural gas production This was mainly due to commencement of gas production at Reliance’s KG basin.

• Total production of natural gas is expected to reach 255.3 BCM by the end of the Eleventh Plan period.

22.6

22.4

22.3

22.5

23.1

2.3

2.3

2.3

2.3

2.4

7.4

7.0

7.7

8.1

22.0

0 10 20 30 40 50

2005–06

2006–07

2007–08

2008–09

2009–10

ONGC OIL Private/JV

Source: ―Basic statistics on Indian petroleum & natural

gas 2009–10,‖ Ministry of Petroleum & Natural Gas

website, http://petroleum.nic.in/, accessed 6 December

2010.

Annual natural gas production (BCM) — company-wise details

MARKET OVERVIEW




10

Upstream segment — annual natural gas production … (2/2)

Sources: ―Basic statistics on Indian petroleum & natural

gas 2009–10,‖ and ―Report of the Working Group on

Petroleum & Natural Gas Sector for the XI Plan (2007-

2012),‖ Ministry of Petroleum & Natural Gas website,


9.6

9.3

9.1

8.8

8.7

22.6

22.5

23.3

24.1

38.8

0.0 10.0 20.0 30.0 40.0 50.0

2005–06

2006–07

2007–08

2008–09

2009–10

Offshore Onshore

Annual natural gas production (BCM) — offshore/onshore

MARKET OVERVIEW

• In 2009–10, offshore gas production accounted for 81.7 per cent of total annual gas production in India.The remaining share was contributed by onshore production.

• Offshore production grew at the rate of 14.4 per cent CAGR over the period 2005–10.




11

Midstream segment — crude pipeline capacity

Sources: ―Basic statistics on Indian petroleum & natural gas 2008–09,‖ Ministry of Petroleum & Natural Gas website, http://petroleum.nic.in/,


Existing crude pipelines in India (as on 1 April 2010)

MARKET OVERVIEW

• As on 1 April 2010, the total length and capacity of the crude oil pipelines stood at 6,235 kms and 92.6 MMTPA respectively.

• ONGC holds 47.3 per cent of the crude pipeline capacity in India with a 673 kmslong pipeline network.

• IOCL holds 43.6 per cent of the crude pipeline capacity in India with its 4,366 kmslong network of crude pipelines.

• Remaining share of the crude pipeline capacity is held by OIL which owns the 1,193 km long Duliajan-Digboi-Bongaigaon-Barauni pipeline having a capacity of 8.4 MMTPA.

Name of the pipelineCapacity

(MMTPA)

Length

(km)

OIL - Duliajan-Digboi-Bongaigaon-Barauni 8.4 1,193

IOCL - Salaya-Mathura-Panipat Pipeline 21 1,870

IOCL - Haldia-Barauni/Paradip Barauni 11 1,302

IOCL - Mundra-panipat 8.4 1,194

ONGC-Mumbai High-Uran 15.63 204

ONGC-Heera-Uran 11.5 81

ONGC-Kalol-Nawagam-Koyali 8.54 129.31

ONGC-MHN-NGM 2.26 77

ONGC-CTF , Ank to Koyali (AKCL) 2 94.8

ONGC-Lakwa-Moran 1.5 18

ONGC-Geleki-Jorhat 1.5 48.47

ONGC-NRM to CPCL 0.74 6

ONGC-KSP-WGGS to TPK refinery 0.08 13.5

ONGC-GMAA EPT to S. Yanam unloading

terminal0.09 4

Total 92.64 6,235




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Downstream segment — refining … (1/2)

• India has 20 refineries — 17 in the public sector and three in the private sector.

• The country’s refining capacity increased to 184.4 MMTPA in April 2010 from 178 MMTPA in the previous year.

• Its total refinery crude throughput in 2009–10 was 160 MMT, 0.5 per cent lower than the volume in 2008–09 (160.8 MMT).

Source: ―Basic statistics on Indian petroleum & natural gas 2009–10,‖ Ministry of Petroleum & Natural Gas website,


Year

Refinery crude

throughput

(MMT)

2009–2010 160.03

2008–09 160.77

2007–08 156.10

2006–07 146.55

2005–06 130.10

2004–05 127.41

Annual refinery crude throughput

MARKET OVERVIEW




13

Public sector

Installed

capacity

(MMT)

Pro-rata capacity

utilisation (per

cent)

Indian Oil Corporation Limited

(IOCL)48.85 102.0

Hindustan Petroleum

Corporation Limited (HPCL)13.8 121.2

Chennai Petroleum Corporation

Limited (CPCL)10.5 96.2

Numaligarh Refinery Limited

(NRL)3 87.3

ONGC 0.066 70.5

Mangalore Refinery and

Petrochemicals Limited (MRPL)11.82 129

Private sector

Installed

capacity

(MMTPA)

Pro-rata capacity

utilisation (per

cent)

RIL 62 104.3*

Essar 10.5 128.6

Source: ―Basic statistics on Indian petroleum & natural gas

2008–09,‖ Ministry of Petroleum & Natural Gas website,


Downstream segment — refining … (2/2)

Refining capacity details (as on 1 April 2010)• The GoI has opened the refining industry to private sector investment to increase domestic refining capacity.

• Reliance Industries has emerged as the largest domestic refiner and has overtaken Indian oil Corporation (IOCL) after the commissioning of the former’s Reliance Petroleum Ltd (SEZ) (RPL [SEZ]) refinery in 2008, which has increased the company’s total refining capacity to 62 MMT.

MARKET OVERVIEW

*does not contain the RPL (SEZ) capacity utilisation




14

Downstream segment — production of petroleum products

• The production of petroleum products was 151.9 MMT (including 2.2 MMT of LPG production from natural gas) in 2009–10, a decrease of 0.5 per cent over last year’s production (152.7 MMT)

• Petroleum products derived from crude oil include:

• Light distillates — LPG, mogas, naphtha, natural gas liquids (NGL)

• Middle distillates — kerosene

• Heavy ends — furnace and lube oils, bitumen, petroleum coke, paraffin wax

• Production of petroleum products is expected to reach 904.8 MMT by the end of the Eleventh Plan period.



Production of petroleum products (MMT)

MARKET OVERVIEW

40.2 40.4

80.3 79.4

30.0 29.9

0.0

20.0

40.0

60.0

80.0

100.0

2008-09 2009-10

Light distillates Middle distillates Heavy ends




15

Downstream segment — marketing, retail and distribution

• Total sales of petroleum products by companies was 138.2 MMT in 2009–10, which was 3.6 per cent higher than in the previous year (133.4 MMT).

• IOC had the maximum retail outlets in the country at 51.1 per cent, followed by HPCL at 25 per cent and BPCL at 23.8 per cent. The remaining outlets were owned by private players.

• The total number of retail outlets of public sector oil marketing companies (OMCs) increased to 36,462 in April 2010 from 34,948 in 2009.

• The number of LPG distributors in India totaled 9,686 as on 1 April 2010.



Pipeline

Capacity

(MMTPA)

(as on 1 April

2010)

Length (km)

(as on 1

April 2010)

Throughput

(MMT)

(2009–10)

Product 65.90 10,615.8 52.1

LPG 3.90 2,252 3.5

Crude 92.64 6,235.08 72.64

Total 162.44 19,103 128.24

Existing pipeline network in India (as on 1 April 2010)

MARKET OVERVIEW




16

Consumption pattern — energy consumption mix

• India is largely dependent on coal and oil for its energy needs, and this dependency has been increasing over the years.

• The country’s consumption of coal increased to 245.82 million tonnes of oil equivalent (MTOE) in 2009, an increase of 6.5 per cent over the previous year (230.9 MTOE), underscoring the importance of coal as a primary source of energy.

Energy source Unit Consumption

Coal MTOE 245.8

Oil MMT 148.5

Natural gas MTOE 46.7

Hydroelectricity MTOE 24

Nuclear energy MTOE 3.8

Product Unit World India

Oil MTOE 5775 435

Gas MTOE 4125 224

Coal MTOE 3597 816

Source: ―Draft report of the expert committee on Integrated Energy

Policy,‖ Planning Commission 2005.

Source: ―BP Statistical Review of World Energy June 2010,‖ BP.

Projected energy consumption mix in India (2030)

Energy consumption mix in India (2009)

MARKET OVERVIEW


17

EXIM scenario

• The total value of gross crude and petroleum imports was estimated at US$ 87.2 billion (INR 4,184.8 billion) in 2009–10.

• The following are the volumes of imports in 2009–10:

• Crude oil —159.3 MMT

• LNG — 8.8 MMT

• Petroleum products — 14.7 MMT

• India’s primary exports in this sector include petroleum products.

• The total value of its export of petroleum products was estimated at US$ 30 billion (INR 1,440.4 billion) in 2009–10.



Import value (US$ billion)

MARKET OVERVIEW

35.8

45.6

56.8

72.6

78.2

5.8

8.6

12.7

13.4

7.0

0.7

1.2

1.5

2.0

1.9

0.0 20.0 40.0 60.0 80.0 100.0

2005-06

2006-07

2007-08

2008-09

2009-10

Crude Oil Petroleum products LNG

Import trend in oil and gas sector




18

Key players – Indian … (1/2)

Company SectorTurnover in 2009–10

US$ billion (INR billion)Operations Remarks

IOC Public 54 (2593.6)

Exploration and production

(E&P), refining, distribution and

marketing through pipelines,

downstream petroleum,

natural gas marketing, bio-fuels

and wind power projects

• IOC accounts for a market share of nearly

46 per cent in domestic petroleum products,

34 per cent of the national refining capacity

and 54 per cent of downstream sector

product pipeline capacity.

ONGC Public 22.1 (1,061.7)

E&P and downstream business

(through its subsidiary —

Mangalore Refinery and

Petrochemicals [MRPL])

• ONGC has the largest share of hydrocarbon

acreage in India.

• The company operates 15 major fields that

contribute about 60 per cent of India’s oil

production.

• It also has the maximum number of

exploration licenses.

HPCL Public 23.6 (1,131.6)

Refining, aviation fuelling and

marketing of petroleum

products

• HPCL has a strong presence in lubricants in

India, and owns brands such as HP Cruise,

HP Lal Ghoda and HP Racer 4.

BPCL Public 27.9 (1,337.5)

Refining, aviation fuelling and

marketing of petroleum

products

• BPCL was the first public sector oil company

to implement enterprise resource planning

(ERP) solutions in the country.

• The company has set up one of the biggest

centres of excellence in Asia to provide

online support to end users.

OIL Public 1.6 (79) E&P• OIL is primarily engaged in the development

of small and medium-sized fields.

MARKET OVERVIEW


19

Key players — Indian … (2/2)

Company Sector

Turnover in

2009–10

US$ billion

(INR billion)

Operations Remarks

GAIL

(India)

Limited

Public 5.6 (270.4)

E&P, gas processing,

transmission,

distribution, marketing

and petrochemicals

• GAIL has pioneered the development of India's gas transmission

infrastructure and currently owns about 7,850 km of natural gas

pipelines. It has transmission capacity of over 150 mmscmd.

• The company owns north India’s only gas-based integrated

petrochemicals complex.

RIL Private 44.1

(2,117.3)

E&P, petroleum refining

and marketing and

petrochemicals

• RIL is credited with the first discovery of gas in the Krishna-Godavari

(KG) basin in 2008, and is capable of producing 40 per cent of India’s

current oil and gas output.

• The company made its second discovery in May 2008 and third one in

December 2009.

• Production of natural gas at the KG basin commenced in June 2009.

• RIL currently has 13 blocks in its international E&P portfolio.

• The company has the largest grassroots refinery in the Asia-Pacific

region at Jamnagar in Gujarat.

Essar Oil

LimitedPrivate 8.8 (424)

E&P, refining and

marketing• Essar has the largest CBM acreage in India (2,700 sq kms).

Adani Gas

*Private 5.4 (258.9) Natural gas distribution

• Adani has set up a gas distribution network at Ahmedabad and

Vadodara in Gujarat and Faridabad in Haryana

Petronet

LNGPrivate 2.2 (106)

LNG re-gasification

terminal

• Petronet has set up India’s first LNG re-gasification terminal at Dahej

in Gujarat, which currently has a capacity of 10 MMTPA.

Source: ―Basic statistics on Indian petroleum & natural gas 2009-10.‖ Ministry of Petroleum & Natural Gas website, http://petroleum.nic.in/, accessed 6

December 2010.; relevant company annual reports.

MARKET OVERVIEW

*Revenue figures pertain to parent company revenues




20

Key players — international

Company Sector

Turnover

(2009–10)

US$ billion

Operations Remarks

Cairn

Energy India

Pty Ltd

Private 0.34

Exploration,

production and crude

pipeline

• Cairn operates the largest producing oil field in the

Indian private sector.

• The company has drilled about 81 wells (including six

horizontal and tested wells in 2009 , achieving a

production rate of more than 11,500 barrels of oil

per day (bopd).

Shell# Private

278.2

(year ending

February 2010)

Fuel retailing; supply of

crude, petroleum

products and

chemicals; technology

support to oil and gas

companies; lubricant

and LNG production

• Shell has an LNG re-gasification terminal at Hazira in

Gujarat, which has a capacity of 3.7 MMTPA.

• The company has established Shell Technology India

in Bangalore, for technical support services for Shell’s

operations in India and worldwide.

BG Group# Private

16.1

(year ending

December 2009)

E&P, transmission and

distribution

• The BG Group has a 65.12 per cent stake in Gujarat

Gas Company Limited, India’s largest private sector

natural gas distribution company, in terms of its sales

volume.

BP# Private

239.3

(year ending

December 2009)

Automotive lubricants,

E&P and solar power

• Castrol India, a part of the BP Group, is the second-

largest player in the Indian lubricant industry and the

market leader in the retail automotive lubricant

segment.

Sources: Relevant company annual reports.

MARKET OVERVIEW

#Revenue figures pertain to group revenues


21

Key trends — alternative fuels … (1/3)

Coal bed methane (CBM)

• CBM is an eco-friendly natural gas (methane), which is adsorbed in coal and lignite seams. Coal is the main source of CBM production, which is conducted by simple depressurisation and dewatering processes.

• Exploration and production of CBM activities furthers the quest to reduce the greenhouse effect and earn carbon credits.

• The GoI approved the CBM Policy in July 1997.

• The first commercial production of CBM was initiated in July 2007 at about 72,000 cubic metres per day. Four rounds of bidding have been completed till date:

• CBM i (2001) — 7 blocks offered

• CBM ii (2003) — 9 blocks offered

• CBM iii (2006) — 10 blocks offered

• CBM iv (2009) — 10 blocks offered

• India is the fourth-largest coal producer in the world with the third-largest proven coal reserves. With about 4.6 TCM of CBM resources, the country has significant prospects for commercial recovery of CBM.

MARKET OVERVIEW

Source: Directofourth- General of Hydrocarbons website, www.dghindia.org/, accessed 09 November 2010.


http://www.dghindia.org/CBMRounds.aspx?tab=0

22


Underground coal gasification (UCG)

• The technique of underground coal gasification converts unminable underground coal or lignite into combustible gases by gasifying the coal in situ. The technology was first widely used in the US in the 1800s and in India, in Kolkata and Mumbai, in the early 1900s. UCG is currently the only feasible technology available to harness energy from deep unminable coal seams, both economically and in an environmentally clean manner. This process reduces capital investment and operating costs as well as the cost of output gases by 25 to 50 per cent compared to surface gasification.

MARKET OVERVIEW


23


Gas hydrates

• The GoI has initiated the National Gas Hydrate Programme (NGHP) to map gas hydrates for use as an alternate source of energy by extracting methane from solids below the seabed in the deep ocean and the permafrost regions of the world.

• NGHP is a consortium of national E&P companies and research institutions.

Biofuels

• Biofuels (bioethanol and biodiesel) are fuels that are produced as an alternate source of energy from domestic renewable resources.

• Biofuels have lower emissions compared to petroleum or diesel.

• In India, biodiesel is produced from plants (renewable resources) such as jatropha and has the potential to reduce the country’s dependence on oil imports.

• Bioethanol is mainly produced from sugar or starch containing materials such as sugarcane and cellulosic material.

• The GoI has signed an agreement with the US to develop a joint clean energy research and development centre with second generation biofuels as one of its priority areas.

Sources: Directorate General of Hydrocarbons 2007–08 annual report, website, www.dghindia.org/CBMRounds.aspx?tab=0, accessed 6

December 2010, ―Status report on underground coal gasification,‖ August 2007, Government of India; ―National Policy on Biofuels,‖ Ministry of

New and Renewable Energy website, www.mnre.gov.in/policy/biofuel-policy.pdf, accessed 17 November 2010.

MARKET OVERVIEW


http://www.dghindia.org/CBMRounds.aspx?tab=0

http://www.mnre.gov.in/policy/biofuel-policy.pdf



24

Growth drivers … (1/2)

Abundant raw material

• India has large reserves of coal, crude oil and natural gas.

Growing demand for natural gas

• Utilisation of natural gas in different industries has increased over the years.

Industry-wise utilisation of natural gas in India

MARKET OVERVIEW

18,97822,191

32,111

11,892 10,541

15,135

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

2007-08 2008-09 2009-10

Energy purposes Non-energy purposes

Source: ―Basic statistics on Indian petroleum & natural gas 2009–

10,‖ http://petroleum.nic.in/, accessed 6 December 2010.M

illio

n c

ub

ic m

etre

s



25

Growth drivers … (2/2)

• Natural gas is an important input in various industries for the following:

• Energy:

• Power generation

• Industrial and domestic fuel

• Tea plantations

• Captive use or LPG shrinkage

• Non-energy:

• Fertiliser industry

• Petrochemicals

• CNG

MARKET OVERVIEW


26

Contents

Advantage India

Market overview


Investments


Opportunities



27

Industry infrastructure

Name of SEZ and

statusState

Area

(hectares)Sector

Developer/

PromoterDetails

Mangalore SEZ Ltd

(Notified)Karnataka 588

1.Petrochemicals

and petroleum

2. Multi-product

(proposed)

ONGC,

KIADB,

IL&FS, KCCI

• Dedicated pipeline-cum-road

corridor (proposed)

• Water and power available

• Non-processing zone to have

housing, offices, educational and

health facilities

• Proposed units — OMPL, ISPRL,

MRPL refinery

Gujarat

Hydrocarbons and

Power SEZ Ltd

(Formal approval)

Gujarat 140 Oil and gas

Gujarat

Hydro-

carbons and

Power SEZ

Ltd

• Target companies from upstream

and downstream businesses

• Proposed residential

accommodation, educational,

healthcare and recreational

facilities

Nagarjuna Oil

Corporation Ltd

(Formal approval)

Tamil Nadu 104.01Petrochemicals

and petroleum

Nagarjuna Oil

Corporation

Ltd,

Nagarjuna

Fertilisers &

Chemicals

Ltd

• Establishment of a 6 MMTPA

petroleum refinery at an estimated

cost of about US$ 1 billion

• Project expected to be

commissioned by mid-2011

Karnataka Industrial Development Board (KIADB), Karnataka Chamber of Commerce and Industry (KCCI), ONGC Mangalore Petrochemicals Ltd

(OMPL), Indian Strategic Petroleum Reserves Limited (ISPRL)

Sources: Relevant SEZ official websites

INDUSTRY INFRASTRUCTURE


28

Contents

Advantage India

Market overview


Investments


Opportunities



29

Investments — FDI

Country-wise FDI (April 2000–September 2010)

CountryFDI (total value)

(US$ million)Focus area(s)

Singapore 11,329 Oil refinery and transportation

Mauritius 51,089 Oil refinery and fuel

UK 6,212 Oil refinery, oil exploration and fuel

Cyprus 4,314 Oil refinery, oil exploration and fuel

US 9,002 Oil refinery and fuel

• India’s petroleum and natural gas sectors attracted FDI equity worth US$ 525 million between April 2010 and September 2010.

• Cumulative FDI in the petroleum and natural gas sectors has been estimated at US$ 3.2 billion between April 2000 and September 2010.

Source: ―Factsheet on FDI,‖ Department of Industrial Policy and

Promotion (DIPP) website, www.dipp.nic.in, accessed 6 December,

2010.

Source: ―Basic statistics on Indian petroleum & natural gas 2009–10.‖ Ministry

of Petroleum & Natural Gas website, http://petroleum.nic.in/, accessed 6

December 2010.

Cumulative FDI

Period: April 2000 to September 2010

Sector Amount of FDI

(US$ million)

Petroleum and natural gas 3,191

INVESTMENTS


http://www.dipp.nic.in/



30

Investments — M&A … (1/2)

• Inbound deals:

• ONGC signed a Memorandum of Understanding (MoU) with Arrow Energy (Australia) for cooperation in CBM production in 2009.

• Vedanta Resources signed an agreement to buy 51 to 60 per cent of Cairn India’s oil and gas assets for US$ 9.6 billion. Vedanta seeks to acquire a 31 to 40 per cent stake directly and the remaining 20 per cent through its subsidiary, Sesa Goa.

• Domestic deals:

• 2009: IOCL has bought a 5 per cent stake in OIL for US$ 232.9 million.

• 2010: Reliance Power Ltd has acquired Reliance Natural Resources Ltd for US$ 1,529 million.

M&A scenario — details

Period : January 2009 to August 2010

Deal type No of dealsDeal value

(US$ million)

Inbound 7 27

Outbound 4 3,065

Domestic 8 3826

Sources: Bloomberg, Thomson One Banker; company

websites

INVESTMENTS


31

Investments — M&A … (2/2)

• Outbound deals:

• Reliance Eagleford Upstream LP, a subsidiary of Reliance India Ltd (RIL), has entered a JV with Pioneer Natural Resources Company. It will acquire a 45 per cent stake in Pioneer’s Eagle Ford Shale acreage for a consideration of US$ 1.3 billion.

• Reliance Marcellus LLC, a subsidiary of Reliance India Ltd (RIL), has formed a JV with Atlas Energy, Inc The former has acquired a 40 per cent interest in Atlas’ Marcellus Shale acreage for US$ 1.7 billion.

• An international consortium, comprising Indian national oil companies, has acquired a 40 per cent stake in Empresa Mixta in Venezuela. The members and their stakes include ONGC VideshLimited (OVL) —11.0 per cent, IOCL — 3.5 per cent, OIL — 3.5 per cent, RepsolYPF — 11 per cent and PETRONAS — 11 per cent. The total project cost is US$ 19 billion.

• Through its subsidiary, Reliance Marcellus II, LLC, Reliance Industries has formed a 60:40 JV with Carrizo Oil & Gas, Inc of the US. Reliance plans to acquire a 20 per cent interest in Carrizo’s 52,600 net acres in Pennsylvania’s shale acreages for US$ 65 million through the agreement. The company will also acquire a 100 per cent stake in these acreages from an affiliate of AvistaCapital Partners for US$ 327 million.

INVESTMENTS


32

Increasing demand

• Between 2005 and 2010, India’s consumption and import of crude oil increased steadily, while production remained largely stagnant due to the country’s low oil discovery rate.

• Imports are currently meeting the high demand for crude oil as a source of energy. They accounted for 82.5 per cent of total crude oil supply in 2009–10.

Product Unit 2014–15 2019–20 2024–25

Petroleum

productsMMT 226 288 368

Natural gas MMSCMD 329 358 391

*Sources: ―Basic statistics on Indian petroleum & natural gas 2009-10," Ministry of Petroleum & Natural Gas website, http://petroleum.nic.in/,

accessed 6 December 2010; ―BP Statistical Review of World Energy, June 2010,‖ BP; ―India Hydrocarbon Vision 2025,‖ Government of India

Val

ue (

MM

T)

*Crude oil — demand-supply trend

*Demand projections

INVESTMENTS

32.2 34.0 34.1 33.5 33.7

119.6 120.4132.9

143.6 148.5

99.4 111.5121.7

132.8

159.3

0.0

50.0

100.0

150.0

200.0

2005-06 2006-07 2007-08 2008-09 2009-10

Production Consumption Imports




33

Contents

Advantage India

Market overview


Investments


Opportunities



34

Policy and regulatory framework … (1/4)

Sector/Activity FDI Cap/Equity Entry route Other conditions

E&P 100% Automatic

Subject to the sectoral

regulations of the Ministry

of Petroleum & Natural

Gas

Refining

49% for public sector undertakings

(PSUs) without involving any

divestment or dilution of domestic

equity in existing PSUs; 100% for

private companies

Foreign Investment

Promotion Board

(FIPB) for PSUs and

automatic route for

private companies

Subject to sectoral policy

Source: ―Petroleum and natural gas sector FDI,‖ Ministry of Petroleum & Natural Gas website, http://petroleum.nic.in/, accessed 6 December 2010.

FDI policy

POLICY AND REGULATORY FRAMEWORK




35


• Oil Field (Regulation and Development) Act, 1948

• Oil and Natural Gas Commission Act, 1959

• Petroleum and Minerals Pipelines Act, 1962 — acquisition of user’s rights by the GoI on land demarcated for laying pipelines for the transport of petroleum and other minerals from one area to another

• Oil Industry (Development) Act, 1974

• Coal Bed Methane Policy, 1997 — to encourage exploration and production of CBM gas as a new eco-friendly source of energy



36


• Freight Subsidy (for far-flung areas) Scheme, 2002 — to compensate public sector OMCs on the freight incurred to distribute subsidized products in far-flung areas

• Auto Fuel Policy 2003 — to provide a roadmap to comply with various vehicular emission norms and corresponding fuel quality upgrading requirements over a period of time

• National Biofuel Policy, 2002 — to promote biofuel usage, the GoI has provided concessional excise duty of 16 per cent on bioethanol and exempted biodiesel from excise duty.

• Petroleum and Natural Gas Regulatory Board (PNGRB) Act, 2006 — to regulate refining, processing, storage, transportation, distribution, marketing and sale of petroleum, petroleum products and natural gas

• New Exploration Licensing Policy (NELP), 1999 — to provide a contract framework for E&P of hydrocarbons; licenses for exploration only awarded through a competitive bidding system; eight rounds of bidding completed so far


Source: Ministry of Petroleum & Natural Gas 2007–08 annual report.


37


Government of India initiatives

• The Eleventh Plan outlay for the oil and gas sector has been fixed at US$ 47.7 billion (INR 2,290.7 billion), about 121 per cent more than the allocation for the Tenth Plan.

• Thrust areas for E&P in the plan:

• Increasing domestic production by attracting investments in the upstream sector

• Increasing production at ONGC’s assets, including its maturing fields

• Providing exploration coverage of 80 per cent during the period

• Establishing a national knowledge hub during the period

• Improvement of gas availability:

• Intensifying domestic E&P activities

• Exploiting new sources of energy such as CBM

• Conducting underground coal gasification

• Implementing the National Gas Hydrate Programme (NGHP) to evaluate hydrate resources

• The GoI has formulated a regulatory framework for the safe usage of LPG and CNG as an automotive fuel.

Source: Ministry of Petroleum & Natural Gas 2007–08 annual report.



38

New Exploration Licensing Policy (NELP) … (1/2)

• The GoI formulated the NELP in 1997–98 to provide an equal platform to both public and private sector companies for exploration and production of hydrocarbons.

• The NELP was conceptualised to increase domestic production and to attract inward investments.

• The introduction of this policy has had a catalytic effect on the liberalisation of the oil and gas sector by opening up the E&P segment for investments.

• Under the NELP, acreages are offered to participating companies through open competitive bidding.

Chronology of events:

• 1998 — 48 exploration blocks offered in the first round

• 2000 — second round of the NELP launched and 25 exploration blocks offered

• 2002 — third round of the NELP launched and 27 exploration blocks offered

• 2003 — fourth round of the NELP launched and 24 exploration blocks offered



39

New Exploration Licensing Policy (NELP) … (2/2)

• 2005 — fifth round of the NELP launched and 20 exploration blocks offered

• 2006 — sixth round of the NELP launched and 55 exploration blocks offered

• 2007 — seventh round of the NELP launched and 57 exploration blocks offered

• 2009 — eighth round of the NELP launched and 70 exploration blocks offered

• 2010 — ninth round of the NELP launched on 15 October 2010 — bid closing date 18 March 2011

Sources: ―Chronology of E&P events in India,‖ Directorate General of Hydrocarbons website,

http://www.dghindia.org/EandPGovernanceInIndia.aspx, accessed 5 January 2010; ―Press note on launch of NELP – VIII,‖ 9 April, 2009, Ministry

of Petroleum & Natural Gas website www.petrolrum.nic.in; NELP-IX website, http://www.indianelpix.com/, accessed 15 November 2010;

―India-US Agreement for Setting up Joint Clean Energy Research and Development Centre,‖ 9 November 2010, Press Information Bureau,

Government of India website, http://www.pib.nic.in/newsite/erelease.aspx?relid=0, accessed 16 November 2010.



http://www.dghindia.org/EandPGovernanceInIndia.aspx

http://www.petrolrum.nic.in/

http://www.indianelpix.com/

http://www.pib.nic.in/newsite/erelease.aspx?relid=0

40

Highlights of the CBM Policy

• Blocks are awarded through an open international competitive bidding system.

• The GoI has no participating interest.

• No upfront payment is required.

• Exemption from payment of customs duty on imports is required for CBM operations.

• Companies have the freedom to sell gas in the domestic market.

• Companies are provided a seven-year tax holiday.

Source: Directorate General of Hydrocarbons 2007–08 annual report.



41

PNGRB — key functions

For petroleum, petroleum products and natural gas:

• Ensures the availability of resources at all times

• Monitors prices and transportation rates to check restrictive trade practices

• Ensures equitable distribution

• Enforces retail service obligations for retail outlets and marketing service obligations for entities

• Maintains information data bank of activities relating to petroleum, petroleum products and natural gas

• Lays down technical standards for related activities in this sector

Source: ―About PNGRB,‖ PNGRB website, www.pngrb.gov.in, accessed 11 November 2010.



http://www.pngrb.gov.in/

42

Contents

Advantage India

Market overview


Investments


Opportunities



43

Opportunities in the upstream segment … (1/2)

Sources: Ministry of Petroleum & Natural Gas website, www.petroleum.nic.in; ―India-US MOU on Shale Gas,‖ Ministry of Petroleum & Natural Gas, 8

November 2010, Press Information Bureau, Government of India website, http://www.pib.nic.in/newsite/erelease.aspx?relid=0, accessed 17 November 2010.

OPPORTUNITIES

Exploration and

development of new

fields

Development of

unconventional

resources


• India has significant potential to discover new oil and gas basins since 78 per cent of the country’s

sedimentary area is yet to be explored. Recent large-scale oil and gas discoveries in the Krishna

Godavari and Rajasthan basins have amply demonstrated this potential.

• The GoI has enacted favourable regulatory policies and provided several fiscal incentives to promote

the development of the domestic upstream segment. As a result, the NELP has received an

encouraging response so far. A total of 246 blocks were awarded under the eight bidding rounds

(from 2001 to November 2010) and 68 oil and gas discoveries have been made so far in the NELP

blocks.

• In India, drilling activities are moving towards the deep sea, as most areas nominated under the

NELP are under the deep sea. In the eight rounds of NELP bidding, a total of 80 deep sea blocks

were awarded. Consequently, this has opened up opportunities for global upstream companies to

carry out deepwater exploration, either independently or in partnerships, with domestic players.

• The GoI has also opened up avenues for the exploration and development of CBM fields. Up till

2010, 31 CBM blocks have been awarded over four rounds of CBM bidding.

• Methane hydrates are expected to be an important source of energy in the future, especially after

the discovery of methane hydrate reserves in the Krishna, Godavari and Andaman basins. India has

recently set up the National Gas Hydrate Program (NGHP) to harness the potential of this source.

• Furthermore, the development of shale gas in the country is likely to gain importance with the

technological advancements taking place. India has signed an MoU with the US for shale gas

cooperation, including resource assessment and technical studies for shale gas exploration in the

country, as well as for training Indian personnel in the shale gas domain.

http://www.petroleum.nic.in/

http://www.pib.nic.in/newsite/erelease.aspx?relid=0

44

Opportunities in the upstream segment … (2/2)

Source: Ministry of Petroleum & Natural Gas; ONGC website, www.ongcindia.com, accessed 16 November 2010.

OPPORTUNITIES

Mature oil-

producing basins

Increasing demand

for skilled labour

Growing demand

for oilfield services

(OFS) and

equipment


• There are promising opportunities for companies specialising in the deployment of secondary and

tertiary forms of enhanced oil recovery (EOR) techniques, since the majority of the country’s

producing basins have matured or have begun to mature.

• The demand for skilled human resources is set to increase since the segment is witnessing

substantial capacity augmentation across the value chain.

• This is a ready platform for global petroleum institutes to establish their presence in India.

• E&P spend in the country has doubled from about US$ 2.5 billion in 2004–05 to about US$ 5 billion

in 2007–08. Overall E&P spend is expected to be in the range of US$ 90–110 billion in the next 7–10

years.

• This is will create a sustained demand for OFS, e.g., drilling rigs, offshore support vessels, tubular

goods, and seismic services and equipment for constructing process platforms, pipelines and

collecting stations, as well as other surface facilities for transportation of oil and gas from wells to

delivery points.

http://www.ongcindia.com/

45

Opportunities in the midstream segment

Source: Ministry of Petroleum & Natural Gas website, www.petroleum.nic.in, accessed 6 December 2010; Welspun Corp website,

www.welspun.com, accessed 17 November 2010.

OPPORTUNITIES

Expansion of gas

transmission

pipelines

Augmentation of

LNG capacity


• The country’s gas pipeline coverage has increased substantially and has significant potential for

further expansion. India currently has a trunk gas pipelines network of 9,900 km with a transmission

capacity of 292 MMSCMD.

• Domestic gas supplies are expected to increase significantly from the new domestic gas fields and

LNG capacity. To monetise the increased gas supplies, the GoI is aggressively promoting setting up

of gas transmission infrastructure across the country by encouraging the participation of players

from the private and public sectors. For example, GAIL (India) Ltd is planning to lay 6,663 km of gas

pipelines by 2012–13 at an estimated costs of US$ 6.3 billion (INR 303 billion), which will provide

ample opportunities for gas transmission, engineering, engineering procurement construction (EPC)

and pipeline-manufacturing companies.

• Between 2004 and 2010, LNG imports’ share in the total domestic gas supply of the country has

improved significantly from 1 per cent to 20 per cent due to brownfield and greenfield expansions.

• India is expected to witness significant expansion in its LNG re-gasification capacity in the near to

medium term, which is expected to increase the share of LNG in its domestic gas supply to 32 per

cent in 2015. This is expected to create opportunities for players specialising in operating LNG

terminals, engineering and provision of EPC services.


http://www.welspun.com/

46

Opportunities in the downstream segment … (1/2)

Source: Ministry of Petroleum & Natural Gas website, www.petroleum.nic.in, accessed 6 December 2010; PNGRB website, www.pngrb.gov.in,

accessed 11 November 2010.

OPPORTUNITIES

Emphasis on city gas

distribution (CGD)

networks

Augmentation of

refining capacity


• The successful development of CGD networks in Delhi and Mumbai, coupled with the support provided

by the GoI, is likely to give a boost to this segment in the scenario of increasing gas availability. PNGRB

projects may result in CGD coverage growing from 41 cities at present to 250 cities by 2020, which

would entail an investment of about US$ 8–9 billion.

• Therefore, this segment offers promising opportunities to both global and domestic players in the field of

CGD infrastructure development, including gas distribution pipelines, CNG stations and manufacturing

of CNG kits.

• Domestic refiners are aggressively increasing their refining capacity by expanding their existing facilities

and building new grassroot refineries. Indian refiners are expected to increase their capacity by 62

MMTPA by 2010–2012. With significant capacity additions planned, India is expected to become a global

refining hub.

• Opportunities for players to construct new refineries, either independently or in collaboration, are due

to the following reasons:

• India offers low construction and operation costs to set up new refineries in the country.

• The country’s favourable location and vast coastline provides its refiners with a strategic freight

advantage.

• Developed countries are expected to increasingly rely on imported petroleum products as stringent

environmental norms and high capital costs limit refining capacity, construction and/or expansion in

these countries. This presents an opportunity for Indian refiners to increase their exports.

• India has favourable regulatory policies, such as relaxation of FDI limits and tax rebates for new

refineries, to promote capacity enhancement in this segment.


http://www.pngrb.gov.in/

47

Opportunities in the downstream segment … (2/2)

Source: Ministry of Petroleum & Natural Gas website, www.petroleum.nic.in, accessed 6 December 2010

OPPORTUNITIES

Expansion of

petroleum product

distribution

networks


• The demand for transportation and cooking fuel is expected to increase significantly in the future.

This is expected to drive the demand for new transportation fuels and LPG marketing stations.

• The GoI has projected an investment of US$ 12.7 billion (INR 608 billion) for the development of

marketing infrastructure for petroleum products for 2007–2012. Consequently, this creates

opportunity for the following:

• Enhanced role of private players in domestic distribution of petroleum products

• Manufacturing and distribution of LPG cylinders, kits, valves, regulators, etc., as well as

manufacturing of new LPG pipelines, tankers and bottling facilities

• Collaboration between private and foreign players with domestic oil marketing companies in

areas including the expansion of retail networks and logistics support

• International experience could be leveraged in building non fuel retailing business (convenience

stores) and brand building activities such as quality assurance, loyalty cards, conducting surveys

and soliciting customer feedbacks.


48

Contents

Advantage India

Market overview


Investments


Opportunities



49


Name Address Contact person Telephone E-mail

Oil Industry

Development Board

(OIDB)

301, World Trade Centre, Babar

Road, New Delhi –110001

Mr T S

Balasubramanian,

Financial Adviser

and Chief Accounts

Officer

91-11-

23413298

91-11-

23414692

[email protected]

Petroleum

Conservation Research

Association (PCRA)

Sanrakshan Bhavan, 10 Bhikaji Cama

Place, New Delhi – 110066

Mr Arun Kumar,

ED

91-11-

26198799

Ext.301

[email protected]

Bureau of Energy

Efficiency (BEE)

Ministry of Power, 4th floor, SEWA

Bhawan, RK Puram, New Delhi –

110066

Dr Ajay Mathur,

Director General

91-11-

26178316, 91-

11- 26179699

[email protected],

[email protected]

Oil Industry Safety

Directorate

Ministry of Petroleum & Natural Gas,

7th floor, ―New Delhi House‖, 27

Barakhamba Road, New Delhi –

110001

Mr J B Verma, ED91-11-

[email protected]

Petroleum Planning and

Analysis Cell (PPAC)


2nd floor, Core-8, SCOPE Complex, 7

Institutional Area, Lodhi Road, New

Delhi – 110003

Dr Basudev

Mohanty, Director

91-11-

24362501, 91-

11- 24361380

-

Directorate General of

Hydrocarbons


C-139, Sector 63, Noida – 201301

Mr S K Srivastava,

Director General

0120 -

[email protected]

INDUSTRY ASSOCIATIONS


mailto:[email protected]








50

Note

Wherever applicable, numbers in the report have been rounded off to the nearest whole number.

Exchange rate used: US$ 1= INR 48

NOTE


51

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DISCLAIMER


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transportation of crude

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advantage indiaoil gas