Oil and Gas Industry of India

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Submitted By

Ajay Mundra Siddharth Malik Amit Kumar Shivang Gupta Akshata Diwedi Amisha Agrawal Anant Jain Amit Vikram

Evolution of the Industry

Evolution of the Industry

The origin of the Indian oil & gas industry can be traced back to the late 19th century, when oil was first struck at Digboi in Assam in 1889.

At independence, oil exploration and production activities were largely confined to the North-Eastern region, particularly Assam and the daily crude oil production averaged just 5,000 barrels. The foundation of the Oil & Gas Industry in India was laid by the Industrial Policy Resolution, 1954, when the government announced that petroleum would be the core sector industry.
In pursuance of the Industrial Policy Resolution, 1954, Governmentowned National Oil Companies ONGC (Oil & Natural Gas Commission), IOC (Indian Oil Corporation), and OIL (Oil India Ltd.) were formed.

Evolution of the Industry

In mid 1980s exploratory efforts by ONGC and OIL India discovered of oil and gas in a number of structures in Bassein, Tapti, Krishna-Godavari-Cauvery basins, Cachar (Assam), Nagaland, and Tripura. In 1984-85, India achieved a self-sufficiency level of 70% in petroleum products.

By the end of 1990s, oil production had begun to decline.

Domestic oil production was able to meet only about 35% of the domestic requirement.

To meet its growing petroleum demand, India is investing heavily in oil fields abroad like Russia, Sudan, Iraq, Libya, Egypt, Qatar etc.

Advantage India
Investment worth US$ 563 billion is expected across the oil and gas value Chain under the Eleventh plan (2007-2012) 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. Liberal FDI regime Advantage India Skilled workforce Substantial capacity additions 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 industrys value chain. Over the period 20002009, 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.

Huge Capital Investment plans High demand potential

About 130,000 people were employed in the petroleum industry in 2009-10. The University of Petroleum and Energy Studies in Dehradun, Uttarakhand, is Asias first and only energy university.

Domestic gas supplies are projected to increase from 163 million metric standard cubic meters per day (MMSCMD) in 200910 to 285.4 MMSCMD by 2012. Refining capacity is projected to increase from 184.4 million metric tonnes per annum (MMTPA) in 200910 to 241 MMTPA by 2012.

Segment of Industry

Segment of Industry
Key segments upstream, midstream and downstream 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.

Core and Allied Product of the Industry

Core Product of the Industry

Allied product of Industry

Product
Benzene

Usage
Chemical industry

carbon black feedstock

Jute Batching oil LABFS

Carbon black manufacturers

Jute industry LAB manufacturers

Micro Crystalline Wax (MCW)

Paraffin wax Petcoke: Propylene Raw Petroleum Coke (RPC) Sulphur

Pharmaceutical industry
Candle manufacturers Cement industry Chemical industry CPC manufacturers Sulphur Sulphuric Acid manufacturers and Sugar Industry

Toluene

Explosives manufacturers

Size, Growth and Profitability

Size, Growth and Profitability

Indias oil and gas sector holds strategic importance in the economy The Indian oil and gas sector is one of the six core industries in India. it meets around 42 per cent of the countrys primary energy demand and contributes over 15 per cent to the gross domestic product (GDP). Due to increasing refining capacities, India is set to be a top exporter of petro-products in Asia, surpassing South Korea.

Indias exports of refined products stood at 0.95 million barrels per day (b/d) as of June 2011 and US$ 4.6 billion worth of petroleum products were exported during July 2011.

Size, Growth and Profitability

The recently released BMI forecasts state that India will account for 12.4 per cent of Asia Pacific regional oil demand by 2015, while satisfying 11.2 per cent of the supply. The 17 Public sector refineries are located at Guwahati, Barauni, Koyali, Haldia, Mathura, Digboi, Panipat, Vishakapatnam, Chennai, Nagapatinam, Kochi, Bongaigaon, Numaligarh, Mangalore, Tatipaka, and two refineries in Mumbai.
The private sector refinery built by Reliance Petroleum Ltd is in Jamnagar. It is the biggest oil refinery in Asia.

Size, Growth and Profitability

Crude Oil production for April-July 2011 was 12.858 million metric tonne (MMT), as compared to the 11.985 MMT in April-July 2010. Natural Gas production during April-July 2011 was 16356.3 million cubic metres (MCM). During April-July 2011, 57.01 MMT of crude oil was refined, compared to 54.33 MMT refined during corresponding period in 2010.

Size, Growth and Profitability

International Energy Agency (IEA) forecasts an increment of 3.8 per cent in Indias fuel demand led by diesel and petrol (gasoline). Demand for petrol is expected to expand by 7.6 per cent (363,000 b/d) in 2011 and eventually by 6.7 per cent (388,000 b/d) in 2012.

Global consultancy firm McKinsey anticipates that natural gas demand in India is expected to increase from current 166 million standard cubic meters per day to 320 million standard cubic meters per day by 2015. Gas consumption is expected to increase from an estimated 55 billion cubic metres (BCM) in 2010 to 76 BCM in 2015, while domestic production is anticipated to increase from around 45 BCM in 2010 to at least 73 BCM in 2015.

Growth of Oil and Gas Industry in India

Total Oil production has been increasing over the last 30 years.

Growth of Oil and Gas Industry in India (Contd.)

Total Oil Consumption has also been increasing linearly over the last 30 years.

Growth of Oil and Gas Industry in India (Contd.)

Total Natural Gas production has been increasing over the last 30 years. In last few years there has been a quantum jump.

Major Players Market Capitalization and Share Price

Major Player
Company Name
Reliance Industries Ltd. ONGC IOCL Cairn India Lte. GAIL OIL BPCL Petronet LNG LTD. Essar oil Ltd. HPCL

Market Capitalization
2681 bn 2318 bn 752 bn 551 bn 547 bn 323 bn 238 bn 130 bn 127 bn 125 bn

Share price

819.00 271.15

310.00
290.45 431.80 1345.00

659.00
174.40 93.70 369.90

Market Share of Oil and Gas Companies

Market Share of Oil and Gas Companies
1%
11% 28% 18% IOCL ONGC Reliance HPCL

BPCL
20% 22% Others (GAIL, OIL)

Life cycle of Industry

Level of Competition (Contd.)

SWOT Analysis

Strengths: Developing Economy Government Decision Weakness: Crude prices Lack of freedom

Opportunities: Equity oil Natural gas

Threat: Competition Continuing government interference

GOVERNMENT POLICIES AND REGULATIONS

FDI Policy
Sector/Activity FDI Cap/Equity Entry route Other conditions
Subject to the sectoral regulations of the Ministry of Petroleum & Natural Gas

E&P

100% 49% for public sector undertakings (PSUs) without involving any divestment or dilution of domestic equity in existing PSUs; 100% for private companies

Automatic

Refining

Foreign Investment Promotion Board Subject to sectoral (FIPB) for PSUs and policy automatic route for private companies

POLICIES AND REGULATIONS

Oil Field (Regulation and Development) Act, 1948. Oil and Natural Gas Commission Act, 1959. Petroleum and Minerals Pipelines Act, 1962 acquisition of users 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.

POLICIES AND REGULATIONS

Freight Subsidy (for far-flung areas) Scheme, 2002 Auto Fuel Policy 2003 National Biofuel Policy, 2002

Petroleum and Natural Gas Regulatory Board (PNGRB) Act, 2006

NELP (New Exploration Licensing Policy)

The GoI formulated the NELP in 199798 to provide an equal platform to both public and private sector companies for exploration and production of hydrocarbons. The NELP was conceptualized to increase domestic production and to attract inward investments.
The introduction of this policy has had a catalytic effect on the liberalization of the oil and gas sector by opening up the E&P segment for investments.

NELP
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

NELP
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 and 33 exploration blocks offered.

Policy for Change in Price of Petroleum Products

In line with the recommendations of a High Level Expert Group headed by Dr. Kirit Parikh the Government has decided that the pricing of petrol and diesel, both at the refinery gate and the retail level, will be market-determined.

It has also been decided that in case of a high rise and volatility in international oil prices, Government will intervene in the pricing of petrol and diesel. In view of the importance of the household fuels, namely PDS Kerosene and Domestic LPG, the Government has decided that the subsidies on these products will be continued.

Regulatory Bodies
Petroleum and Natural Gas Regulatory Board

The Petroleum and Natural Gas Regulatory Board Act, 2006 was enacted in April, 2006.
To protect the interest of consumers . To ensure uninterrupted and adequate supply of petroleum, petroleum products and natural gas in all parts of the country and promote competitive markets in Oil and Gas sector of India.

Human Resource

Challenges
To operate in harmony with the constantly changing business imperatives. Tremendous pressure on the HR to replace the ageing workforce within the coming years

Employee development and retention, E-learning.

Tough working conditions

Practices
Rewarded with fantastic pay packages and offered one month of vacation with family, completely paid by the company. Flexible lateral movements are offered for employees to discover their niche areas in the field. Interactive sessions with the employees through contextual databases and company sponsored offsite are facilitated to promote interpersonal effectiveness and bring down the barriers to communication amongst a diverse team of FEs.

Practices
Motivational work groups, discussion forums and close supervision ensure that signs of de-motivation are detected early. In addition to money, perks, incentives, vacations, etc which are predominant motivators in the oil industry, the motivation at field service manager level is the increased responsibility and the leadership role associated with it.

References
Ministry of Petroleum and Natural Gas Website. Ministry of Trade and Commerce Website. Ministry of External Affairs Website. India Brand Equity Forum (IBEF) Website. Wikipedia.

THANK YOU