Chemtech

SIZE:

• Oil & Gas provides for 35% of India’s energy requirements
• It is a critical input for downstream industries like petrochemicals, fertilizers and energy
• Crude oil demand is currently about 116 MMT while the domestic production of crude is 33.4 MMT
• Crude oil imports increased by 7% p.a. during the last 3 years
• Natural gas demand is about 150 MMSCMD (2004) while the domestic supply is only 81 MMSCMD
• Several major gas finds have taken place in India in the last few years

STRUCTURE:

• Oil and Natural Gas Commission (ONGC) and Oil India Limited (OIL), both public sector companies, are the largest with about 83% share of the total domestic oil and gas production
• The Exploration and Production (E&P) sector is witnessing increasing private sector participation: both domestic & foreign
• In the last four years, private sector/JV companies have made 32 significant hydrocarbon discoveries
• The world’s largest gas discovery in 2002 (about 5 trillion cubic metres) was made by Reliance Industries Ltd.
• International E&P companies like Hardy Oil & Gas, Niko Resources and Cairn Energy are already present in India

OPPORTUNITY:

• Crude Oil demand is projected to increase to about 190 MMT by 2012
• Rising global Crude Oil prices have triggered increased E & P focus to expand domestic production
• Gas demand is expected to reach 330 MMSCMD by 2012
• A CAGR of 10% for the next seven years
• Increased use of gas for power generation, petrochemicals, fertilizers and city gas distribution will drive demand growth

POTENTIAL:

• Growing demand supply mismatch provides ample opportunities for investment
• Exploration and production of Crude Oil, Gas and CBM
• The Government is actively promoting the creation of Strategic Oil & Gas reserves through partnerships with the private sector
• 32% of the Indian sedimentary area is unexplored – discovery of oil fields by investors such as Cairn Energy and ‘giant’ gas fields by Reliance, ONGC, etc. indicate a large potential for profitable investment in exploration
• Investment need of $7-8 billion in exploration and production by 2010

GOVERNMENT POLICY:

• 100% FDI is allowed in the exploration of Crude Oil and Natural Gas through the automatic route.
• The New Exploration Licensing Policy (NELP) is in place (since 1998) to facilitate Private sector participation in Oil and Gas exploration
• Over 108 oil blocks have been awarded since 1999 via 5 rounds of global competitive bidding under the NELP programme
• A Coal Bed Methane (CBM) Policy has been formulated which provides for attractive fiscal and contract terms for the exploration of CBM blocks
• Petroleum and Natural Gas Regulatory Board Bill to be enacted shortly - will result in the setting up of an Independent Regulator for Oil & Gas

SIZE:

• Petroleum & Natural Gas constitutes over 16% of GDP and includes transportation, refining and marketing of petroleum products and gas
• $90 billion revenues in FY 05
• India has a crude oil refining capacity of about 127 MMT
• Natural gas demand is about 150 MMSCMD (2004) with only 54% being met through domestic sources
• Production of petroleum products has grown at 6.5% p.a. during the last 3 years

STRUCTURE:

• Public sector companies play a major role in oil refineries, oil and gas pipelines and gasoline retail outlets
• Indian Oil Corporation, Bharat Petroleum and Hindustan Petroleum together account for about 70% of India’s refining capacity and own/franchise most gasoline retail outlets
• Gas Authority of India Ltd. (GAIL) owns and operates a large gas grid
• Reliance Industries and Essar Group are the major Indian Private sector participants
• Reliance is expanding its Jamnagar refining capacity to 60 MMTA. Expected to be the single largest grassroot refinery in the world
• Shell has invested in refining and retail; British Gas has invested in city gas distribution
• BP, Total, Exxon Mobil and Eni are also present in India. While they are currently in marketing lubricants, Total and BP plan to expand in other value chain segments

OPPORTUNITY:

• High GDP growth rate, rapidly growing vehicle population and better road infrastructure will drive consumption of petroleum products
• Industry is expected to grow at a CAGR of about 8% to 10%
• Over 190 MMT of refining capacity required by 2010
• Over 120MMSCMD of additional demand for Natural Gas in the next five years
• Recent gas finds and increased use of gas for power generation, petrochemicals, fertilisers and city gas distribution

POTENTIAL:

• Several areas of unexploited potential, including:
• City gas distribution
• LNG (import) infrastructure – terminals, regasification, pipelines to industrial consumers
• Growing demand-supply mismatch provides opportunities for investment in the entire value chain for petroleum (refining, product pipelines, storage and retail) and Natural Gas
• Investment need of $15 billion and $8 billion estimated in refining and marketing respectively by 2010

GOVERNMENT POLICY:

• 100% FDI is allowed in petroleum refining, petroleum product and gas pipelines and marketing/retail through the automatic route
• Marketing / retail of petroleum products requires divestment of 26% in favour of the Indian partner / public within 5 years.
• Virtual administrative price control of government over most petroleum products
• Petroleum and Natural Gas Regulatory Board Bill to be enacted shortly will result in the setting up of an Independent Regulator for Oil & Gas
• Natural Gas Pipeline Policy to be enacted shortly

• India is the fifth largest energy consumer in the world
• Largest contributor to the national exchequer in 2004-05 with taxes amounting to US$ 27 billion.
• Oil & Gas constituted 40 per cent of primary energy source in 2004.
• India is sixth largest crude oil consumer in the world with consumption at 119.3 MMT in 2004.
• Petroleum, Oil Lubricants (PoL) imports is 28 per cent (Source : PwC Analysis) of the total imports of India and PoL exports is 8 per cent of total exports for 2004-05.
• All five Indian companies appearing on the Fortune 500 list operate in the Oil & Gas sector.
• India is Ninth largest crude oil importer in the world.
• India ranks sixth in refining capacity in the world with capacity at 2.5 million barrels of oil per day in 2004 which is 3 per cent of the world’s refining capacity.
• India met 75 per cent of its crude oil demand through imports. The domestic production of crude oil has been in the range of 32-34 MMT over the past few years. About 60 per cent of it’s crude imports are from the Middle East.
• India has 26 sedimentary basins with an area of 3.14 million square km and prognosticated reserves of 28 billion tonne of oil equivalent of gas. The country is relatively unexplored with only 18 per cent of area extensively explored (Source : DGH). Only 25 per cent of the prognosticated reserves have been established till date. India has a total of 18 refineries with IndianOil (Indian Oil Corporation Ltd.) currently owning the maximum refining capacity.