Oil And Gas
Oil consumption in India is estimated to reach 4 million barrels per day (MMbpd) by FY16.

Oil and Gas Industry in India

Latest update: March, 2015

Oil consumption in India

Oil consumption in India is estimated to expand at a CAGR of 3.3 per cent during FY2008-16 to reach 4 mbpd.

Oil consumption in India

Shares in crude pipeline network by length

In terms of length, IOCL accounts for 45.5 per cent (4,448 km) of India's crude pipeline network.

Shares in crude pipeline network by length

Imports and domestic oil production in India

Backed by new oil fields, domestic oil output is anticipated to grow to 1 mbpd by FY16.

Imports and domestic oil production in India

Shares in India's total refining capacity

In FY14, IOC emerged as the largest domestic refiner with a capacity of 54.2 MMT.

Shares in India's total refining capacity

Updated: March, 2015

SECTORAL REPORT | March, 2015

Introduction

The oil and gas sector is one of the six core industries in India. It is of strategic importance and plays a pivotal role in influencing decisions across other important spheres of the economy.

In 1997–98, the New Exploration Licensing Policy (NELP) was envisioned to deal with the ever-growing gap between demand and supply of gas in India. As per a recent report, the oil and gas industry in India is anticipated to be worth US$ 139,814.7 million by 2015. With India’s economic growth closely linked to energy demand, the need for oil and gas is projected to grow further, rendering the sector a fertile ground for investment.

To cater to the increasing demand, the Government of India has adopted several policies, including allowing 100 per cent foreign direct investment (FDI) in many segments of the sector, such as natural gas, petroleum products, and refineries, among others. The government’s participation has made the oil and gas sector in the country a better target of investment. Today, it attracts both domestic and foreign investment, as attested by the presence of Reliance Industries Ltd (RIL) and Cairn India.

Market Size

Backed by new oil fields, domestic oil output is anticipated to grow to 1 MBPD by FY16. With India developing gas-fired power stations, consumption is up more than 160 per cent since 1995. Gas consumption is likely to expand at a CAGR of 21 per cent during FY08–17.

Domestic production accounts for more than three-quarters of the country’s total gas consumption.

India increasingly relies on imported LNG; the country was the fifth-largest LNG importer in 2013, accounting for 5.5 per cent of global imports. India’s LNG imports are forecasted to increase at a CAGR of 33 per cent during 2012–17.

State-owned ONGC dominates the upstream segment (exploration and production), accounting for approximately 60 per cent of the country’s total oil output (FY13).

IOCL operates 11,214 km network of crude, gas and product pipelines, with a capacity of 1.6 MBPD of oil and 10 million metric standard cubic metre per day (MMSCMD) of gas. This is around 30 per cent of the nation’s total pipeline network. IOCL is the largest company, operating 10 out of 22 Indian refineries, with a combined capacity of 1.3 MBPD.

Investment

According to data released by the Department of Industrial Policy and Promotion (DIPP), the petroleum and natural gas sector attracted foreign direct investment (FDI) worth US$ 6,519.53 million between April 2000 and January 2015.

Following are some of the major investments and developments in the oil and gas sector:

  • Kirloskar Oil Engines Ltd (KOEL) and MTU Friedrichshafen, GmbH have signed a memorandum of understanding (MoU). The MoU lays down exclusive cooperation on the building and commissioning of emergency diesel gensets (EDG).
  • CDP Bharat Forge GmbH has acquired 100 per cent equity shares of Mécanique Générale Langroise (MGL) for € 11.8 million (US$ 12.91 million). The acquisition would consolidate Bharat Forge’s position in the oil and gas sector by enhancing service offerings and geographical reach.
  • Technip has won a € 100 million (US$ 109.37 million) contract from Oil and Natural Gas Corporation (ONGC) to build an onshore oil and gas terminal in Andhra Pradesh.
  • Essar Oil Ltd has signed a deal with Russia-based OAO Rosneft to import 10 million tonnes (MT) of crude oil per year for 10 years.
  • The oil marketing companies have reduced the price of non-subsidised liquefied petroleum cooking gas (LPG) by Rs 43.5 (US$ 0.69) per cylinder. The companies have also reduced jet fuel rates by 12.5 per cent, the sixth straight reduction in prices since August 2014.
  • Reliance Industries Ltd (RIL) and Mexican state-owned company Petroleos Mexicanos (Pemex) have entered into a memorandum of understanding (MoU) for cooperation in the oil and gas sector.
  • GAIL Global USA LNG LLC (GGULL) has signed an agreement with the US-based WGL Midstream Inc for sourcing gas required to produce 2.5 MT of liquefied natural gas (LNG) a year at the Cove Point Terminal in Maryland, US.

Government Initiatives

Two landmark initiatives for energy efficiency – Design Guidelines for Energy Efficient Multi-Storey Residential Buildings and Star Ratings for Diesel Gensets and for Hospital Buildings – were launched by Mr Dharmendra Pradhan, Minister of State with Independent Charge for Petroleum and Natural Gas, Government of India.

Some of the major initiatives taken by the Government of India to promote oil and gas sector are:

  • India and Norway have discussed bilateral relationship between the two countries in the field of oil and natural gas and decided to extend cooperation in hydrocarbon exploration.
  • To strengthen the country`s energy security, oil diplomacy initiatives have been intensified through meaningful engagements with hydrocarbon rich countries.
  • PAHAL - Direct Benefit Transfer for LPG consumer (DBTL) scheme launched in 54 districts on November 11, 2014 and expanded to rest of the country on January 1, 2015 will cover 15.3 crore active LPG consumers of the country.
  • 24 x 7 LPG service via web launched to provide LPG consumers an integrated solution to carry out all services at one place, through MyLPG.in, from the comfort of their home.
  • Special dispensation for North East Region: For incentivising exploration and production in North East Region, 40 per cent subsidy on gas price has been extended to private companies operating in the region, along with ONGC and OIL.
  • The Cabinet Committee on Economic Affairs (CCEA), chaired by Prime Minister Mr Narendra Modi, has approved a mechanism for procurement of Ethanol by Public Sector Oil Marketing Companies (OMCs) to carry out the Ethanol Blended Petrol (EBP) Program.

Road Ahead

By 2015-16, India’s demand for gas is set to touch 124 MTPA against a domestic supply of 33 MTPA and higher imports of 47.2 MTPA, leaving a shortage of 44 MTPA, as per projections by the Petroleum and Natural Gas Ministry of India. Moreover, Business Monitor International (BMI) predicts that India will account for 12.4 per cent of Asia-Pacific regional oil demand by 2015.

Exchange Rate Used: INR 1 = US$ 0.016 as on March 24, 2015

References: Media Reports, Press Releases, Press Information Bureau, Ministry of Petroleum and Natural Gas

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

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