Introduction
Oil and gas sector is one of the key catalysts in fuelling the growth of Indian economy. With a 1.2 billion population and an economy that has consistently at approximately 8 per cent annually, India's energy needs are increasing fast, warranting a robust demand for oil and natural gas in the country. India has emerged as the 5th largest refining country in the world, accounting for 4 per cent of the world's refining capacity. India exported 50 million tonnes (MT) of refined petroleum products during 2010-11. With our refining capacity increasing further, this figure is likely to touch about 70 MT by 2014, making India one of the world's major exporters of petroleum products.
The share of oil and natural gas in India's total primary energy demand is 40 percent. The planned investments span across the oil and gas value chain including exploration and production, oil and gas pipelines, petroleum refineries, R-LNG terminals, city gas distribution networks and petrochemical plants, according to KPMG's November 2011 sector report, KBuzz.
With an enriched resource position, India ranks second in BMI's upstream business environment ratings while India shares first place with China in BMI's downstream business environment ratings. 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, as per the BMI forecasts.
In addition, India is also the world's fourth largest importer of oil. The petroleum and natural gas industry in India has attracted foreign direct investment (FDI) worth US$ 3.280.72 million from April 2000 to September 2011, according to the data provided by Department of Industrial Policy and Promotion (DIPP). The Department further recorded US$ 144 million during April–September 2011-12, in the industry.
Oil & Gas- Market Dynamics
Production and Consumption
From about 22 million tonnes per annum (MTPA) during 2004-05, the import of crude oil from the African continent has increased to more than 35.31 MT during 2010-11.
Investment in oil and gas sector over next 5 years is expected to reach US$ 65- US$ 70 billion, according to KPMG's November 2011 sector report, KBuzz.
According to the provisional production data released by the Ministry of Petroleum and Natural Gas in a press release:
- Crude Oil production was recorded at 22.44 million metric tonnes (MMT) for April-October 2011, as compared to the 21.54 MMT in April-October 2010
- Natural Gas production was 28,431.4 million cubic metres (MCM) during April-October 2011
- During April-October 2011, 96.95 MMT of crude oil was refined, compared to 93.58 MMTof oil refined during corresponding period in 2010
Oil and Natural Gas Corporation (ONGC) has the onus to maximise domestic oil production, which in 2010 stood at 909,000 b/d of estimated average. Due to incredible efforts made by ONGC and UK-based Cairn Energy, BMI predicts oil production at around 1.2 million b/d by 2013 in its report for the third quarter (Q3) of 2011.
Oil consumption in India is projected to increase by 4-5 per cent per annum by 2015, indicating a demand of 4.01 million b/d by 2015.
Diesel & Petrol
India's fuel demand may rise 3.8 per cent in 2012 led by diesel and petrol (gasoline), as per International Energy Agency’s (IEA) forecast. Diesel comprises for about 40 per cent of the total fuel consumption in India. Its demand is expected to increase to 1.37 million b/d in 2011 rising by 5.8 per cent and further to 1.44 million b/d in 2012, increasing by 5.5 per cent.
India's petroleum refining capacity is expected to rise to 240 MTPA by March 2012 from the current 188 MTPA, attracting an estimated investment of US$ 13.5 billion - US$ 14.6 billion. This will boost the country's exports of petroleum products, according to Mr S Sundereshan, Secretary, Ministry of Petroleum and Natural Gas. Moreover, 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. The Ministry of Petroleum anticipates a growth of 4.6 per cent in the sale of oil products in the FY12.
Gas
The 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, as per Global consultancy firm McKinsey's analysis.
India's share (in the Asian pacific region) of gas consumption in 2010 was an estimated 10.9 per cent, while its share of production is estimated at 11.1 per cent, according to BMI's Q3 2011 report. BMI expects that the India's share of gas consumption would reach to 11.7 per cent by 2015 while that of supply would stand at 13.1 per cent.
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.
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