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.
During FY14, the total consumption of petroleum products in India was 158.2 million tonnes (MT).
The share of fuels in the country's exports surged from 5.59 per cent in 2003-04 to 20.05 per cent during 2013-14. Total exports of fuel products amounted to US$ 62.69 billion in value terms during FY14.
India is the fourth-largest consumer of oil and petroleum products in the world. Its energy demand is projected to touch 1,464 million tonnes of oil equivalent (Mtoe) by 2035 from 559 Mtoe in 2011. Furthermore, the country’s share in global primary energy consumption is anticipated to double by 2035.
Oil consumption is estimated to reach 4 million barrels per day (MMbpd) by FY16, expanding at a compound annual growth rate (CAGR) of 3.2 per cent during FY08-16. Also, backed by new oil fields, domestic oil output is anticipated to grow to 1 MMbpd by FY16.
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 Rs 31,501.55 crore (US$ 5.13 billion) between April 2000 and July 2014.
The following are some of the major investments and developments in the oil and gas sector.
Reliance Industries Ltd (RIL) plans to invest US$ 2 billion in its three shale assets in the US. RIL has already invested US $7.3 billion since 2010 towards development of shale gas and oil in the US market. The company also, along with its partner British Petroleum (BP), plans to invest about Rs 800 crore (US$ 130.35 million) for exploratory drilling in an offshore block in the Bay of Bengal. RIL is the operator of the offshore block CY-DWN-2001/2, also known as CY-III-D5, with 70 per cent equity, with BP holding the remaining stake. BP's contribution to the investment would be Rs 240 crore (US$ 39.11 million).
ONGC Videsh Ltd (OVL) has signed Production Sharing Contracts (PSCs) for two blocks in Myanmar. The contracts were signed between OVL, Myanmar Oil & Gas Enterprises Ltd (MOGE), National Oil Company of Myanmar, and Machine & Solutions Co Ltd (M&S). ONGC will also invest over Rs 5,700 crore (US$ 928.73 million) to push up production by 6.9 MT of crude oil and 5 billion cubic metres (bcm) of gas by 2030 from its Mumbai High (North) oil and gas field.
Steel-to-BPO conglomerate Essar is in talks with Germany's BASF, the biggest chemicals company in the world, for a petrochemicals joint venture (JV), as per sources.
Larsen & Toubro has won an order worth Kuwaiti Dinar 239.7 million from the Kuwait Oil Company (KOC). L&T arm - L&T Hydrocarbon will carry out the order that entails engineer-procure-construct work for a gathering centre for KOC, a subsidiary of Kuwait Petroleum Corporation.
Indian Oil Corporation Ltd (IOCL) through its wholly owned affiliate IndOil Montney Ltd, Canada, has signed transaction agreements with Progress Energy Canada Ltd and PETRONAS Carigali Canada BV for acquiring a 10 per cent interest in Progress Energy Canada’s LNG-destined natural gas reserves in northeast British Columbia and the proposed Pacific NorthWest LNG Ltd (PNW LNG) export facility in Canada’s West Coast.
GAIL (India) Ltd has entered into an agreement with Japan-based Chubu Electric Power Co for collaboration in the area of joint LNG procurement. Additionally, the two companies will look to work together on shipping optimisation.
India and Azerbaijan have proposed to form a joint working group in the field of hydrocarbon. The two countries have agreed to explore opportunities for partnership in renewable energy sector, energy efficiency and numerous upcoming projects in petro-chemicals, oil and gas, pipelines, etc., in India, Azerbaijan or other countries, in collaboration or JV.
Mr Kazuyoshi Akaba, State Minister of Economy, Trade and Industry, Japan, met Mr Dharmendra Pradhan, Minister of State (Independent Charge) for Petroleum and Natural Gas, India. Mr Pradhan suggested taking the strong Indo-Japan bond to a higher level stating that Japan has inspired India in manufacturing, technology and philosophy of governance.
The expert appraisal committee of Ministry of Environment and Forests, Government of India, has given the go ahead to IOCL’s Rs 4,320 crore (US$ 703.81 million) liquefied natural gas (LNG) terminal project at Ennore, near Chennai. The proposed facility’s capacity will be five million tonnes per annum (MTPA). The terminal is expandable to 10-15 MTPA. This is part of the corporation’s Rs 56,000 crore (US$ 9.12 billion) investment plan for the 12th Five-Year Plan (2012-17).
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, while satisfying 11.2 per cent of the supply. This is not to say that the gap cannot be met.
ONGC plans to explore 30 additional shale gas wells in the country at an investment of about Rs 600 crore (US$ 97.7 million) for the project. The use of shale gas can be the first step towards ‘economic freedom’, as per Mr M Veerappa Moily, India’s former Oil Minister. He felt that the country could follow a similar path to the US which was initially a net importer of energy before becoming a net exporter of energy, driven by shale gas and oil.
Exchange Rate Used: INR 1 = US$ 0.0163 as on September 25, 2014
References: Media Reports, Press Releases, Press Information Bureau, Ministry of Petroleum and Natural Gas