The Indian oil and gas (O&G) sector is projected to touch US$ 139,814.7 million by 2015 from US$ 117,562.9 million in 2012. The sector provides vast opportunities for investors. The New Exploration Licensing Policy (NELP) of 1997–98 was envisioned to deal with the ever-growing gap between demand and supply of gas in India. It has successfully attracted both foreign and domestic investment, as attested by the presence of Cairn India and Reliance Industries Limited in the country.
India’s economic growth, as with all other countries, is closely linked to energy demand. The need for oil and gas, which are among the primary sources for meeting energy requirements, is thus projected to grow further.
To meet this demand, the government has adopted several policies, such as allowing 100 per cent foreign direct investment (FDI) in several segments of the sector, including petroleum products, natural gas, pipelines, and refineries.
In 2011, India’s O&G sector witnessed one of the biggest FDI deals in the country, with British Petroleum (BP) formalising a US$ 7.2 billion partnership with Reliance Industries, for exploring offshore gas reserves.
At the end of FY 2011–12, India had total reserves of 1330 billion cubic metres (bcm) of natural gas and 760 million metric tonnes (mt) of crude oil.
Diesel is the country’s most consumed fuel, accounting for almost 45 per cent of the total demand for petroleum products. Since 2003–04, the demand for the transportation fuel has been increasing at a rate of 6–8 per cent.
About 62 per cent of petrol in the Indian market is consumed by two-wheelers, 27 per cent by cars, and 6 per cent by three-wheelers. The rest are consumed for other purposes such as operating generators, and by people in rural areas who need the fuel to run their livelihood, according to a survey conducted by global information and measurement company, Nielsen.
The Government of Assam has agreed to allow the clearing of forest areas that were hindering a major investment by ONGC. The investment was endorsed by Indian Prime Minister, Mr Manmohan Singh as a means to revive the hydrocarbons industry in the state. ONGC had previously embarked on a Rs 7,800 crore (US$ 1.25 billion) investment plan to revitalize its operations in the state with fresh technology and infrastructure, in 2008.
With the objective of harnessing the country’s hydrocarbon prospects and to give them greater flexibility in future, the Government of India plans to establish a National Data Repository (NDR) centre. The centre is expected to be complete by 2015 or 2016. The companies would use the data and pick acreage for prospecting, which is an attempt at reforming the existing production sharing contract system. Also, there will be hydrocarbon production linked payments (PLP) as against the present production sharing basis. Most of the reforms are aimed at encouraging indigenous energy exploitation, by offering flexible terms to companies.
ONGC will explore 30 additional shale gas wells in the country over the next two years, according to its chairman and managing director Mr Sudhir Vasudeva. The company plans to invest about Rs 600 crore (US$ 96.81 million) for the project. Shale gas is natural gas that can be found in fine-grained sedimentary rock. The gas is often locked in small spaces and is called ‘tight gas’ due to this characteristic. It requires high-end technique to produce the hydrocarbon at economic rates.
The use of shale gas can be the first step towards ‘economic freedom’, according to Oil Minister M Veerappa Moily. The minister feels that India could follow a similar path to the US, which turned from a net importer of energy to a net exporter of energy with the use of shale gas and oil. The news could not have come at a better time. By 2015–16, India’s demand for gas is set to rise to 124 million tonnes per annum (mtpa) against a domestic supply of 33 mtpa and higher imports of 47.2 mtpa, which still leaves a shortage of 44 mtpa, according to projections of the Petroleum and Natural Gas Ministry.
Exchange Rate Used: INR 1 = US$ 0.01613 as on December 18, 2013
References: Media Reports, Press Releases.