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November 30, -0001

The oil and gas industry has been instrumental in fuelling the rapid growth of the Indian economy. India has total reserves of 775 million metric tonnes (MT) of crude oil and 1074 billion cubic metres (BCM) of natural gas as on April 1, 2009, according to the Ministry of Petroleum.

Petroleum exports during 2008-09 were US$ 26.2 billion according to the Ministry of Petroleum.

Under New Exploration Licensing Policy (NELP VIII), 1.62 sq km of area comprising 70 blocks was put up for bidding.

The Cabinet Committee on Economic Affairs (CCEA) has approved award of 33 out of 36 oil and gas blocks that were bid for in New Exploration Licensing Policy (NELP-VIII), for which bidding closed on October 12, 2009.

Production

By the end of the Eleventh Plan the refinery capacity is expected to reach 240.96 MMTPA.

  • Crude oil production during 2009-10 was 33.68 MT, compared to 33.50 MT in 2008-09.
  • Refinery production in terms of crude throughput was 160.03 MT in 2009-10.
  • The production of natural gas went up to 47.57 billion cubic metres tonnes (BCM) in 2009-10 from 32.84 BCM in 2008-09.

Consumption

The sales/consumption of petroleum products during 2008-09 were 133.40 MT (including sales through private imports), an increase of 3.45 per cent over sales of 128.94 MT during 2007-08, according to the Ministry of Petroleum.

India's domestic demand for oil and gas is on the rise. As per the Ministry of Petroleum, demand for oil and gas is likely to increase from 186.54 million tonnes of oil equivalent (mmtoe) in 2009-10 to 233.58 mmtoe in 2011-12.

The refining capacity in the country increased to 177.97 million tonnes per annum (MTPA) as on April 1, 2009 as compared to 148.968 MTPA as on April 1, 2008.

Gas

India's natural gas demand is expected to nearly double to 320 million standard cubic meters per day by 2015, according to a report released by global consultancy firm McKinsey at the VI Asia Gas Partnership Summit.

According to the report, the current demand of 166 million standard cubic metres per day (mscmd)—made up of nearly 132 mscmd supplies from domestic fields and the rest from imported LNG-- is likely to rise to at least a minimum of 230 mscmd and a maximum of 320 mscmd by 2015.

In January 2010, Gas Authority of India Ltd (GAIL) said that gas availability in India is expected to grow at 23 per cent compounded annual growth rate (CAGR) to 312 mscmd by FY14, buoyed by trebling of domestic production to 254 mscmd and doubling of regasified liquefied natural gas imports to 58 mscmd.

To capture the opportunity presented by the impending gas surge in India, GAIL is investing significantly in its pipeline network. Over the next three years, it will invest US$ 660.7 million –US$ 770.8 million, expanding its transmission capacity from the current 150 mscmd to 300 mscmd.

State-owned Oil and Natural Gas Corp (ONGC) has added 83 million tonnes of oil and gas reserves in the 2009-10 fiscal, the highest in two decades.

The ultimate reserve accretion of ONGC including its joint ventures (with firms like Cairn India) in domestic fields in 2009-10 has been 87.37 million tonnes of oil and oil equivalent gas against the target of 76.28 million tonnes.

ONGC on a standalone basis added 82.98 million tonnes of oil and oil equivalent gas reserves.


Investments and Acquisitions

  • Indian Oil Corp aims to expand the capacity of its Panipat plant by 25 per cent to 300,000 barrels per day (bpd) by October 2010 to meet growing fuel demand. The refinery expansion will cost US$ 224.8 million.
  • Mahanagar Gas Ltd (MGL) will invest over US$ 3.37 billion in a span of 5-6- years to lay infrastructure for the supply of both Compressed Natural Gas (CNG) and Piped Natural Gas (PNG)
  • The Ruias of Essar Group have injected US$ 293 million in Essar Oil by subscribing to global depository shares (GDS) to part finance its US$ 1.7-billion expansion plans. The proposed expansion plan includes scaling up of the Jamnagar refinery capacity by 25 per cent to 375,000 barrels.
  • State-owned gas firm GAIL India will invest about US$ 3.37 billion over the next 2-3 years in laying pipelines to connect consumption centres in North India to fuel sources.
  • Energy major Reliance Industries gained an overseas foothold by agreeing to pay US$ 1.7 billion to form a joint venture with U.S.-based Atlas Energy
  • Gujarat State Petroleum Corporation (GSPC) has inked an agreement with government of Egypt for oil and gas exploration in the African nation where the Indian firm has been alloted blocks.
  • Templeton Strategic Emerging Markets Fund (TSEMF) has invested US$ 20.6 million investment in Shiv-Vani Oil & Gas Exploration Services.
  • Indian state-run Oil & Natural Gas Corp will invest US$ 7.11 billion for the first phase development of three marginal fields located in Mumbai offshore on the western coast.

Government Initiatives

The government has been taking many progressive measures to create a conducive policy and regulatory framework for attracting investments.

  • FDI up to 100 per cent under the automatic route is permitted in exploration activities of oil and natural gas fields, infrastructure related to marketing of petroleum products, actual trading and marketing of petroleum products, petroleum product pipelines, natural gas and LNG pipelines, market study and formulation and petroleum refining in the private sector.
  • FDI up to 49 per cent is permitted under the government route in petroleum refining by the public sector undertakings.
  • Vision-2015 approved in 2009, for the oil sector which will focus on expanding the marketing network as well as quality of the products and services to customers covering four broad areas of LPG (liquefied petroleum gas), kerosene, auto fuels and compressed natural gas/piped natural gas.
  • In 2009, the government announced a seven-year tax holiday for commercial production of gas in respect of contract to be signed under NELP VIII & Coal Bed Methane (CBM) IV with a view to give a boost to exploration and production.

India will complete building its first strategic crude oil storage by October 2011 in an effort to insulate itself from supply disruptions.

The country is building underground storages at Visakhapatnam in Andhra Pradesh and Mangalore and Padur in Karnataka to store about 5.33 million tonnes of crude oil. This is enough to meet nation's oil requirement of 13-14 days.

The storage at Visakhapatnam will have capacity to store 1.33 million tonnes of crude oil in underground rock caverns and will be completed by 2011, while the Mangalore facility will be able to store 1.55 million tonnes and would be completed by November 2012. A 2.5-million tonnes storage at Padur, near Mangalore, would be completed by December 2012.

Exchange rate used: 1 USD = 44.52 INR (as on April 2010)