Professional Documents
Culture Documents
CONTENTS
Oil and Gas Industry in India 2
Leading Players in the Industry 5
Reserves and Resources 8
Exploration and Production 9
Refining 12
Demand 14
Marketing and Distribution 17
Investment Opportunities and Potential 21
Oil exploration in India began in 1867, when oil was struck Petroleum Sector Reforms (PSR), the fourth, fifth, sixth,
at Makum, near Margherita in Assam. However, exploration seventh and eighth rounds of exploration bidding were
and production (E&P) started in a systematic way only in announced between 1991 and 1994. For the first time
1899, after the Assam Oil Company (AOC) was formed. At Indian companies with or without previous experience in
the time of Independence, India’s domestic oil production E&P activities were permitted to bid. The Government, then
was just 250,000 tonnes per annum. Under its Industrial announced the Joint Venture Exploration Programme, in
Policy Resolution of 1954, the Government announced 1995. The exploration blocks were located in those areas
that petroleum would be considered as a core sector in for which the Petroleum Exploration Licence was with the
the country. The Geological Survey of India, carried out National Oil Companies (NOCs) and these companies were
extensive reconnaissance surveys and mappings, to locate required to have a 25-40 per cent participating interest from
structures suitable for exploration of oil and gas. However, day one. The Government of India has signed Production
petroleum exploration in the country received the real Sharing Contracts (PSCs) for 28 exploration blocks under
thrust only after the setting up of Oil and Natural Gas Pre-NELP (New Exploration Licensing Policy) rounds, since
Commission (ONGC), in 1955. 1993. Out of these, 10 blocks have been relinquished/
Several foreign companies have entered the Indian E&P surrendered. At present, 17 exploration blocks are under
scene since the early fifties. These included Indo Stanvac operation.
Project, a joint venture between the Government of India More recent developments in E&P in the country are
and Standard Vacuum Oil Company for West Bengal detailed in the relevant sections in this report.
onland. In the early seventies, Carlsbons Natomas stepped
in for Bengal offshore, Assamerc for Cauvery offshore and
Reading and Bates, for Kutch offshore. Later entrants Institutional structure
inlclude Shell, for Kerala offshore and Chevronn- Texaco, in
Krishna - Godavari offshore. Overview of the Institutional Structure
The first oil and gas pool was discovered in Jwalamukhi and Leading Companies
(Punjab) and Cambay (Gujarat) in 1958 and Oil India Limited
(OIL), was set up in the the same year. The two public sector The institutional structure of the oil and gas sector in India
companies, ONGC and OIL, discovered over 260 oil and gas is given overleaf.
fields located in Assam, Bombay Offshore Cambay, Cauvery, The Ministry of Petroleum and Natural Gas, is the primary
Krishna-Godavari, Tripura-Cachar and West Rajasthan agency for regulating this sector in India. It is entrusted with
basins. The discovery of the vast Bombay High field in 1974, the responsibility of handling legislation and issues related
in the west coast offshore was the most significant event in to E&P of oil and natural gas, such as, refining, distribution
India’s upstream petroleum sector. and marketing; and the import, export, and conservation of
The Government of India, further liberalised the petroleum products and Liquefied Natural Gas (LNG). There
petroleum exploitation and exploration policy in 1991, are several leading Public Sector Undertakings (PSUs) and
and invited private companies, both foreign and Indian, private players across the value chain.
to participate in the exploration of oil and gas. Under the
Oil & GAS
Upstream: Downstream:
Exploration & Production Refining & Marketing Industry Bodies/Others
Bharat Petroleum
(Refining & Marketing) Petroleum India International
Gail
Gastransport & Petrochemicals
PSUs in Oil and Gas Sector Centre for High Technology, Directorate General of
• Balmer Lawrie & Co. Ltd.
Hydrocarbons (DGH):
• Bharat Petroleum Corporation Ltd.
• Biecco Lawrie Co. Ltd.
The directorate reviews exploration programmes of
• Bongaigaon Refinery and Petro-Chemicals Ltd.
companies, development plans of commercial discoveries
• Chennai Petroleum Corporation Ltd.
and advises the Government on their adequacy. It
• Kochi Refineries Ltd.
also advises the Government, on offering of acreage
• Engineers India Ltd.
for exploration to companies and on issues related to
• Gas Authority of India Ltd.
exploration and optimum exploitation.
• Oil and Natural Gas Commission (ONGC), Hindustan Petroleum
Oil Industry Safety Directorate (OISD) sector, with effect from 1st April 2002 and the abolishment
of Government of India’s Oil Coordination Committee (OCC).
This is a technical directorate under the Ministry that PPAC assists the Government in discharging some of the
formulates and coordinates the implementation of self functions earlier being performed by OCC, these functions
regulatory measures, aimed at enhancing safety in the oil include administration of subsidy on Public Distribution
and gas industry in India. System (PDS), kerosene and domestic LPG and freight
subsidy for far flung areas; maintenance of information data
Petroleum Conservation Research Association bank to deal with emergencies; analysing the trends in the
(PCRA) oil prices forecasting petroleum import and export trends
and operationalising the sector specific surcharge schemes,
It was set up in 1976 as a part of the Government’s response if any.
to the oil crisis of early seventies, to undertake studies to
identify the oil potential and to make recommendations Petroleum Federation of India (PetroFed)
for achieving conservation of petroleum products in the
economy. It sponsors R&D activities, for the development PetroFed was registered in 2002, under the Societies
of fuel-efficient equipment/devices and organises Registration Act of 1860, to coordinate with governments,
multi-media campaigns, for creating mass awareness for regulatory agencies and other representative bodies in
the conservation. the petroleum industry, work for global competitiveness
of the petroleum industry optimise resources promote
Petroleum Planning and Analysis Cell (PPAC) safety, healthy environment and energy conservation and
coordinate with oil marketing companies, for ensuring
This cell was set up subsequent to the dismantling of the compliance of ‘Good Business Practices’.
Administered Pricing Mechanism (APM) in the petroleum
OI L & GAS
The key players in the industry are the PSUs operating users and Compressed Natural Gas (CNG) to the
under the Ministry. These PSUs are involved in a range transport sector
of operations, from exploration to production, refining, • Participating stake in the Dahej LNG Terminal and the
marketing, infrastructure and diverse multi-sector upcoming Kochi LNG Terminal in Kerala
operations. Some of the leading players in the industry are
as follows: Besides, GAIL has been entrusted with the responsibility
of reviving the LNG terminal at Dabhol, as well as sourcing
Gas Authority of India Ltd. (GAIL) LNG. It has established a presence in the CNG and city gas
sectors in Egypt, through equity participation in three
GAIL is India’s flagship natural gas company, present along Egyptian companies, namely, Fayum Gas Company SAE,
all aspects of the natural gas value chain (including E&P, Shell CNG SAE and National Gas Company SAE. It also has
processing, transmission, distribution and marketing). a stake in China Gas Holding, to explore opportunities in
Today, GAIL is spearheading the move to a new era of clean the CNG sector in mainland China and a wholly-owned
fuel industrialisation and is also expanding its business to subsidiary company GAIL Global (Singapore) Pte Ltd,
become a player in the international market. Its business in Singapore.
infrastructure comprises of:
• 5,800 kilometres of natural gas high pressure trunk Oil India Limited (OIL)
pipeline, with a capacity to carry 130 Million Metric
Standard Cubic Metres per Day (MMSCMD) of natural gas OIL is a premier national oil company, engaged in the
across the country business of E&P and development of crude oil and natural
• 7 LPG processing units, to produce 1.2 Million Metric gas, transportation of crude oil and production of LPG. The
Tonnes Per Annum (MMTPA) of LPG and other liquid company has over 100,000 square kilometres of licence area.
hydrocarbons Today, it is an integrated upstream petroleum company.
• Gas-based integrated petrochemical complex at Pata,
with a capacity of producing 310,000 tonnes per annum
of polymers ONGC
• 1,922 kilometres of LPG transmission pipeline network,
with a capacity to transport 3.8 MMTPA of LPG ONGC is India’s flagship energy company, which is fully
• 30 oil and gas exploration blocks and 3 coal bed methane integrated across the hydrocarbon value chain. ONGC is
blocks ranked number one amongst E&P companies in Asia and
• 13,000 kilometres of optical fibre cable network, offering third amongst global E&P companies. It figures in the Fortune
highly dependable bandwidth for telecom service Global 500 list of 2007. It also has the distinction of being the
providers first Indian public enterprise to have its Clean Development
• Joint venture companies in Delhi, Mumbai, Hyderabad, Mechanism (CDM) projects registered by the United Nations
Kanpur, Agra, Lucknow, Bhopal, and Pune, for supplying Framework Convention on Climate Change (UNFCCC). Some
Piped Natural Gas (PNG) to households and commercial of the company’s achievements include
MARKET & OPPORTUNITIES
Source: DGH
Source: DGH
Most of the crude oil and natural gas production in India, is Of the 65 discoveries made in India, 16 have been appraised,
offshore. The production of oil and gas in India by operator, 12 have been commercially established, the Ministry
is given in the table above. has approved development plans for eight, 11 are under
commercial evaluation and the development plans for four,
Significant discoveries of oil and natural gas have been are under scrutiny by the DGH.
made in India, from the year 2000 onwards, depicted as
follows :
Total Discoveries ( PSC) - 65 As on March, 2007
Chinn ewala tibba Per NELP -26
Nelp-39
SARASWATI BAGHJ AN, MATIMEKHANA,
RAGESHWARI, GR-F
Total Discoveries ( Nom) - 44 CHABUA, N CHANDMARI,
KAMESHWARI, N. TINSLI, W. ZALO NI,
MANGALA,ASIHWARIYA, SAMDANG, MORAN-N
SHAKIT,BHAGYAM, BAZALONI, BAREKURI
VUJAYA, VANDANA, NI-2
NC-WEST-1, GS- V-1, NE-1
NP-2,MA-6, SGL-1 BA NAMALL, LAIPLING GAON &
MEK EYPORE
Delhi
ESU-1 SONAMURA
Rajasthan
PK-2, SANAND EAST (1) Basin
RJ-ON-90/1 DHIRUBHAL-9,10,11, 15, 20, 21
TARAP UR-1 CB-ON INDIA
CB-ON-2000/1 Kolkata
BHEEMA, NS ENDUM URU
CB-ON-2000/2 NEC- OSN - 97/1&2 TURPUTALLU
NMT-2
G-4-2AB
B-9, RV-1 Mumbai
NEC- OSN - 97/1&2
VASAL EAST & WEST DHIRU BHAI-24, 25, 28, & KG-8,
KG-OSN-2001/2&3 KG-17
SWP-1
DHIRU BHAI-1, 2, 3, 4, 5, 6, 7, 8,
Chennai 16, 18, 19, 22, 23, 26
LAKSHMI KG-DWN-98/2
India, has more recently discovered extensive reserves Petroleum Exploration Licence Areas Under Operation Currently
Under NOCs and Private/JV Companies
of alternative fuels, such as, Coal Bed Methane (CBM), gas
hydrates and shale oil. India has 35,400 square kilometres COMPANY/OPERATOR Area Share
(square
of coal bearing area and 44 coal and lignite fields in 12 kilometres)
states, with a resource potential of 162 Trillion Cubic Feet ONGC 575,046.21 53.92%
(TCF) of CBM. Out of which, 13,600 square kilometres have RIL 329,684.00 30.91%
been opened up for CBM exploration by the DGH and 26 OIL 38,260.02 3.59%
exploration blocks (with a resource base of 50 TCF) have HOEC 33,922.96 3.18%
been awarded to E&P agencies. CAIRN 30,926.00 2.90%
India, has estimated offshore resources of 1,894 Trillion FOCUS 18,771.16 1.76%
Cubic Metres (TCM) of natural gas in the form of hydrates. A ENI 14,445.00 1.35%
fresh impetus was given by the Ministry in the form of the OAO GAZPROM 7,779.00 0.73%
National Gas Hydrate Programme (NGHP), in September GSPCL 4,843.17 0.45%
2000. Since then, geo-scientific studies on the east and west GGR 3,155.00 0.30%
coasts of India have been carried out and three prospective ENPRO FINANCE 2,360.00 0.22%
areas have been mapped. Drilling/coring of gas hydrate was PONEI 1,906.00 0.18%
carried out in the east and West Coast and Krishna-Godavari CANORO 1,444.70 0.14%
basin. Scientific studies on the cores are under progress. TULLOW 1,277.00 0.12%
Likewise, resource estimation of oil shale is currently in NIKO 957.00 0.09%
progress in Assam and expected to be completed by 2008. HEPI 859.00 0.08%
The Ministry, has also tied up with foreign institutions ESSAR 430.50 0.04%
having experience and expertise in oil shale exploration GEOPETROL 295.00 0.03%
and exploitation. JOGPL 206.00 0.02%
TOTAL 1,066,567.72
Source:DGH
• O NGC and OIL are the largest players with about 83 per cent share
of the total domestic oil and gas production;
• E&P sector is witnessing increasing private sector participation, both
domestic and foreign
• In the last four years, private sector/joint venture companies have
made 32 significant hydrocarbon discoveries
• The world’s largest gas discovery in 2002 (about 5 trillion cubic
metres) was made by Reliance Industries Ltd.
• International E&P companies like Hardy Oil & Gas, Niko Resources
and Cairn Energy
12 MARKET & OPPORTUNITIES
Refining
Playerwise Details
Today there are 19 refineries in the country, 17 in the (As of 1st April 2006, thousand tonnes)
public sector and two in the private sector, with an Installed capacity Refinery crude
throughput
installed capacity of 149 MTPA (as of January 2007)
Public sector
IOCL 41,350 38,522
India has witnessed a spectacular growth in the refining
BPCL 12,000 10,298
sector over the years.
HPCL 13,000 14,229
KRL 7,500 6,939
The refining capacity in the country has grown, from 62.2
CPCL 10,500 10,362
MMT as of April 1998 to 149 MMT as of April 2007. It is
BRPL 2,350 2,356
expected to go up to 235 MMT by 2012. Based on demand
NRL 3,000 2,133
estimates, this implies a surplus capacity of 86 MMT by
ONGC 78 93
2011-12 and a potential for exports from the country
MRPL 9,690 12,014
(Source: PPAC).
Private sector
Opportunities in refining
In the liberalised scenario, the Government of India, has
opened the refining sector to “Joint Sector,” as well as, to the • E xports of capital goods: With such phenomenal growth
private sector for achieving faster growth. About 27 MTPA in this sector, there is ample scope and opportunity
additional capacity is planned to come up under PSUs. for the transfer of technologies required and exports of
Under joint venture, 43 MTPA capacity will be added in capital goods to India. The technologies required will
the next 5-6 years. This will be contributed by IOCL’s tie up be for upgrading the bottom of the barrel, to meet the
with Kuwait Petroleum Company, for one refinery, HPCL’s predominant demand for middle distillates and also to
tie-ups with Oman Oil Company and Saudi Aramco, for improve the quality of petroleum products, to make them
two refineries and BPCL’s tie-ups with Oman Oil Company environment friendly.
Oil & GAS 13
*Provisional
**Includes Propylene, C-3, Propane, Hexane, Special Boiling Point Spirit, Benzene, Toulene, Petroleum Hydro Carbon Solvent, Natural Eptane, Methyl
Tertiary Butyl Ether, Poly Isobutine, Poly Butadine Feed Stock and Methyl Ethyl Keetone Feedstock
***Includes Mineral Turpentine Oil, JP-5, Linear Alkyl Benzene Feedstock, Aromex, Jute Batching Oil, Solvent 1425, Low Sulphur Heavy Fuel HSD,
Desulphursation Hydrocracket Bottom and Special Kerosene
****Includes Carbon Black Feed Stock, Sulphur, Solar Oil, Light Aluminium Rolling Oil and Extracts
Source: PPAC, Ministry of Petroleum and Natural Gas
•B
uilding refineries, including inland refineries: India, has a well as for exports will be economically attractive.Most of
large reserve of trained and highly skilled manpower, the new refineries will be located on the coasts, while the
available at a relatively lower cost when compared to the major centres of demand for the petroleum products are in
advanced countries. The country has also acquired enough the inland locations, particularly in the North/North-West
experience in the installation and efficient operations of regions. Therefore, opportunities exist for building inland
petroleum refineries, in the last 35 years. It is, therefore, refineries in the country. The refineries in the country are
estimated that the operating costs will be low and the also allowed forward integration in petrochemicals for
value-addition in Indian refineries will be high. Thus, better value-addition, which opens up another vast area
setting up of refineries in India for the domestic market as for investments.
14 MARKET & OPPORTUNITIES
Demand
As per the estimates by DGH, coal comprises 54 per cent preference, with allocation to power sector amounting to
of India’s primary energy consumption, while oil comprises 42.41 per cent and 32.05 per cent to the fertiliser sector.
about 33 per cent (as of 1st April 2006). The growth in Natural gas to the extent of 11 per cent is also being used
demand is projected to catapult the overall demand to 196 as a fuel source in industries and the balance is used for
MMT in 2011-12 and 250 MMT in 2024-25. The growing production of LPG and C2/C3.
demand-supply gap has led the Indian government to open
up E&P to private participants, through NELP and develop Consumption of Petroleum Products in India
a more holistic strategy for acquisition of equity oil abroad. Year Consumption
On the gas front, when compared to mature natural gas (in MMTPA)
based economies like, Japan, Korea, and the United States, 1980-81 30.9
India is a relatively new entrant. However, the increasing 1984-85 38.8
significance of this fuel in the Indian context can be gauged 1989-90 54.1
from the fact that, by 2025, the country is expected to 1996-97 79.2
leave behind both China and Japan in having the largest 2001-02 100.4
natural gas demand in Asia. The demand in each of these 2002-03 104.1
countries is expected to be in the range of 350 MMSCMD. 2003-04 107.7
The registered demand with GAIL alone, for natural gas in 2004-05 111.6
the country is around 260 MMSCMD. The Government of 2005-06 111.9
India, has also constituted an Expert Group to assess the 2006-07* 117.5
realistic demand for natural gas. *Estimated
Source: PPAC, Ministry of Petroleum and Natural Gas
According to the estimates given by the Integrated Energy petroleum products and the rest goes to the power sector
Policy Report, Planning Commission of India, 2006, the where it substitutes coal. The share of NG in the fuel mix,
total energy requirement (including oil, gas, coal, nuclear is expected to go up, from the present 8.8 per cent levels
and hydro energy sources) in the country by 2032 would be to 22 per cent in 2031-32
1,651 Million Tonnes of Oil Equivalent (MTOE). This assumes • Per capita consumption of NG in India is currently amongst
an 8 per cent GDP growth rate through 2032. the lowest in the world, at 29 cubic metres when compared
to the world average of around 538 cubic metres
Oil and Gas Demand Forecasts (2032)
Estimates by DGH suggest that by 2024-25, demand of
Total Oil Gas
Energy
crude oil will outstrip supply by a huge extent.
Aggregate Consumption 1,651 486 197
(MTOE) Demand and Production of Crude Oil
(2001-02 to 2024-25)
Per capita (KGOE) 1,124 331 134
Year Crude Oil (MMT)
Source; Planning Commission of India 2006 Demand Supply Gap
2001-02 99.70 32.03 67.67
The significant potential for natural gas demand is being
2002-03 114.30 33.05 81.25
driven by the following key factors:
2005-06 140.00 33.98 106.02
• The share of natural gas in India’s energy basket is only
2011-12 199.60 33.47 166.13
around 9 per cent, as compared to the world average of
2024-25 376.50 61.4 315.1
around 24 per cent. More than 50 per cent of natural gas
(NG) volume goes to sectors in which it is a substitute to Source: DGH
16 MARKET & OPPORTUNITIES
In the coming years the demand for natural gas in the country Currently, more than 71 per cent of natural gas is used
is also expected to outstrip the supply significantly. for energy purposes. For non energy purposes, the major
industries that are users of natural gas in India are fertilisers
Demand and Production of Natural Gas
(2001-02 to 2024-25) and petrochemicals.
*Provisional
Source: ONGC, OIL, GAIL, DGH
OI L & GAS 17
4.3 per cent to 5.1 per cent per annum over the 2003-04 Pricing
level. Therefore, the long-term policy directions for oil and
gas -sector are built on the following factors: India has traditionally operated under an Administered
• F aster exploration of the entire domestic sedimentary Pricing Mechanism (APM), for petroleum products. This
basins, to augment domestic availability of oil and gas system is based on the retention price concept under which
• I mprovement in oil and gas recovery levels the oil refineries, oil marketing companies and the pipelines
• A
cquisition of equity oil and gas abroad are compensated for operating costs and are assured a
• E
xploitation of alternative fuel sources such as CBM, gas return of 12 per cent post-tax on the net worth. Under this
hydrates, hydrogen fuel cells and blending of bio-fuels concept, a fixed level of profitability for the oil companies is
• I mprovement in energy efficiency and conservation ensured, subject to their achieving their specified capacity
• M
aintenance of strategic reserves in oil and petroleum utilisation. The administered pricing policy of petroleum
products products ensures that products used by the vulnerable
sections of the society, like kerosene, or products used as
Under the new investment policy for different sectors, feedstock for production of fertiliser, like naphtha, may be
announced in July 1991, for facilitating the inflow of foreign sold at subsidised prices.
capital, a number of policy initiatives have been taken by The APM was dismantled in April 2002. Gradually, the
the Government of India, such as: Government of India has moved to market-determined,
• E
quity participation in commercial and industrial ventures tariff-based pricing. Free imports are permitted for almost
has been freed from all restrictions and foreign companies all petroleum products, like kerosene, LPG and lubricants,
can now invest up to 100 per cent of equity in different except petrol and diesel. It is contemplated that, all
activities, in the petroleum sector administered price products will be taken out of the
• D
eregulation and delicencing of various petroleum administered pricing regime in a phased manner and the
products in the country system will be replaced by a progressive tariff regime.
• Gradual decontrol of pricing and distribution On the pricing front, the government-appointed
• F reedom to form joint ventures for the development of committee on pricing and taxation of petroleum products,
infrastructure and for marketing and refining activities; has recommended that the oil companies should shift from
• S
implification of the procedure for obtaining industrial an ‘import parity based pricing’ to a ‘trade based pricing’.
licences It has also suggested, the reduction in custom duties
• A
pprovals normally available within 6 to 8 weeks of filing on petrol and diesel from 10 per cent to 7.5 per cent and
the application. Empowered committees have been the shifting of excise duty from an ad-valorem levy, to a
constituted to accord various approvals under a fast time- specific levy.
bound schedule
• U
nder the New Industrial Policy, proposals for foreign
investment need not necessarily be accompanied by Policy related to exports and imports
foreign technology agreements
• M
arketing of transport fuels (petrol, diesel and aviation Imports of all petroleum products are permitted under the
turbine fuel) permitted, subject to meeting minimum Open General Licensing (OGL) scheme, except for crude
investment of US$ 500 million in the oil and gas sector oil, motor spirit, diesel, aviation turbine fuel, furnace oil,
• A
ll such proposals, including those proposing investments bitumen, wherein imports are permitted under freely
by NRIs or for 100 per cent export oriented units, are tradable special import licences. Exports of aviation turbine
considered for approval by the Foreign Investment fuel, bitumen, crude oil, diesel, kerosene, LPG, motor spirit,
Promotion Board (FIPB). In case of composite proposals, naphtha and raw petroleum coke are channelised through
i.e., proposals seeking other industrial approvals like Indian Oil Corporation Ltd. All other products can be freely
industrial licences, technical collaboration, etc. along exported.
with approval for foreign investment, the FIPB provides
composite clearance
Oil & GAS 19
Another significant trend in oil and gas regulation in Gas Linkage Committee
India is the opening up of the sector to private and foreign
participation. 100 per cent Foreign Direct Investment (FDI) The Gas Linkage Committee (GLC), was established to
is allowed in exploration, creation of pipeline infrastructure, manage the allocation of gas to eligible customers. This
refining and in downstream retailing.100 per cent FDI in was linked with the administered price mechanism, which
retailing is allowed, subject to minimum investment of US$ depressed domestic gas prices for certain sectors. However,
445 million in midstream or upstream sectors. new fields under the National NELP, are already exempt from
the purview of the GLC and can trade at market prices
Policy and Regulatory Framework - Gas Infrastructure Status for Gas Pipelines
Over the past six years, the trend in natural gas regulation Development of gas pipelines and related storage has
has been towards opening up the sector for greater been granted ‘Infrastructure Status’. While, this would
investment, setting up an independent regulator to monitor be translated into a number of benefits for companies
post production activities, and enabling a transition planning on developing gas transmission pipelines, it will
from the administered control regime to a market driven also allow for lower gas transmission tariffs, when part of
mechanism. Significant regulatory issues, which will impact these benefits are passed on to the end consumer.
the gas sector in India, include:
FDI in Natural Gas Sector
Petroleum & Natural Gas Regulatory Board Act,
2006 (PNGRB Act, 2006) FDI of 100 per cent is allowed in the exploration, pipeline
infrastructure, LNG and trading segments, subject to
The Act, envisages setting up a Petroleum & Natural Gas approval. The integrated LNG policy is currently under
Regulatory Board, to regulate the refining, processing, discussion and is likely to be put in place soon.
storage, transportation, distribution, marketing and sale of
petroleum, petroleum products and natural gas, excluding
production of crude oil and natural gas.
Investment Opportunities
and Potential
Opportunities in the Oil Sector On the domestic supply side, India’s current refining
capacity stands at around 143 MMT. The domestic refining
Investments under NELP companies have planned capacity additions to the tune
of 90 to 100 MMTPA in the next 4-5 years. This large scale
Though, the recent rounds of NELP bidding are still commissioning of capacities, when viewed against the
dominated by public sector, the Government is keen on expected demand of 196 MMT, suggests that India’s
greater foreign participation under NELP process. DGH has petroleum product exports are slated to rise. It is expected
indicated that 70-80 blocks, including those in unexplored that Reliance Industries’ refinery expansion of 580,000
states, will be made available in NELP-VII. barrels per day at Jamnagar, will only cater to export
markets in Europe and North America.
Destination India as refining hub Another development has been the receipt of FDI in a
public sector refinery for the first time. HPCL, has entered
India’s key advantages for developing itself as an export into a partnership with Mittal Investments, for setting up
refining hub, includes cost competitiveness, arising mainly the refinery-cum-petrochemical complex at Bhatinda, in
out of lower labour costs as compared to developed Punjab. This development might be viewed as the first step
markets and locational advantages. Geographically, India towards greater involvement by international oil firms in
is strategically located en route to the Middle East’s crude greenfield projects.
consignments for East Asian and Pacific-rim markets. In
fact, India possesses surplus refining capacity and has Increased investment in fuel quality upgradations
already turned into a net exporter of products. Certain
areas of the country have been already demarcated for the Prompted by stringent fuel specifications in the developing
development of export-oriented refineries. Dialogues are countries and the domestic “Auto Fuel Policy” which
underway between the Ministry and some oil companies mandate Euro IV norms by 2010, significant investments
on implementation of the strategy and building supporting have been planned for upgrading existing refineries.
infrastructure for exports. IOC has planned investments of US$ 1.5 billion towards
By 2010, the expected worldwide deficit in refining upgradation of its Gujarat refinery, US$ 3.5 billion for
capacity will be around 112 MTPA, because of the shutting installation of a naphtha unit at its Panipat plant and US$
down of some of the smaller refineries in developed 750 million for its Haldia refinery. HPCL and BPCL have
economies. Smaller refineries in North America and Europe planned similar investments for their Vishakhapatnam and
are finding it uneconomical to invest in cleaner fuels Mumbai refineries, respectively. This quality upgradation
because of high compliance cost and cleaner fuel norms. calls for adopting state-of-the-art technology, requiring
In Japan and Australia, oil majors have rationalised their huge investments of the order of US$ 2.5 billion by way
refining assets because they are becoming uneconomical of providing reformulated gasoline producing units,
to operate. hydrocrackers, hydro-treaters, hydrodesulphurisers, etc.
22 MARKET & OPPORTUNITIES
Disclaimer
This publication has been prepared for the India Brand Equity
Foundation (“IBEF”).