oil and gas sector
DESCRIPTION
Sector UpdatesTRANSCRIPT
CONTENTS
Executive Summary India at advantage O&G – Various Segments with stats Key Players M&A Activity Growth Drivers Opportunities Recent News Conclusion
EXECUTIVE SUMMARY
World’s fourth-largestenergy consumer
Fourth-largest consumer of oil and petroleum products
Sixth-largest LNG importer in 2011
LNG imports accounted for about one-fourth of total gas demand. India's gas demand is estimated to more than double over the next five years
Oil consumption is estimated to reach 4.0 mbpd by FY16, expanding at a CAGR of 3.2 per cent during FY08–FY16F
India’s energy demand is expected to double to 1,464 Mtoe by 2035 from 559 Mtoe in 2011. Moreover, the country’s share in global primary energy consumption would increase twofold by 2035
Notes: Mtoe - Million Tonnes of Oil Equivalent; mbpd - Million Barrels Per Day
INDIA AT ADVANTAGE
INDIA
Growing DemandIndia is the world’s fourth-
largest energy consumer; oil and gas account for 37.3 per
cent of total energy consumption
Policy supportGovernment has enacted
various policies such as the New Exploration Licensing
Policy and Coal Bed Methane
Supportive FDI guidelines100 per cent Foreign Direct
Investment (FDI) is allowed in upstream and private sector
refining projects
Skilled workforceAbout 140,000 people were employed in the petroleum industry at the end of FY12
O & G – VARIOUS SEGMENTS
The country has 5.6 billion barrels of proven oil reserves, with an average oil production of 0.8 mbpd (2012)
India has 1,330 bcm of gas reserves and produced 47.6 bcm of gas in 2012 Backed by new oil fields, domestic oil output is anticipated to grow to 1.0 mbpd
by FY16 In FY12, imports accounted for approximately 81 per cent of the country’s total
oil demand
•The upstream segment is dominated by the state-owned ONGC
•It is the largest upstream company in the exploration and production (E&P) segment, accounting for approximately 62 per cent of the country’s total oil output
Upstream segment -
Exploration and production
•IOCL operates a 11,163 km network of crude, gas and product pipelines, with a capacity of 1.6 mbpd
•This is around 30 per cent of the nation’s total pipeline network
Midstream segment –
Storage and transportation
•IOCL is the largest company, operating 10 out of 22 Indian refineries
•Reliance launched India’s first privately owned refinery in 1999 and has gained a considerable market share (28 per cent)
Downstream segment – Refining,
processing and marketing
Notes: bcm – Billion Cubic Meters ; mbpd – Million Barrels Per Day;
SOME STATS With India developing gas-fired power stations, consumption is up more than
160 per cent since 1995 Domestic production accounts for more than three-quarters of total gas
consumption in the country Imports constitute the rest; in 2012, the share of imports was 22.0 per cent India increasingly relies on imported LNG; the country was the sixth-largest LNG
importer in 2011 and accounted for 5.3 per cent of global imports Total crude oil production was 38.0 mmt during FY12 ONGC, the largest crude oil producer in country, accounted for 62 per cent of
total crude oil production in India As Per Aranca Research, Demand is not likely to simmer down any time soon, given strong economic
growth and rising urbanisation; during FY2008–17F, gas consumption is likely to expand at a CAGR of 21.0 per cent
Backed by new oil fields, domestic oil output is anticipated to grow to 1.0 mbpd by FY16 from 0.8 mbpd in FY12
India’s LNG imports are forecast to increase at a CAGR of 33 per cent during 2012–17
Notes: * – Provisional; mmt – Million Metric Tonne, mmtpa – Million Metric Tonnes Per Annum
KEY PLAYERS
Company Ownership FY13 Turnover (USD billion)Indian Oil Corporation Limited 78.9 per cent state-owned 84.7Reliance Industries Public Listed 73Bharat Petroleum Corporation Limited 54.9 per cent state-owned 44.5Hindustan Petroleum Corporation Limited 51.1 per cent state-owned 39.7ONGC 69.2 per cent state-owned 29.7GAIL India Limited 57.3 per cent state-owned 9.4Oil India Limited 68.4 per cent state-owned 1.8
Company Ownership (per cent) Global Turnover (USD billion)Cairn Energy India Pvt Private Sector 3.2 (FY13)Shell Private Sector 460.0 (1Q2013)BG Group Private Sector 20.8 (1Q2013)BP Private Sector 370.9 (1Q2013)
Domestic Players
International Players
AND THEIR MARKET SHARE (%)
55%
19%
15%
6%
2%
3% Product pipeline network by length
IOC
HPCL
BPCL
OIL
PCCK
PMHB
26%
10%
7%6%
1%
7%
27%
9%7%
India's total refining capacity
IOC
BPCL
HPCL
CPCL
NRL
MRPL
RPL
EOL
RECENT MAJOR M&A ACTIVITYDate Announced
Acquirer Name Target Name Value of Deal (USD Mn)
Nov 2012 ONGC Videsh ConocoPhillips (Kashagan Field)
5000
Nov 2012 Inpex Corp ONGC Exploration Block KG-DWN-2004/6
Not Disclosed
Sep 2012 ONGC Videsh Hess Corp (Azrei oilfield)
1000
Feb 2011 BP PLC Reliance Industries Ltd.
9000
Aug 2010 Sesa Goa Cairn India Ltd. 1180.8
Aug 2010 Vedanta Resources PLC
Cairn India Ltd. 6568.5
Jun 2010 Reliance Industries Ltd.
Infotel Broadband Svcs Ltd
1026.7
Feb 2010 Investor Group Republic of Venezuela-Carabobo
4848
GROWTH DRIVERSRobust domestic market; expected to expand
• India is the world’s fourth-largest energy consumer• The country accounted for 10.3 per cent of total
demand for gas in Asia-Pacific in 2011
Increasing demand for natural gas
• Several industries are increasing the usage of natural gas in operations
• pulp and paper, metals, chemicals, glass (Main Industries)
Abundant raw material
• The nation has large coal, crude oil and natural gas reserves
• Oil reserves amounted to 5.6 billion barrels in FY12 • Natural gas reserves stood at 1.3 tcm in FY12
Huge investments
• Investments worth USD75 billion is expected across the oil & gas value chain under the 12th Plan (2012–17)
• Since April 2000, FDI worth USD5.4 billion has been invested in India’s petroleum and natural gas sectors
Favourable policies
• 100 per cent FDI allowed in E&P projects/companies; 49 per cent allowed in refining
• New Exploraton Licensing Policy(NELP) & Coal Bed Methane (CBM)
Natural gas discoveries
• Several domestic companies (such as ONGC, have reportedly found natural gas in deep waters
• This offers significant expansion opportunity for the next decade Note: TCM - Trillion Cubic Meters, E&P - Exploration and
Production
OPPORTUNITIES
Upstream segment
Midstream segment
Downstream segment
• Locating new fields for exploration: 78 per cent of the country’s sedimentary area is yet to be explored • Development of unconventional resources: CBM fields in the deep sea •Opportunities for secondary/tertiary oil producing techniques • Increased demand for skilled labour and oilfield services and equipment
• Expansion in the transmission network of gas pipelines • LNG imports have increased significantly; this provides an opportunity to boost production capacity • In light of mounting LNG production, huge opportunity lies for LNG terminal operation, engineering, procurement and construction services
• Development in city gas distribution (CGD) networks, which are similar to Delhi and Mumbai’s CGDs • To construct new refineries considering advantages such as low operation costs, lesser freight charges and favourable policies • Expansion of the country’s petroleum product distribution network
SHALE GAS PROSPECT OF INDIA India has 63 tcf of recoverable shale gas reserves
The Cambay, Krishna Godavari, Cauvery, and the Damodar Valley are the most prospective sedimentary basins for carrying out shale gas activities in the country
Around 20 tcf of gas has been classified as technically recoverable reserves in the Cambay basin in Gujarat (the largest basin in the country), spread across 20,000 gross square miles with a prospective area of 1,940 square miles
It is estimated that the Krishna Godavari (KG) basin encloses a series of organically rich shales, containing around 27 tcf of technically recoverable gas. KG basin, located in Eastern India, holds the country’s largest shale gas reserves, extending over 7,800 gross square miles with a prospective area of around 4,340 square miles
India is likely to launch bidding for shale gas exploration toward the end of 2013
In April 2012, the Directorate General of Hydrocarbons (DGH) submitted its draft policy on exploitation of shale gas to the Ministry of Petroleum and Natural Gas
Notes: tcf – Trillion Cubic Feet
RECENT NEWS RIL slapped with a fine of USD 800 mn for
failing to produce expected amount of gas Price of petrol is falling while diesel price is
rising. Since Jan13 the government raised diesel prices recently for the 10th time
Kuwait, Qatar & UAE eye stake in ONGC petchem project
News of recent tension in Syria leads to rise in crude prices
CONCLUSION The sector presents great opportunity for
economic growth of the country. Increase in exploration activity can help in
finding new reserves. Reducing the price and currency pressure in the
economy by reducing the dependence on imports.
Government policy needs to be uniform and clearly stated. Recent case of RIL vs. the state sour investor sentiment for the sector.
Rise in investment crucial for growth in the sector.
SOURCES BP Statistical Review, June 2012 BMI forecasts http://petroleum.nic.in/ World Oil Outlook 2012 US Energy Information Administration
(EIA) Crisil Research