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Indian Oil and Gas Industry

October 2006

Contents

Market Overview

Government regulations & policy

Business opportunities and Advantage India

www.imacs.in

IMaCS 2006 Printed 22 Jul 2011 Page 2

Indian Oil and Gas Industry - Prime mover of the Indian economy

Oil and Gas Industry Size is estimated at USD 110 bn (about 15% of Indian GDP) Contributes to about 64% of gross revenues of Government (both Central and State together) through Taxes and Duties Total Contribution to Government exchequer in 2004-05 = USD 27 bn Contributes to about 45% of Indias primary energy consumption Constitutes 30.87% of Indias imports in 2005-06 Accounts for 11.21% of Indias exports in 2005-06 India is the Sixth largest crude consumer in the world India is the Ninth largest crude importer in the world Indias has the sixth largest refining capacity - 2.56 million barrels per day representing 2.99% of world capacity

India is the Fifth largest energy consumer in the world

Primary Energy Consumption (2005) 387.3 MMTOE

Oil and gas accounts for 44% of Indias primary energy consumption

Compounded Annual Growth rate of Energy Consumption (1996-2005) 3.62%

Energy-GDP Elasticity = 0.58

Indias GDP would fall by 1.5% for every USD 10 increase in the price of oil per barrel

Source: Integrated Energy Policy; BP Statistical Review 2006, Ministry of Commerce, MoP&NG, Stg Comm Report, FICCI Report, ABN AMRO , IMaCS Analysis IMaCS 2006 Printed 22 Jul 2011
www.imacs.in
Page 3

Supply has failed to keep pace with demand

Crude Oil (MMT)
400 300 200 100 0 107 32 2001-02 135 35 2006-07 Year 172 34 2011-12 61 2024-25 368

Natural Gas (MMSCMD)

500 400 300 200 100 0

151 81 2001-02

231 95 2006-07 Year

313 158 2011-12

391 170

2024-25

Source: DGH Presentation

Oil Demand

Production

Demand

Supply

Yawning Demand-Supply Gap : Need to

Intensify exploration efforts to convert the remaining prognosticated hydrocarbon reserves to established reserves Increase recovery factor of producing fields Tie up crude oil and gas imports setting up of LNG Regasification terminals/ laying of transnational pipelines Scout for equity oil and gas from abroad Explore new technologies like coal gasification, coal to oil conversion, gas hydrates exploration, coal bed methane extraction etc. IMaCS 2006
Printed 22 Jul 2011 Page 4

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Intensive Exploration & Production a must .

Sedimentary Area 3.14 million sq km Only 19% of the area extensively explored Domestic Hydrocarbon Scenario (as on 1.04.2006):
28-32 BMT 8.2 BMT 1.42 BMT 1.85 BMT 32.19 MMT 88.22 MMSCMD

Prognosticated Resources (Oil + Oil Equivalent Gas) Established Geological reserves (O + OEG) O + OEG already produced Balance Recoverable Reserves (O + OEG) Current Oil Production Current Gas Production

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Source: DGH / MoP&NG

IMaCS 2006 Printed 22 Jul 2011 Page 5

Exploratory measures initiated by Government.

New Exploration Licensing Policy

Coal Bed Methane Policy

110 Production Sharing contracts in 5 New Exploration Licensing Policy (NELP) rounds 30 discoveries with hydrocarbon in-place reserves of over 600 MMT in last 3-4 years Investment commitment of about USD 5 bn in exploration phases under NELP Perception of prospectivity of Indian sedimentary basins reflected in NELP VI response Exploratory Measures

16 Blocks already awarded with production potential of 25 MMSCMD under Coal Bed Methane (CBM) I & II rounds Significant commercial finds in blocks held by RIL and ONGC First commercial production of CBM by 2007-08 54 Bids received for 10 CBM blocks offered in the third round Award of blocks in near future

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IMaCS 2006 Printed 22 Jul 2011 Page 6

Governments exploratory measures bearing fruits..

Major Upstream Players Major Discoveries
Year Discovery Gas Gulf of Cambay Operator Cairn

British Gas

2000 2001

Oil & Gas Krishna Godavari Deep Cairn waters Gas KG Basin Deep waters RIL (Worlds biggest discovery for the year) Oil in Barmer-Sanchor basin (Rajasthan) Gas in Mahanadi basin shallow waters Gas in KG Basin shallow waters Oil in KG Basin shallow waters Cairn RIL GSPC RIL

GSPC

RIL

2002

ONGC

2003 2004 2005

HOEC

OIL

Cairn

2005

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Source: DGH

IMaCS 2006 Printed 22 Jul 2011 Page 7

Oil Refining Capacity from shortage to surplus

Refinery Capacity in MMT

Refineries IOC Group BPC Group HPC ONGC/ MRPL RIL Essar 18 138.5 No 10 3 2 2 1 June 06 60.2 22.5 13.0 9.8 33.0 2006-07 60.2 22.5 16.2 9.8 33.0 12.0 153.7 2011-12

Refinery Throughput 127 MMT (2005)

Imported Crude 78% Domestic Crude 22%

Refining Capacity (M M T)

72.2 30.5 25.2

1000 863
9.8 60.0 12.0 210.0

800 MMT 600 400 200 0

Ch ina Ru ss ia Ja pa n S. Ko re a Ind Ge ia rm an y US A Ita ly
IMaCS 2006 Printed 22 Jul 2011 Page 8

328

270 226

129 127 116 114

Refining Capacity more than doubled between 1998 and 2006

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Source: MoP&NG, BP Statistical Review 2006

Petroleum product exports - a major Foreign Exchange earner

Consumption 2005-06 (MMT)
Product Diesel Petrol LPG Kerosene FO/LSHS Naphtha Bitumen, ATF, Lubes, Solvents MMT 40.2 8.6 10.3 9.4 12.7 12.2 18.5 %

Exports Sector with vast export potential Exports increased by about 65% from 2004-05 to 2005-06
14 12 11.5

35.9% 7.7% 9.2% 8.4% 11.4%

USD bn

10 8 6 4 2 0 6.99

10.9% 16.5%

111.9

100%

2004-05

2005-06

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Source: MoP&NG, Ministry of Commerce & Industry

IMaCS 2006 Printed 22 Jul 2011 Page 9

Inland Petroleum transportation gradual shift from railways to pipelines

Mode of Transportation

11%

4%

India
5%

USA
3%

43%

34%

42% R ail Pipeline C oas tal R oad

Rail Pipeline

58%

Coas tal

Road

Share of pipeline transportation in India much lower as compared to USA, inspite of its advantages Total POL pipeline length currently under operation in India 12,204 kms POL pipelines under implementation 5,561 kms (Investment of USD 1.5 bn)
IMaCS 2006 Printed 22 Jul 2011 Page 10

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Source: MoP&NG, Infraline, IMaCS analysis

Presence of both State and Private players in the Indian oil market
Marketing Infrastructure Oil Marketing Companies
Company IOC HPCL BPCL IBP Retail Outlets 11,739 7,313 7,318 3,468 29,838 LPG Distributors SKO Dealers 4,856 2,202 2,123 89 9,270 3,564 1,648 1,014 381 6,607

Marketing Infrastructure Others

Company ONGC NRL RIL Shell Essar Retail Outlets 1 58 1,218 12 516

Administered Pricing

Market Determined Pricing

Controlled Pricing

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Source: MoP&NG

IMaCS 2006 Printed 22 Jul 2011 Page 11

Massive Investments planned in gas pipelines

Total Investment required in the proposed projects is about USD 15-20 bn

Transnational Gas pipelines planned

Iran-Pakistan-India pipeline Myanmar-India Pipeline Turkmenistan-AfghanistanPakistan-India pipeline

Source: MoP&NG, Infraline, IMaCS Research

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IMaCS 2006 Printed 22 Jul 2011 Page 12

Contents

Market Overview

Government regulations & policy

Business opportunities and Advantage India

www.imacs.in

IMaCS 2006 Printed 22 Jul 2011 Page 13

Government regulations have evolved over time in tune with domestic compulsions and international hydrocarbon scenario.

1947-1962 Setting up of Public Sector Upstream Oil Companies ONGC (1956) and OIL (1959) Free Investment Downstream Multinationals like Shell, Caltex, and Esso conducting operations

1962-1970

1970-1990 Offer of exploration blocks to international oil companies (1979 onwards) Nationalization of foreign Companies (1970)

1990-2000 Setting up of regulator DGH (1993) Introduction of NELP

Post 2000 Implementation and award of NELP blocks CBM policy

Upstream

Government, the only player

Increasing Government participation Formation of national oil refining companies

Delicensing of Refinery sector (MRPL 1996) Open marketing of many products Selective private participation

Dismantling of APM (2002) Passing of Petroleum and Natural Gas Regulatory Board Act, 2006 Liberalised FDI regime

Strict Government Coexistence of controls Public and Private Sectors

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IMaCS 2006 Printed 22 Jul 2011 Page 14

Policy initiatives to attract Foreign Direct Investment

Exploration & Production

Upto 100% FDI through automatic route Through incorporated/ unincorporated Joint Ventures or directly

Upto 100% FDI if set up as a private Indian company Upto 26% in case of state owned companies

Refining

Marketing

Upto 100% FDI through automatic route

Product Pipelines

Upto 100% FDI through automatic route

Natural Gas/ LNG pipelines

Upto 100% FDI allowed Approval required from Foreign Investment Promotion Board.
IMaCS 2006 Printed 22 Jul 2011 Page 15

www.imacs.in

Contents

Market Overview

Government regulations & policy

Business opportunities and Advantage India

www.imacs.in

IMaCS 2006 Printed 22 Jul 2011 Page 16

India offers significant advantages for the domestic and global oil and gas majors

Strategic location

Nearness to the premier crude oil and gas supply market (Middle East) Geographical Proximity to the major petroleum product importers China and Japan

Well Developed Maritime infrastructure Government policies conducive to the growth of the sector tax holidays, Special Economic Zones for Petroleum products Availability of experienced manpower at lesser costs Cost advantage Existence of hi-tech indigenous EPC Companies lower construction periods Large domestic market

M ark et S iz e (in b illio n U S $ )

200 100 0 G as O il 21 183

Anchor customer of the various petroleum products Possibility of achieving economies of scale

71 12 59
2006-07 12 59

162

2024-25 21 162

www.imacs.in

Source: IMaCS Research

IMaCS 2006 Printed 22 Jul 2011 Page 17

Significant Business Opportunities exist for foreign players

Upstream

NELP rounds and Open acreage system (Opportunities for providers of services platforms, rigs, Offshore vessels etc.) Redevelopment of existing fields to improve recovery factor Offer of CBM blocks through Competitive bidding route. Natural gas hydrate programme Underground coal gasification Coal to oil conversion

Midstream/ Downstream

Refining Expansion of existing capacities, setting up of new refineries, acquiring stakes in these refineries Ethanol and Biodiesel production cultivation of Sugarcane and Jatropha Petroleum marketing setting up of retail outlets, new product pipelines. LNG imports Setting up of LNG Regasification terminals. Offshore Transshipment (Single Buoy Mooring) Laying of cross country gas grid and transnational gas pipelines City Gas Distribution including laying of CGD and CNG networks
IMaCS 2006 Printed 22 Jul 2011 Page 18

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Key Players in the Indian Oil and Gas Sector

Company Fortune 500 Rank
153

Profile
Indias largest company by sales (Turnover of USD 37 bn) Indias flagship Downstream company - Along with subsidiaries accounts for 47% of Petroleum market share among Public Sector Oil Companies, 41% of National refining capacity and 51% downstream pipeline capacity Operates the largest and widest network of petrol and diesel stations in the country

342

Indias largest private sector company on all major financial parameters Presence in Upstream, midstream and downstream segment

368

PSU engaged in refining and marketing of petroleum products Has two subsidiary companies Kochi Refineries Ltd. And Numaligarh Refineries Limited Refining Capacity 22.5 MT (16.25% of Indias refining capacity)

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IMaCS 2006 Printed 22 Jul 2011 Page 19

Key Players in the Indian Oil and Gas Sector

Company Fortune 500 Rank
378

Profile

Another mega Public sector company with focus on refining and marketing Turnover of about US$ 17 Billion Accounts for about 10% of Indias total refining capacity

402

Indias Flagship E & P Company Accounts for 77% of crude oil and 81% of natural gas produced in India Venturing into downstream refining and marketing

All the five Indian companies in the Fortune 500 list are from the oil and gas industry All the five Indian companies in the Fortune 500 list are from the oil and gas industry
IMaCS 2006 Printed 22 Jul 2011 Page 20

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Global majors present in India

71% stakeholder in Castrol, Indias major lubricant company Plans to develop a 2.5 MTPA LNG Terminal at Kakinada Participated in the CBM III and NELP VI bidding rounds expected to win some blocks One of the bidders for strategic sale of HPCL Presence in both upstream and downstream Stakeholders in Tapti gas fields and Panna/Mukta oil and gas fields, Cambay basin block Interests in city gas distribution through participation in Gujarat Gas Limited and Mahanagar Gas Limited Leverages its distribution assets to operate Broadband service, Iqara

Among the top FDI investors in India (Hazira port and LNG terminal project milestone for FDI in the sector) Interests in both upstream and downstream (LNG, Lubricants, LPG, Bitumen, retail fuels and even solar energy)
IMaCS 2006 Printed 22 Jul 2011 Page 21

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Global majors present in India

Owns 10% stakeholder in Petronet LNG Limited, a JV promoted by Indian public sector companies to set up LNG terminals to import LNG

5% stakeholder in Reliance Petroleum Limiteds proposed new refinery at Jamnagar Possibility of increasing the stake to 29%

Wholly owned subsidiary TotalFinaElf, a major player in lubricants market Another 100% subsidiary ElfGas India Ltd owns and operates LPG Import Terminal at Mangalore 50% stakeholder in LPG Import terminal at Visakhapatnam

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The India Brand Equity Foundation is a public-private partnership between the Ministry of Commerce & Industry, Government of India and the Confederation of Indian Industry. The Foundations primary objective is to build positive economic perceptions of India globally India Brand Equity Foundation c/o Confederation of Indian Industry 249-F Sector 18, Udyog Vihar Phase IV Gurgaon 122015, Haryana, INDIA Tel +91 124 401 4087, 4060 - 67 Fax +91 124 401 3873 Email ajay.khanna@ciionline.org Web www.ibef.org

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Disclaimer

This presentation has been prepared jointly by the India Brand Equity Foundation (IBEF) and ICRA Management Consulting Services Limited, IMaCS (Authors) All rights reserved. All copyright in this presentation and related works is owned by IBEF and the Authors. The same may not be reproduced, wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this presentation), modified or in any manner communicated to any third party except with the written approval of IBEF. This presentation is for information purposes only. While due care has been taken during the compilation of this presentation to ensure that the information is accurate to the best of the Authors and IBEFs knowledge and belief, the content is not to be construed in any manner whatsoever as a substitute for professional advice. The Author and IBEF neither recommend or endorse any specific products or services that may have been mentioned in this presentation and nor do they assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed in this presentation. Neither the Author nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any reliance placed or guidance taken from any portion of this presentation.
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