Industry Analysis

Oil and Gas Industry

 Agenda
1 Industry Value Chain & Structure
2 Market Size & Growth
3 Industry Segments
4 Competition
5 Issues & Concerns
6 Outlook
1.a Industry Overview

üOil & Gas Industry accounts for 15 %

of The GDP .
üIndia a net importer of crude oil .
üIndia is emerging as a refining hub .
üThe industry is highly organized .
ü
ü
ü
 1.b Industry Value Chain & Structure

SESMIC SURVEY
e exploration , appraisal of a discovery , development of oil / gas fields , production of oi

Govt . NELP

EXPLORATION UPSTREAM
DOWNSTREAM
PRODUCTION

SHIPPING
REFINING &
BLENDING

STORAGE
tion of petrol eum produc ts , storage in terminals , and marketing of petroleum products inc
DISTRIBUTION

MARKET
2. MARKET SIZE AND GROWTH

Source : Annual Reports

üOil & Gas Industry accounts for 15 % of the Indian GDP ;

üCAGR of India ’ s crude consumption is 5 . 9 %;
ü Net Sales of Major companies have increased -> India
emerging as a refining hub .
ü
SOARING CRUDE OIL PRICES -GLOBALLY

REASON
üHuge gap between
demand and supply ;
üDepreciating Dollar ;

ü
ü
INDIAN CRUDE OIL BASKET

ØIndian crude basket lower than

NYMEX Brent crude but still
higher than average crude
price for the year
Ø
ØPrice seems to be dipping in
near future as Crude has
corrected from highs.
3.INDUSTRY SEGMENTS

üEXPLORATION & PRODUCTION

üREFINING
ü
üMARKETING
ü
ü
3.1.1 EXPLORATION
üSedimentary area of 3 . 14 sq km of 26

sedimentary basins .
üNELP approved in 1997 - provided a level -

playing field .

üUnder NELP PSC 110 blocks have been signed .

ü30 discoveries have been made

ü
 3.1.2 PRODUCTION

Source: www.ibef.com

of crude oil during 2006 – 07 was 21 , 474 . 71MMT ; PSU 80 % Private Playe

roduction during 2006 – 07 was 11 , 823 . 50MMT

al gas in 2006 – 07 was 44 , 506 . 75m cubic metres ( MCM )

tion has increased

3.2 REFINING

Source : www.ibef.com

q
qHPCL promises strong growth with around 11% growth in 2007-2008
q
qBPCL expansion project of 5.1 MMTPA commissioned
q
qMRPL has received orders from Mauritius government
q
q
 MARKETING

Source : www . businessweek . com

is the market leader with roughly 5000 LPG distributors , 11739 retail

is followed by BPCL , HPCL and IBP ; IBP is now a part of IOCL

players are Shell , Essar and ONGC - retail outlets only

 SECTOR WISE GAS DEMAND
BREAKUP

ential demand from fragmented industries on gas availability

r segment constitute 70 % of the demand

chunk may come down because of low incremental urea demand

ndustrial sector may grow as various entities may find gas cheaper th
 CONSUMPTION PATTERN
otal consumption during 2006 - 2007 was 128 MMT

iesel has the maximum consumption - 46 . 08MMT

onsumption of ATF increased compared to previous year due to increase in the n

PG consumption also increased comparatively as it was viewed as a good subst

Source: www.domain-b.com
 PRICE BREAK-UP

of customs duty and taxes , i . e ., the government ’ s share

etrol at pumps we people pay Rs 28 tax extra .

4. COMPETITION ANALYSIS

4.1 PORTER’s ANALYSIS

4.2 HERFINDAHL INDEX
Threat Of New Entrant - MODERATE

Capital Intensive Business.

Govt. regulation is a big hindrance as a large number of licenses are

required.
FDI Norms relaxed, Foreign players can enter in JVs but Govt. pricing
policy discourages.
Bargaining power of supplier-HIGH
Highly dependant on international pricing mechanism, has to import bulk


of crude oil. among rivals-MODERATE

Competition

Oil exploration- Only few major players are allowed to bid under NELP.
Only PSUs are operating, no private participation.

Bargaining power of buyers- LOW

Prices are fixed by the govt. thus no choice for retail buyers.

Threat of substitutes-LOW
Technically, Economically not viable

4.2 HERFINDAHL INDEX

HI CALCULATION 2006 Sq of Mkt. Share 2007 Sq of Mkt. Share

BPCL 0.08304 0.006896 0.067925862 0.00461
CPCL 0.02127 0.000452 0.017208531 0.00030
GAIL 0.01379 0.000190 0.011065201 0.00012
HPCL 0.07717 0.005955 0.064335586 0.00414
IOC 0.18620 0.034670 0.138849304 0.01928
ONGC 0.48948 0.239590 0.594682852 0.35365
RIL 0.09607 0.009229 0.082217422 0.00676
MRPL 0.02801 0.000784 0.020010199 0.00040
Bongaigaon 0.00498 0.000025 0.003705044 0.00001
refineries
HI 0.297791 0.389272

ØIt implies moderate concentration of pricing power and

competition in the industry.
HI value implies high concentration in the industry.
 5. ISSUES & CONCERNS
Regulations

üFor PSU - FDI 49 % in refining activities ; 100 % FDI in

private refining companies ;
ü
üGovernment issued oil bonds worth 13943 crores ; Oil
companies can access maximum 1500cr daily ;
ü
üNELP : Commitment to invest of about US$5 billion in
exploration phases
ü
üNatural Gas : In PSC the incremental revenue from
production is disproportionately in favour of government
ü
üEstablishment of bio fuel on PPP basis .
6 . OUTLOOK
Lower profit margin for OMC .
Higher subsidy bill for govt . which will
increase if crude edges Northwards
Higher crude realizing greater profit
margin for refining companies
Subsidized selling by ONGC to continue
effecting the bottom - line
Many new E & P players entering in offshore
drilling so great room to expand in
segment
THANK YOU