Investment Opportunity in Oil and Gas Sector

Oil and Gas Sector of India
Oil and gas is a lifeline of a nation. For they not only fulfill the day to day domestic requirement but also cater to many industries. India no doubt is a vast nation and that too developing. India is developing very fast and lots of industry needs the constant and uninterrupted supply of gas and oil. Hence Government has chalked out various programmes and policies to open this sector for the private participants. Initially it was the government agencies that were solely responsible for oil and gas exploration and its distribution. But post 1991 period saw many reforms and policies that allowed private sector also to play an important and crucial role.

Facts and Figure

• Nearly 35% of India’s energy requirements iss fulfilled by oil and natural gas
• Oil and natural gas are critical for industries like petrochemicals, fertilizers and energy
• Domestic production of crude oil is 33.4 MMT whereas the demand is about 116 MMT. There is a vast mismatch between demand and production.
• During the last three years, Crude oil imports have been increased by 7% p.a.
• There is also mismatch between the demand and the production of natural gas. The demand of natural gas is about 150 MMSCMD (2004) while the domestic supply is only 81 MMSCMD
• In the last few years, many gas fields have been explored.

Major players and presence in value chain

Industry Structure

• Oil exploration and production is carried out by both public sector companies and private sector.
• Public sector companies have the major share. Oil and Natural Gas Commission (ONGC) and Oil India Limited (OIL), accounts for 83% of the total domestic oil and gas production
• The role of both domestic and foreign players is increasing every year.
• Private sector/Joint venture companies have made 32 significant hydrocarbon discoveries in the last four years
• Reliance Industries Ltd. has made the world’s largest gas discovery in 2002 (about 5 trillion cubic meters)
• Some of the major foreign players present in India are Hardy Oil & Gas, Niko Resources and Cairn Energy
  

Government Policy

• Government has permitted 100% FDI for the exploration of Crude Oil and Natural Gas through the automatic route
• To facilitate Private sector participation in Oil and Gas exploration
• The New Exploration Licensing Policy (NELP) has been enacted since 1998
• Under the NELP programme, more than 108 oil blocks have been awarded since 1999 through global competitive bidding
• To explore CBM blocks, new policy, Coal Bed Methane (CBM) Policy has been formulated which provides for attractive fiscal and contract terms
• An Independent Regulator for Oil & Gas will be established after the enactment of Petroleum and Natural Gas Regulatory
  

Investment Opportunity and Business Potential

• By 2012, it is expected that the demand for crude oil might increase to about 190 MMT
• The global price of crude oil is increasing, therefore government is focusing more on E & P to expand domestic production
• The demand for gas is expected to rise to 330 MMSCMD by 2012
• The growth in this sector is expected in next seven years is 10% p.a
• The demand for gas will increase due to increasing use of its for power generation, petrochemicals, fertilizers and city gas distribution
• There is huge gap between the demand and the supply. This gives enough opportunities to the investors for investment
• Opportunities also lie in exploration and production of Crude Oil, Gas and CBM
• Through the active partnership of the private sector government is actively promoting the creation of Strategic Oil & Gas reserves
• There is still huge potential for exploration. According to estimates nearly 32% of the Indian sedimentary area is still unexplored.
• Private players such as Cairn Energy, Reliance energy, etc have recently discovered huge area of oil and gas fields which indicates that there is huge potential in this sector
• For exploration and production of oil and gas there is still a need of $7-8 billion of investment