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Tuesday, 22 November 2011

Oil and Gas Industry - Sleeping Giant of India

There are many ways to look at the oil and gas industry.
From a personal perspective, oil and gas provide the world's 6.9 billion people with 60 percent of their daily energy needs. The other 40 percent comes from coal, nuclear and hydroelectric power, "renewables" like wind, solar and tidal power, and biomass products such as firewood.
As fuels, they keep us warm in cold weather and cool in hot weather; they cook our food and heat our water; they generate our electricity and power our appliances; and they take us by car, bus, train, ship or plane to places near and distant. We all feel the economic pinch when the prices of gasoline , home heating fuel or electricity increase sharply, even though in many developed countries, they still cost less than some brands of bottled water! 
As petrochemical feedstocks, oil and gas are the raw materials used to manufacture fertilizers, fabrics, synthetic rubber and the plastics that go into almost everything we use these days, from toys to personal and household items to heavy-duty industrial goods. 
From a business perspective, oil and gas represent global commerce on a massive scale. World energy markets are continually expanding, and companies spend billions of dollars annually to maintain and increase their oil and gas production. Over 200 countries have invited companies to negotiate for the right to explore their lands or territorial waters, hoping that they will find and produce oil and gas, create local jobs and provide billions of dollars in national revenues.
From a geopolitical perspective, large quantities of oil and gas flow daily from "exporting" regions such as the Middle East, Africa and Latin America to "importing" regions such as North America, Europe and the Far East. This creates political, trade, economic and even national security concerns on both sides. Oil and gas exporters want to maximize their revenues and improve their trade balances while maintaining control and sovereignty over their natural resources. At the same time, importing nations want to minimize trade deficits and ensure a steady, reliable oil supply. China, for example, has recognized that it must obtain access to oil in order to continue its long-term sustained growth and is actively seeking new sources of supply in the major producing companies. 
From an internal policy perspective, producing countries continually wrestle with questions of how best to develop their resources and attain long-term sustainable benefits for their people. At the same time, consuming countries are always considering how to reduce their dependence on imported oil, either by imposing higher energy taxes to spur conservation, tapping into domestic resources such as coal (less costly but more polluting than imported oil) or developing alternative energy sources such as nuclear power.These issues have major long-term impacts, both within individual countries and on the world at large, even affecting such fundamental issues as war and peace.
Finally, from a health, safety and environmental (HSE) perspective, there is a continuous concern for safety in oil and gas operations, the impact that new projects have on surface environments, the possibility of oil spills and the effect of pollutants such as CO2 (carbon dioxide, a product of hydrocarbon combustion) on global climate change and air quality.
The oil and gas business is clearly a multifaceted, global industry that impacts all aspects of our lives. And yet it is one that we tend to take for granted until a crisis emerges-a tanker runs aground, a hurricane damages a refinery, a country changes political leaders or revises its energy policies. Then we blame "big oil" or OPEC or the politicians or the local service station attendant before things quiet down again.

Indian Oil and Gas Industry 
Oil and gas in India’s energy portfolio With a GDP of US$1.25 trillion, India is currently the world’s fourth-largest economy. The country’s oil and gas sector has contributed significantly to the GDP, and the sector is expected to become increasingly critical for India’s economic development, since it fuels the growth of other sectors. India is already the fifth-largest energy consumer in the world, with oil and gas accounting for 45% of the country’s energy needs. However, the proportion of natural gas consumption in India to total energy consumption in the country (around 9%) is one third compared with the proportion of natural gas in the world’s primary energy consumption. With a 53% share in the primary energy sector, coal remains the dominant fuel, but its share is projected to decrease with the thrust on gas and other renewable sources increasing. With India’s growing population and rising living standards, the demand for energy is expected to increase in future. India’s fuel needs are likely to grow at a significant rate, considering the growth pattern of the country’s GDP in the past few years. Currently, India’s per capita consumption of energy is well below that of the world average (around one fourth)

Changing business landscape

India is currently facing a substantial crude oil deficit, as its current production levels are lagging behind the fast pace of the economy. This has resulted in significant imports of crude oil. The demand-supply gap is set to widen in future with a consumption increase of 47% between 2008 and 2018  and with production poised to increase by around 12% in the same period India’s heavy dependence on import of crude oil has compelled the Government  of India (GoI) to provide a long-term policy for the hydrocarbons sector in order to meet the country’s future energy needs. There are significant implications for the oil and gas sector in terms of the growth path it has charted:

The introduction of the New Exploration and Licensing Policy (NELP) and the subsequent entry of multinational companies (MNCs) in the exploration and production (E&P) sector have given impetus to the country’s oil and gas sector. Unexplored sedimentary area of 50% in 1995–96 reduced to 15% in 2009.

In the past five years, the refining sector has witnessed additions in its refining capacities, and this trend is expected to continue with the implementation of major new capacities. It is anticipated that this sector will witness large investments for capacity augmentation, quality upgrades, the clearance of bottlenecks, and the revamping of various refineries. India is likely to boost its refining capacity by 45% by 2011–2012 as against 2008 (150 MTPA).

The petrochemical sector is poised for significant growth due to significant demand for petrochemical products. The demand is expected to touch 12 million tons by 2012, thereby witnessing annual growth of 9%–10%. With various refining companies diversifying into the petrochemical segment, existing capacities in this sector are likely to double in the next five years.

On the back of growth in petroleum production and refining, as envisaged by the Hydrocarbon Vision 2025 report, infrastructure is likely to witness significant growth, especially in the pipelines sector. IOCL and GAIL are cumulatively expected to add around 5,000 km to their existing pipeline networks.

It is expected that the GoI’s emphasis on clean fuel will lead to a marked increase in the city gas distribution (CGD) business, with around 40 cities expected to fall under the ambit of CGD by 2012.


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