India is one of the fastest growing economies in the world.

This economic growth has led to a significant increase in the consumption of oil and other hydrocarbon products. India is currently the third largest oil consumer in Asia after China and Japan; while it stands 5th on the world stage after USA,EU,China and Japan in the consumption of these products. In our country coal along with oil satisfy nearly two thirds of the energy requirements. The share of natural gas consumption is 7% which is expected to rise as more gas deposits are discovered and explored. The oil and gas sector has led to an massive investment for foreign investors to the tune of $3.4 billion , as per the data given by the Department of Policy and promotion. The production of oil stands at 3.144 million metric tones for April 2012.The natural gas production was at 3,623.7 million cubic meters for April 2012. The amount of crude oil refined was 12.314 million metric tones at the end of April 2012.These statistics were released by the Ministry of Petroleum and Natural gas. According to Business Monitor International (BMI)'s India Oil and Gas Report for second quarter of 2012, India's average oil and liquids production for 2011 is estimated at 939, 000 barrels per day (B/D) which will touch the peak production at 1.06 million B/D in 2015. Further giving its demand outlook, BMI projects consumption to rise sharply to 4.07 million B/D by 2016 from 3.27 million B/D in 2011. Total gas consumption is estimated by BMI at around 92 billion cubic meters (BCM) in 2016 from around 68 BCM in 2011. Diesel & Petrol Demand for diesel in India is growing at an annual rate of 8 per cent thereby, creating ample opportunities for private refiners. The country's petrol consumption increased by 3.7 per cent to 1.25 million tonnes (MT) while that of diesel was up 8 per cent to 5.9 MT during April 2012. According to the data provided by the Petroleum Planning and Analysis Cell, petrol consumption in India during April-January 2011-12 was 12.35 MT. It is projected that India would consume 14.82 MT of petrol in the year, registering a growth of 4.41 per cent in FY12 while consumption of diesel is expected to be 63.91 MT, registering a growth of 6.4 per cent. India's local oil products sale, a proxy for domestic oil demand, edged up 0.2 per cent to 12.66 MT during April 2012. Gas Gas, as an energy resource, is very high on demand across the industrial, residential and power sectors. BMI states that gas consumption in India has increased by more than 160 per cent since 1995 while average annual demand would grow by 6 per cent over next few years. Gas production is estimated at 52 BCM in 2011 while total gas consumption is predicted at 92 BCM in 2016 from an estimated 68 BCM in 2011 by BMI. Key Developments and Investments

ONGC has planned to invest Rs 440 crore (US$ 79.43 million) to undertake drilling of 40 oil and gas wells in the Krishna-Godavari basin in 2013-14. The proposal is with the Ministry of Environment and Forests for approval and the onshore wells are located at East Godavari, West Godavari and Krishna Districts of Andhra Pradesh. Gujarat State Petronet Ltd (GSPL) has formed a joint venture (JV) with three public sector oil companies - Indian Oil Corporation Ltd (IOCL), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) - for setting up three cross-country natural gas transmission pipelines that would extend for 3, 995 km. India's biggest liquefied natural gas (LNG) importer Petronet LNG, has inked an agreement to infuse Rs 4,500 crore (US$ 812.42 million) in establishing a 5 MT import terminal at Gangavaram Port on the Andhra coast. This will be the country's fifth LNG terminal after Dahej, Dahbol, Hazira and Kochi. Reliance Power, Shell and Kakinada Sea Ports Ltd (KSPL) JV has recommended setting up a gas import terminal on the East coast with an annual capacity of 5 MT (expandable to 10 MT). The project would require an investment of around US$ 1 billion and is expected to be ready by 2014. Trafigura Pte Ltd, the Singapore-based unit of the world's third-largest crude oil trader, Netherlands' TrafiguraBeheer BV, has acquired a 24 per cent stake in Nagarjuna Oil Corporation Limited (NOCL) for Rs 650 crore (US$ 117.35 million). NOCL is setting up an oil refinery in Tamil Nadu. Trafigurawill also invest Rs 600 crore (US$ 108.32 million) in Portoil Ltd - an 80:20 JV between NOCL and Trafigura.

Government Initiatives The Indian government is planning to leverage upon its goodwill with Afghanistan and is hoping to secure oil and gas exploration blocks in the country, while it may also participate in the upcoming auction of six blocks to the north of Mazar-i-Sharif. An Indian delegationis expected to visit Afghanistan regarding the same. India, in order to diversify its gas basket, has signed the gas sale purchase agreement (GSPA) for the Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline. The Tapi gas project values around US$7.6billion. The state government of Andhra Pradesh and GDF Suez LNG UK Ltd will implement a project framework for establishing a floating storage re-gasification unit at Kakinada seaport. With an investment of Rs 4, 000 crore (US$ 722.15 million), the terminal will be set up by GAIL and APGDC and is expected to be completed by the end of 2013. The facility would be highly beneficial for gas-based independent power generation companies and hence, would give an intense impetus to the economic activity in the East Coast. Road Ahead According to Petroleum Minister Jaipal Reddy, India's natural gas sector is poised to grow at a compounded annual growth rate (CAGR) of 19.5 per cent over 2012-17 while consumption is expected to grow from the current 166.2 million standard cubic metres per day (MSCMD) to 473 MSCMD in 2017.

BMI predicts that greater development of offshore and unconventional gas resources would enhance India's gas basket that would be instrumental in meeting burgeoning demand. On the similar lines, refining segment is projected to expand rapidly with new projects coming up. India is anticipated to surpass Singapore as Asia'stop exporter of refined fuels over the forecast period of 2011-21.

PEST analysis of the oil and gas sector in india:Political :- There is a risk of war perennially present in the middle east eg:-iran Israel conflict, iran-iraq war, Iraq Kuwait war etc. Due to the arab spring the political stability has been affected in the oil producing countries eg:- Libya, Bahrain etc. The trade should be beneficial to both the countries eg:- embargo on iran has forced it increase trade with china and India thus benefitting the parties involved in the trade The crude oil prices are impacted by many factors, which are summarized as below :Production: The OPEC nations are the major producer of worlds crude oil.Therefore, every policy made by such countries related to the crude oil prices has their influence on crude oil prices. Any decision taken by OPEC nations for increasing or decreasing production of crude oil impacts the price level of crude oil in international commodity markets. Natural Causes and Accidents: In recent years, global community has witnessed many events which in turns have volatility effects on the price level of crude oil. Like hurricane Katrina in 2008 and other type of tropical cyclone have hit the major portion of globe, which as a result driven the crude oil prices to reach at its peak. More recent being the oil spill in the Gulf of Mexico. Inventory: In throughout the world, oil producers and consumers get to stock their crude oil for their future requirements. This gives rise to speculation on price expectations and sale/arbitrage chances in case any unexpected thing happens during supply and demand equations. Any upward or downward movement in inventory level shoots up volatility in price index of crude oil, which generates lot of changing movement in sensex. Demand: With a sharp rise in economic demand, requirement of crude oil is increasing to manifold in context to the limited supply. The high demand economies of crude oil are putting undue pressure on the available fixed resources. The major gap created between demand and supply of crude oil is forcing the price curve of crude oil to rise in upward direction.

The price structure of crude oil is also influenced by the cyclical pattern. It has been observed that requirement of crude oil gets increased during summer season in comparison to the winter season. As any dip in the seasonal temperature increases the consumption of energy for heating purpose in many cold nations. Demand shoots up and thus generates the requirement of tapping the inventories. Similarly, in summer, supply exceeds the demand and petroleum inventories are build up for storage purpose. Henceforth, crude oil prices drop. Economic Factors:- Government intervention in controlling the prices eg:-India ; Infrastructure for storage and transportation; Labour cost; Skilled work force; Stability of currency and exchange rates compared to the host country. This industry is extremely open; trade flows are large compared to production and there is considerable overlap between oil production and refining internationally, and to some extent in India. So we begin with a brief discussion of the international petroleum industry and its components refining being one of them. Petroleum is extracted from underground reserves; then it is cracked or refined into end products for various uses. The petroleum industry thus has two parts: an oil exploration and production industry upstream and a refinery industry downstream. Most oil producers also own refineries. But the reverse is not true; a high proportion of oil is sold to refinery companies that do not produce crude oil. Sedimentary rocks in which hydrocarbons are trapped often hold gas, sometimes in association with crude oil and sometimes alone. It consists mostly of methane, which is lighter than air and toxic. It therefore requires airtight tanks for storage and similarly leak-proof pipes or trucks for transport, which raise its capital costs. Associated gas was flared in early years of the industry; it is still flared at remote or minor wells where the cost of its collection and transport would be high, or often re injected into the oilfield to maintain pressure which forces oil up to the surface. But where the quantities are large enough, natural gas is mined and traded. It is mainly used as an industrial, domestic and vehicular fuel. Motor vehicles run almost exclusively on petrol and high-speed diesel oil, both fuels derived from mineral oil although they can be modified to run on certain bio fuels. Vehicles are so widely dispersed that they require an extensive distribution system for these two refinery products. As motor vehicle use has spread across the world, it has brought along with it petrol pumps, logistics etc. Social Factors:-It is very harmful to the environments as the ecological system in the area gets disturbed.eg:-Mexico oil spill, The products generated by this industry is known to generate various pollutants including carbon monoxide which leads to global warming. The safety of the workers working at the oils rigs and refining factories is a big challenge Technology Factors:-There is a need to control the fuel emissions hence more refined and environment friendly fuels like euro 5& 6 have to be produced ; Inventory control using modern IT infrastructure; seismic library must be compiled to get to know the risk and benefits of a particular exploration . Competitor analysis :-

The oil and gas history in India dates back to 1867, with the discovery of oil deposits in Makum, near Margherita, Assam. The oil and gas sector in India has since witnessed the birth of numerous oil and gas companies. In India, the oil and gas industry jobs attract huge labour force. With the inset of bigger players into the oil & gas sector in India engaging in mass oil & gas production, the oil & gas prices have been revised although still in the unaffordable segment for many. The primary competition is between the Public sector undertaking and the Private sector companies. Public Sector Undertakings (PSU's): ONGC - Oil & Natural Gas Corp (exploration and production) OIL - Oil India Limited (exploration & production) IOC - Indian Oil Corporation (refining & marketing) BPCL - Bharat Petroleum Corporation Ltd (refining and marketing) HPCL - Hindustan Petroleum (refining & marketing) GSPC - Gujarat State Petroleum Corp

Private Oil & Gas companies in India

RIL - Reliance Industries Limited (Indian Oil& gas company) ESSAR (Indian Oil& Gas company) Cairns Energy India British Gas (BG) energy Niko (upstream exploration& production) Chevron Oil Limited Shell Oil British petroleum(JV with RIL in KG basin)

Total (downstream exploration& production, chemicals)

The ministry of Petroleum From 1979 onwards, began to invite international bids for exploration and development from time to time. Nine rounds of bidding were held till 1997; 32 blocks were awarded for exploration and 30 for development. In 1997 they produced 3 mtpa of crude and 7 mcmd of gas. But since refining and distribution were government monopolies, the licensees had to sell their oil and gas to the government. Negotiations with the government were protracted and involved each time. So the rounds attracted little international interest. In the meanwhile, the government monopolies could not increase production and refining capacity to keep up with demand. Between 1985-86 and 1995-96, the import ratio went up from 31 to 44 per cent for crude and from 7 to 27 per cent for refined products. The policy of government ownership and control of oil was a part of a socialist approach which applied to all economic policies. These policies became discredited when a serious balance of payments problem arose in 1989-91; a new government elected in 1991 overhauled many of the policies. It appointed two committees in 1994-95: one under the chairmanship of U Sunderarajan was asked to examine replacing administered by market-determined prices, and a strategic planning group on restructuring of the oil industry (R Group) was asked to look at the structure and organization of the industry. The story of which of their recommendations influenced policy and how far is convoluted; but the government made the following major policy changes. The government announced a New Exploration Licensing Policy in 1997, which differed from the old one in the following respects.6 1 Bidders were to compete on cost recovery they could ask for up to 100 per cent and on their share of profit petroleum. 2 They were free to sell their share of the oil to anyone within the country. 3 Conditions regarding minimum expenditure, required partnership with government oil companies, and signature, discovery and production bonuses were scrapped. 4 Tax provisions were defined, and their stability promised. There would be a 7year income tax holiday, exemption from customs duty on exploration and drilling equipment, royalty was fixed at 10 per cent except for onshore crude which would pay 12.5 per cent, 5 per cent royalty on discoveries in water deeper than 400 meters, and development expenditure could be amortized over 10 years. 5 The licence could be assigned to third parties under conditions. 6 A Conciliation and Arbitration Act passed in 1996, based on the model set by United Nations Commission on International Trade Law, would apply to disputes. 7 Bidders were required to give the Directorate of Hydrocarbons, which was set up in 1993, the results of their surveys; in case they abandoned the concession, the results would become available to subsequent bidders. Under the New Exploration Licensing Policy, six rounds were held and 162 production-sharing licences were given till 1 April 2007, against 28 before the introduction of NELP. Of the licences,

77 per cent were offshore, and 53 per cent were to government companies. The sedimentary area explored went up from 50 per cent in 1995-96 to 85 per cent in 2006-07 of the total 3.14 square kilometers (1.79 million onshore and up to 400 meters offshore, 1.35 million deep-water beyond 400 meters). Well explored area went up from 15 to 20 per cent, poorly explored area from 17 to 21 per cent, and area being explored from 18 to 44 per cent. These figures suggest that many licensees were sitting on concessions because they did not see a satisfactory path to profitable exploitation of discoveries, or were negotiating such a path. A seventh round of NELP was opened on 1 April 2008. In July, six multinational companies (Chevron and Conoco-Philips of the US, Britain's BG (British Gas) and BP (British Petroleum), Canada's Niko and Anglo-Dutch Shell) wrote to the government to say that they would not bid if the regulatory framework remained uncertain and the government did not adhere to contractual arrangements. Instances of such were:(1) the Enron affair, in which Maharashtra government reneged on a contractual obligation to buy electricity at a fixed price (it was saved from litigation by Enrons liquidation on account of fraud committed by the company in its home country, US), (2) The governments taking away the contractual right of the owners of the Panna-Mukta fields Reliance, British Gas and ONGC to sell gas, and forcing them to sell it to GAIL at a price of its choosing to GAIL (the exploration contracts embodied freedom of sale and pricing), and (3)DGHs renegotiation of conditions embodied in the model production sharing contracts issued at the time of announcement of earlier rounds after bidders had invested money and found oil or gas. The companies were also of the view that DGH, which was supposed to be a regulator, acted more like an arm of the government. The government did not respond to the six companies concerns; consequently, they did not take part in the bids. In the event, of the 57 blocks on offer, 12 received no bids, and 19 received only one bid. Of the 45 winning bids, one was rejected by Cabinet Committee on Economic Affairs, resulting in 44 production sharing contracts. ONGC and its associates got 20 concessions. Thus, the round confirmed a decline in interest amongst international companies, especially experienced ones. There is a more general disincentive to bidding in the fact that the bidders have to sell their production in India, which remains a market dominated by government companies; it is thus impossible to be sure that the concessionaire would get an internationally comparable price for his output. This is particularly obvious in the case of Cairn Energy, which bought a block in Rajasthan from Shell in 2002 and soon struck oil. The find in Barmer was far from the sea. It could be sold to Indian Oil Coorporation, but negotiations have not borne fruit till now. The crude is waxy, and difficult to transport. Cairn has been drilling more exploration wells and raising its estimate of reserves. Now it is planning to lay a heated pipeline to Salaya and export the crude. It is also probably true of Reliance, which first struck oil in Krishna-Godavari basin offshore, and later gas as well. In 2006, Niko Resources whom Reliance had called in as consultant estimated gas reserves at 1 trillion cbm. Reliance tried to sell the gas to power utilities on the south and east

coast, but failed to reach agreement over the price. The power utilities are owned by state governments and make heavy losses. So their ability to pay is in doubt. Thus, private entry was allowed in oil exploration and production in the 1980s, and private firms have discovered substantial oil and gas resources. But none has used them to enter domestic refining and distribution. This is because deregulation of the downstream industries has not kept pace with that of exploration. Exploration and production costs vary enormously according to the location and depth of hydrocarbons and the size of reserves. There is a suggestion that the absence of competition makes it possible for the oil concessionaires to take bribes from suppliers of equipment and services in return of overpayments and. to overestimate investment costs. The chief safeguard against this possibility is The Directorate of Hydrocarbons, whose block management committee approves all field development plans. When it awards E&P contracts, it looks at both costs and at the technological capacity of the applicant and his ability and willingness to save time, do a thorough exploration and bring reserves into production. Besides its own expertise, its comparison of competing bids would help it make a judgment on individual proposals. The expertise it acquires in evaluating bids should give it capacity to supervise PSUs activities also. It is authorized to hire outside experts and consultants when necessary. A suspicion that ONGCs costs had been padded arose in 2006. In April 2007, the allegation that Reliance Industries padded costs was made by the Communist Party of India (Marxist). ONGC pointed out that DeGolyer and McNaughton, an outside consultant, did a third-party audit of all its projects. Reliance got a third-party audit done by Gafney, Cline and Associates when the original discoveries were made, but was asked to get a new audit done. There are two other authorities that check the proposed costs of public enterprises. They would be approved by the parent ministry. It does not have the expertise to make an informed examination; but that does not prevent it from examining the costs. It is also within its purview to take the help of international experts. The other is the Comptroller and Auditor General. He only makes an ex post examination long after the costs are incurred. He reports to Parliament, which can make the government take action on his report. Parliament committees obtain a reply to CAGs findings from the government, but there is no further action. Thus the safeguards within the government against overstatement of costs are not very effective. What is crucial here is that there should be multiple competitors for concessions. This requires expertise in formulating invitations for exploration contracts. From the fact that most exploration contracts have gone to a handful of Indian companies mostly government, some private it can be inferred that there is little competition for them. The reasons are also clear: that the government restricts the discoverers right to sell any oil or gas he finds in the world market, and that the dominance of public sector undertakings in the domestic refining industry makes it impossible for a discoverer to get a fair market price for his oil. Hence if there is padding of costs,it is due to the restraints on competition placed by the government of India. SWOT Analysis of the oil and gas sector:Strengths: Developing economy

 Enhanced international presence Alternate options like shale gas and natural gas Weaknesses: High import dependence Late start in acquisition of assets abroad Lack of freedom due to government interference.

Opportunities: Equity Oil: Major oil marketing companies are now venturing into upstream exploration and production activities so as to secure crude supply. Interdependence Nations eg:-Iran New Technologies New sources eg-:KG basin Threats: Production Stagnantion Ever increasing demand Environmental concerns Increase competition from the private and international players.

Company Analysis: Oil India Limited Oil India Limited (OIL) traces and symbolises the development and growth of the Indian petroleum industry. From the discovery of crude oil in the far east of India at Digboi, Assam in 1889 to its present status as a fully integrated upstream petroleum company, OIL has come far, crossing many milestones. On February 18, 1959, Oil India Private Limited was incorporated to expand and develop the newly discovered oil fields of Naharkatiya and Moran in the Indian North East. In 1961, it became a joint venture company between the Indian Government and Burmah Oil Company Limited, UK. In 1981, OIL became a wholly-owned Government of India enterprise. Today, OIL is a premier Indian National Oil Company engaged in the business of exploration, development and production of crude oil and natural gas, transportation of crude oil and production of LPG. OIL also provides various E&P related services and holds 26% equity in Numaligarh Refinery Limited. The Authorized share capital of the Company is Rs. 500 Crores. The Issued, Subscribed and Paid share capital of the company is Rs. 240.45 Crores. At present, The Government of India, the

Promoter of the Company is holding 78.43% of the total Issued & Paid-up Capital of the Company. The balance 21.57% of the Equity capital is held by others. OIL has over 1 lakh sq km of PEL/ML areas for its exploration and production activities, most of it in the Indian North East, which accounts for its entire crude oil production and majority of gas production.Rajasthan is the other producing area of OIL, contributing 10 per cent of its total gas production. Additionally, OILs exploration activities are spread over onshore areas of Ganga Valley and Mahanadi. OIL also has participating interest in NELP exploration blocks in Mahanadi Offshore, Mumbai Deepwater, Krishna Godavari Deepwater, etc. as well as various overseas projects in Libya, Gabon, Iran, Nigeria and Sudan. The company is registered at Dibrugarh District Assam786602 Management - Oil India Name T K Ananth Kumar N K Bharali Archana S Mathur Sushil Khanna G H Amin A Giridhar

Designation Director (Finance) Director Nominee Director Independent Director Independent Director Government Director

Financial Details :- Current market Capital of OIL =Rs.29450 crores FY12 Revenues =Rs.9863crores FY12 Profit after tax=Rs.3447crores Sector wise analysis compared to its peers is as follows:Market Cap ONGC Cairn India GAIL 241136.49 62359.90 44999.24 Sales 76516.39 8.80 40397.95 22695.86 Net Profit 25122.92 43.96 3653.84 3653.84

Petronet LNG 11073.75

All figures specified are in thousands of crores.

SWOT Analysis of Oil India Limited:Strengths:1. 2. 3. 4. 5. 6. No dependence on import of crude oil. More than 5 decades of E&P expertise Nirvana status to the company making it more autonomous. 2nd Largest Public Sector E&P company. Sound Financial Health Strong operating track record

Weaknesses:1. 2. 3. 4. Bureaucracy Human rights and Rehabilitation Employee management Legal issues.

Opportunities:1.Growing demand for petroleum products 2.Buyout of competition

Threats:1.Government regulations 2.High Competition 3.Environmental laws 4.Economic instability

Business diversification:-

Exploration:- Domestic :-61 E&P blocks; International:Eygt,Gabon,Iran,Libya,Nigeria,Timor,Venezuela and Yemen. New discoveries:- 19 Small to medium discoveries (reserve size less than 30mn bbls during last three years (FY10-12). Production:- 50years of production experience. Advance recovery techniques to maximize production. FY12 Production of 3847 MMT of crude oil .FY12 Production of 2.63bcm of natural gas. Refining and Manufacturing:26% equity stake in Numaligarh Refinery Limited (NRL).The other equity holders inNRL are BPCL and the Government of India. Gas Cracker project:10% equity stake in Brahmaputra cracker and Polymer limited Process natural gas,naptha or any other petroleum product. Distribute and market petrochemical products in India and abroad. Key Projects:Project Carabobo(onshore, Venezuela) Two blocks (383 sq. km) in Orinoco heavy oil belt in Venezuela. Being developed by a Mixed Company, with OILs share of 3.5% Project expected to have a sustained production level of more than 400,000 bopd for40 years Project includes construction of upgrader to transform the extra-heavy crude of 8-9 API into medium crude (16-22) API OILs planned investment in the project is about US$ 424 mn Stratigraphic wells being drilled. Development drilling expected to start in 2-3 monthstime Expected early production to start by the end of 2012/ early of 2013

Project Gabon(West Africa) Activity 2D (GLKM) 3 DAPI Aeromagnetic Survey (Km) Actual Work Done 1,039 GLKM 137 Sq. Km 36,412 Km

Wells 2 location released for drilling Pre-drilling activities in progress .Drilling to commence in August 2012

International Acquisition Strategy:Seek to acquire exploration acreages / producing properties. Employ capital in the midstream and downstream, limited for the purpose of creating additional value in the upstream. A Two Period Strategy: OIL focuses its international efforts to: Launch platforms for international core areas Acquire companies/enter partnerships as a non-operator Build skills in new onshore, offshore and gas plays Make organizational change to operate asset Sustain its core areas as an Asset manager Acquire companies and enter partnerships to grow its core areas launched in Period I Develop partnerships with technology companies to achieve efficiencies Implement its acquisition strategy utilizing joint ventures with other leading players in the industry Partnering strategy with potential midstream and downstream investments in order to retain focus on capital employed in E&P. OIL has international partnerships with Petronas, Medco, Kuwait energy and REPSOL YPF. Diversifying into new areas. Core Focus remains in E&P. Diversifying into new areas. Entry into Offshore/ Deep Water Blocks. Pioneer in Pipeline transportation.entry into Offshore/ Deep Water Blocks. These are some of the highlights of the Oil India limited.

Scr:- oil-india.com/ Scr:- Ibef.com Scr:- Scribd.com Scr:- Petrofed.org Scr:- eravandi.blogspot.com

Scr:- indicus.net(Indian petroleum industry prepared by competition commission of India) Scr:- moneycontrol.com