Oil and Gas Sector

Harneet Kaur Bhusari(9402) Prajakta Joshi(9407) Apoorva Puranik(9413) Disha Shah(9418)

Niche and Magazine Journalsim Assignment 1

The Sector Overview

One of the largest and most important sectors for fuelling economy India- 5th largest refining country accounting to 4% of worlds refining capacity Oil consumption, currently 40 % in India is projected to increase by 4-5 per cent per annum by 2015, indicating a demand of 4.01 million b/d by 2015. India depends on imported crude to meet 75% of domestic demand.
Niche and Magazine Journalsim Assignment 2

 In India, oil and gas is dominated by stateowned entities 5.8 billion barrels of proven oil reserves Average oil production, 815,000 B/D The petroleum and natural gas sector which includes transportation, refining and marketing of petroleum products and gas constitutes over 15 per cent of the GDP.

Niche and Magazine Journalsim Assignment

Upstream Segment Exploration and production

The upstream segment is dominated by the state-owned ONGC It is the largest upstream company in the exploration and production (E&P) segment, accounting for approximately 75 per cent of the countrys total oil output IOCL operates a 10,329 km network of crude and product pipelines with a capacity of 1.4 million B/D This is around 75 per cent of the nations total domestic oil pipeline network IOCL is the largest company, operating 10 out of 19 Indian refineries Reliance launched Indias first privatelyowned refinery in 1999, and has gained a considerable market share (41 per cent 2Q 2011)
Niche and Magazine Journalsim Assignment 4

Midstream segment Storage and transportation

Downstream segment Refining, processing and marketing

Growth Rate of the Sector

Crude Oil production was recorded at 22.44 million metric tonnes (MMT) for April-October 2011, as compared to the 21.54 MMT in AprilOctober 2010 Natural Gas production was 28,431.4 million cubic metres (MCM) during April-October 2011 During April-October 2011, 96.95 MMT of crude oil was refined, compared to 93.58 MMT of oil refined during corresponding period in 2010
(According to the provisional production data released by the Ministry of Petroleum and Natural Gas in a press release) Niche and Magazine Journalsim Assignment
5

Key Developments
41 Km. petroleum pipeline between India and Nepal at a cost of about Rs 100 Crore. ONGC Videshs 25% stake in Kazakhstan's Satpayev acreage. RIL and British Petroleum Plc (BP) have announced the formation of India Gas Solutions. BPCL plans to achieve refining capacity of nearly 42 MT by 2015-16 where the focus will be on low-cost expansions. GAIL has entered into a deal with Carrizo Oil and Gas Inc for acquiring 20 per cent stake in Eagle Ford shale acreage.Magazine Journalsim Assignment Niche and 6

Oil & Gas - Government Initiatives

The India Hydrocarbon Vision 2025 envisages a demand of about 391 million standard cubic feet per day (MMSCMD) of gas by the year 2020-25 New Exploration Licensing Policy (NELP), implemented by Government of India, permits 100 per cent FDI for small and medium sized oil fields via competitive bidding Public-private partnerships (PPP) as well as only private investments can foray into the refining sector.
Niche and Magazine Journalsim Assignment 7

FDI in Oil and Gas

FDI permitted upto 100% through competitive bidding. (petroleum, pipeline, natural gas, LNG etc) since 2003.

The FDI totalled USD574 million in the oil and natural gas sector during Financial Year 2011 Total FDI inflows in Indian petroleum and natural gas has been USD3,159 million from April 2000 April 2011
Niche and Magazine Journalsim Assignment 8

 100 per cent FDI is allowed for petroleum products and pipeline sector as well as natural gas/ LNG pipeline. Minimum 26 per cent equity is covered over five years,in case of trading and marketing. The Government has eradicated the Customs Duty on Crude Oil and trimmed Customs Duty on petroleum products by 5 per cent. Excise Duty on diesel was also reduced by US$ 0.056 per litre
Niche and Magazine Journalsim Assignment 9

Top Five Companies

Indias Oil and Gas Industry has an interesting mix of Oil & Gas companies from the government and private sector. Most of the companies are huge with billion dollar balance sheet and huge operations as is the case with the Oil and Gas Industry worldwide. Except for Reliance Industries, the upstream sector of oil and gas production and distribution is dominated by government owned companies which are heavily regulated.
Niche and Magazine Journalsim Assignment 10

 Oil and Natural Gas giant One of the biggest exporters in India One of the largest petrochemical and oil refining complexes. Sold a stake in its valuable Godavari Basin to BP for a whopping $7.5 billion.

Niche and Magazine Journalsim Assignment

11

 Ranks 3rd in Oil & Gas Exploration & Production (E&P) Industry globally. Market cap of Rs. 235,000 Crores, produced 803 Million Metric Tonnes of crude and 485 Billion Cubic Meters of Natural Gas from 111 fields. ONGC Videsh Ltd. (OVL) is the biggest Indian multinational, with 40 Oil & Gas projects in 15 countries. Created a record of sorts by turning Mangalore Refinery and Petrochemicals Limited (MRPL) to the BSE Top 30, within a year.
Niche and Magazine Journalsim Assignment 12

 Market cap Rs. 58,000 crores. The revenue earned was 24,000 crores (2011-12) with a net profit margin of 11% Responsibility of reviving the LNG terminal at Dabhol and sourcing LNG. GAIL is one of the best performing stocks in the Energy Industry.
Niche and Magazine Journalsim Assignment 13

 It is the second largest Oil and Gas private company listed on the Indian stock exchange. One of the biggest private exploration and production companies currently operating. A subsidiary of the British company Cairn,its growth has been nothing short of phenomenal after winning a bid to explore oil blocs in Rajasthan in the NELP. The company has set up a Processing terminal in Barmer (Rajasthan) to process the crude from fields. A pipeline has also been constructed to transport the crude from Barmer to Bhogat in the Gujarat coast.and Magazine Journalsim Assignment Niche 14

 Major distributor of petroleum, cooking gas and diesel in the Indian market. The company has a market capitalisation of Rs. 21,000 crores. .Bharat Petroleum produces a diverse range of products, from petrochemicals and solvents to aircraft fuel.
Niche and Magazine Journalsim Assignment 15

Major Developments and Issues

Oil producers to take a Rs 60 billion hit on cess increase Rs 2000 billion oil losses next year may play havoc with govt plans Will take corrective steps to deal with oil prices: FM GAIL third quarter PAT up by 13%, Turnover (net of Excise) up by 35% GAIL nine months PAT up by 14%, Turnover (net of Excise) up by 27%
Niche and Magazine Journalsim Assignment 16

Government Policy
Government invites global oil & gas companies to bid for license under NELP NELP-IX Fiscal incentives to attract more companies to invest in the Indian oil & gas sector. Deregulation of petrol prices (2011)

Niche and Magazine Journalsim Assignment

17

National Auto Fuel Policy

Policy aims to comprehensively and holistically address the issues of vehicular emissions, vehicular technologies, and auto fuel quality in a cost-efficient manner while ensuring the security of fuel supply

Niche and Magazine Journalsim Assignment

18

Policy to Attract FDI

Permits FDI up to 100% under the automatic route in exploration, petroleum product marketing and petroleum refining in the private sector FDI up to 26% is permitted with prior Government approval in petroleum refining by the PSU. Actual trading and marketing petroleum products- fdi to 100% with condition that 26% foreign equity would be divested in favor of Indian public
Niche and Magazine Journalsim Assignment 19

It has been decided to

i) Delete the condition of compulsory divestment of up to 26% equity within 5 years for actual trading and marketing of petroleum products; and ii) Allow FDI up to 49%, with prior approval of FIPB, in petroleum refining by PSUs without involving any divestment or dilution of domestic equity in the existing PSUs.
Niche and Magazine Journalsim Assignment 20

Expectations and Provisions

The oil companies were expecting 100% compensation for the under-recoveries in line with year 2008-09, BUT the government restrained from any such moves in the budget presented. The companies were also calling for an extension of the tax holiday for both exploration and refining activities by 10 years, as in case of power sector BUT this pitch did not materialize as per the market expectations.
Niche and Magazine Journalsim Assignment 21

Expectations and Provisions

All eyes were pinged on the potential decontrol measure on diesel, BUT government backed off from such shift, possibly citing the escalating inflationary levels in the country. Expected a decline in the import duty on rising crude oil prices BUT, With only consideration to LPG and Kerosene, and no concern for the rising Crude Oil prices. Expected issue of Diesel Deregulation, BUT no proposal was provided to deregulate it
Niche and Magazine Journalsim Assignment 22

Expectations and Provisions

Expected more freedom to revise petrol prices, abolition of excise duties and special duties prevailing on branded fuels BUT did not materialize Expected flexibility to claim tax holiday in a block of 10 years The budget is NEGATIVE for the entire sector including companies HPCL, BPCL and IOC.

Niche and Magazine Journalsim Assignment

23

THANK YOU!

Niche and Magazine Journalsim Assignment

24