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OIL AND NATURAL GAS
An Overview
The Indian oil and gas sector is one of the six
core industries in India and has very significant
forward linkages with the entire economy. India
has been growing at a decent rate annually and
is committed to accelerate the growth momentum
in the years to come. This would translate into
India's energy needs growing many times in the
years to come. Hence, there is an emphasized need
for wider and more intensive exploration for new
finds, more efficient and effective recovery,
a more rational and optimally balanced global
price regime - as against the rather wide upward
fluctuations of recent times, and a spirit of
equitable common benefit in global energy cooperation.
The Indian oil and gas sector is of strategic
importance and plays a predominantly pivotal role
in influencing decisions in all other spheres
of the economy. The annual growth has been commendable
and will accelerate in future consequently encouraging
all round growth and development. This has necessitated
the need for a wider intensified search for new
fields, evolving better methods of extraction,
refining and distribution, the constitution of
a national price mechanism - keeping in mind the
alarming price fluctuation in the recent past
and evolving a spirit of equitable global cooperation.
Oil and Gas Sector:
An Overview
Exploration and Production (E&P)
The growing demand for crude oil and gas in the
country and policy initiative of Government of
India towards increased E&P activity, have
given a great impetus to the Indian E&P industry
raising hopes of increased exploration.
Oil and Natural Gas Corporation Limited (ONGC)
and Oil India Ltd. (OIL), the two National Oil
Companies (NOCs) and private and joint-venture
companies are engaged in the exploration and production
(E&P) of oil and natural gas in the country.
During the year 2008-09, crude oil production
has been 33.51 million metric tonnes (MMT) with
natural gas at 32.85 billion cubic metre (BCM).Natural
gas production in 2009-10 is targeted to be about
52.116 BCM.
Imports and Exports of crude
oil and petroleum products
During the financial year 2008-09, imports of
crude oil has been 128.16 MMT valued at US$ 73.97
billion. Imports of crude oil during 2007-08 was
121.67 MMT valued at US$ 58.98 billion. This marked
an increase of 5.33 per cent during 2008-09 in
quantity terms and increased by 25.37 per cent
in value terms.
During the financial year 2008-09, exports of
petroleum products in quantity terms is 36.93
MMT valued at US$ 25.41 billion marking an increase
of 6.02 per cent in value terms compared to 2007-08.
New Exploration Licensing Policy (NELP)
New Exploration Licensing Policy (NELP) provides
an international class fiscal and contract framework
for Exploration and Production of Hydrocarbons.
In the first seven rounds of NELP spanning 2000-2009,
Production Sharing Contracts (PSCs) for 203 exploration
blocks have been signed. Under NELP, 70 oil and
gas discoveries have been made by private/joint
venture (JV) companies in 20 blocks.
With a view to accelerate further the pace of
exploration, the eighth round of NELP was launched
in April 2009.In the eighth round of NELP,70 exploration
blocks comprising of 24 deepwater blocks,28 shallow
water blocks and 18 onland blocks will be offered.
Natural Gas
Natural Gas has emerged as one of the most preferred
fuel due to its environmentally benign nature,
greater efficiency and cost effectiveness. At
present, the main producers of natural gas are
Oil and Natural Gas Corporation Limited (ONGC),
Oil India Limited (OIL) and the Joint Ventures
of Panna Mukta & Tapti, and Ravva. Out of
the total production of around 96 MMSCMD, after
internal consumption, LPG extraction and unavoidable
flaring, around 73 MMSCMD is available for sale
to various consumers. In addition, around 7 MMTPA
of re-gasified LNG (about 23 MMSCMD) is also being
supplied to domestic consumers.
Gas produced by ONGC and OIL from the existing
nominated blocks is sold at administered prices
fixed by the Government. As against a total allocation
of 150 MMSCMD of gas, actual supply under APM
is presently around 53 MMSCMD.
Public Setor Undertakings
Oil & Natural Gas Corporation Limited
(ONGC)
Oil & Natural Gas Commission (then Commission)
wasestablished on 14th August, 1956 as a statutory
body under Oil & Natural Gas Commission Act
(The ONGC Act), for the development of petroleum
resources and sale of petroleum products. ONGC
was converted into a Public Limited Company under
the Companies Act, 1956 and named as “Oil
and Natural Gas Corporation Limited” with
effect from February 1, 1994.
ONGC Videsh Limited (OVL)
ONGC Videsh Limited (OVL), a wholly owned subsidiary
of ONGC, was incorporated as Hydrocarbons India
Limited on March 5, 1965 with an initial authorised
capital of Rs. 5 Lakhs, for the business of international
exploration and production. Its name was changed
to ONGC Videsh Limited on June 15, 1989. The authorised
and paid-up share capital of OVL as on March 31,
2007 was Rs. 1,000 crore. The primary business
of the company is to prospect for oil and gas
abroad. This includes acquisition of oil and gas
fields in foreign countries as well as exploration,
production, transportation and sale of oil and
gas.
OVL has presence in 17 countries. It has 37 oil
and gas projects. OVL has production of oil and
gas from Sudan, Vietnam, Syria, Russia and Colombia.
Block BC 10 in Brazil is currently under development
with production expected to begin in 2009-10.
Block A-1 and A-3 in Myanmar, North Ramadan Block
and NEMED in Egypt, Najwat Najem Structure in
Qatar and Farsi Offshore Block in Iran have discoveries
and appraisal work is being carried out after
which the fields shall be put on development.
The remaining projects are in exploration phase.
Further, OVL is pursuing acquisition of various
oil and gas exploration and production opportunities
in Centra Asia, Latin America, Africa, Middle
East and South East Asia, which are at different
stages.
Oil India Liimted (OIL)
Oil India Liimted (OIL), a Government of
India Enterprise, under the administrative set-up
of Ministry of Petroleum and Natural Gas, is engaged
in the business of exploration, production and
transportation of crude oil andnatural gas.The
authorized capital of the company is Rs. 500.00
crores and the paid up capital of the company
is Rs. 214.00 crore.
OIL produces crude oil and natural gas from its
oilfields in Assam and Arunachal Pradesh, non-associated
gas from its fields in western Rajasthan and processes
LPG from the natural gas in Assam. The Company
presently has operational areas in Assam, Arunachal
Pradesh, Mizoram, Orissa, Uttar Pradesh, Uttarakhand
and Rajasthan in the country.
OIL is operating in 19 nominated ML and 19 nominated
PELs. The Company has acquired participating interest
in a total of 21 NELP blocks up to the end of
NELP-VI bidding round with the right of Operatorship
in respect of 12 blocks. The Company also holds
Participating Interests (Pis) in another four
Pre-NELP JV blocks in India and Production Sharing
Interest (PSI) in one Joint Venture Contract with
other partners in Arunachal Pradesh.
OIL is presently active overseas in seven countries,
viz. Libya, Gabon, Iran, Nigeria, Yemen, Sudan
and Bangladesh, pursuing various upstream E&P
activities. In addition, the Company is continuously
scouting for suitable E&P opportunities in
other countries like Syria, Indonesia, Oman, Kazakhastan,
Russia, etc., either alone or with suitable partners.
GAIL (India) Limited
GAIL (India) Limited, India’s principal Gas
Transmission and Marketing Company, was created
in 1984 with the objective of accelerating and
optimizing the effective and economic use of natural
gas and its fractions to the benefit of national
economy. In line with core objective of its incorporation,
GAIL has, over the years, developed natural gas
infrastructure for sustained development of gas
market in the country. GAIL, in the last two decades
of its existence, has created a sizeable natural
gas market in the country and presently markets
around 25 BCM of Natural Gas. GAIL handles around
28 BCM of Natural Gas through its Transmission
Network. Currently, GAIL’s market share in
gas transmission and marketing is 79% and 70%
respectively.
Refining
Refining
Capacity
During the year 2008-09, domestic refinery production
was 160.77 MMT.By the end of XI plan, refinery
capacity is expected to reach 240.96 MMT per annum.The
country is net exporter of petroleum products,
and products like naphtha, petrol, diesel and
Aviation Turbine Fuel (ATF) etc. were also exported
during the year.
At present, there are 20 refineries operating
in the country, out of which 17 are in the public
sector and 3 in the private sector. Out of 17
public sector refineries, 8 are owned by Indian
Oil Corporation Limited (IOCL), 2 each by Chennai
Petroleum Corporation Limited (a subsidiary of
IOCL), Hindustan Petroleum Corporation Limited
(HPCL), Bharat Petroleum Corporation Limited (BPCL)
and Oil and Natural Gas Corporation Limited, and
1 by Numaligarh Refinery Limited (a subsidiary
of BPCL). The private sector refineries belong
to Reliance Industries Limited and Essar Oil Limited.
Chennai
Petroleum Corporation Limited (CPCL)
Chennai Petroleum Corporation Limited (CPCL) formerly
known as Madras Refineries Limited was formed
as a joint venture in 1965 between the Government
of India (GOI), AMOCO India Inc., U.S.A. and National
Iranian Oil Company (NIOC) having a share holding
in the ratio 74%: 13%: and 13% respectively. In
1985, AMOCO disinvested in favour of GOI and the
shareholding percentage of GOI and NIOC stood
revised at 84.62 and 15.38 respectively. Later,
GOI disinvested 16.92% of the paid up capital
in favour of Unit Trust of India, Mutual Funds,
Insurance Companies and Banks on 19th May 1992,
thereby reducing its holding to 67.7%. A public
issue of CPCL shares was also made in 1994. As
a part of the restructuring steps taken up by
the Government of India, Indian Oil Corporation
Limited ( IOCL) acquired equity from GOI in 2000-01.
Currently, IOCL holds 51.88% while Naftiran Inter-trade
Company Limited (an affiliate of NIOC) continued
its holding at 15.40%.
CPCL has two refineries, with a combined refining
capacity of 10.5 million metric tonnes per annum
(MMTPA). The Manali Refinery in Chennai has a
capacity of 9.5 MMTPA and is one of the most complex
refineries in India with Fuel, Lube, Wax and Petrochemical
feedstocks production facilities. The second refinery
at Cauvery Basin, Nagapattinam was set up initially
with a capacity of 0.5 MMTPA in 1993 and later
its capacity was enhanced to 1.0 MMTPA in 2002.
Bongaigaon Refinery
& Petrochemicals Limited (BRPL)
BRPL was incorporated
on February 20,1974 , with the objective of installation
of Refinery having crude processing capacity of
1 MMTPA and a Petrochemical Complex consisting
of Xylene, Dimethyl Terephthalate (DMT) and Polyester
Staple Fibre (PSF) units. The crude processing
capacity of the Refinery was enhanced to 2.35
MMTPA in 1995-96 by commissioning of its Refinery
Expansion Units.
The authorized equity capital and the paid-up
capital of the Company is Rs.200 crore and Rs.199.82
crore respectively. The Government of India disinvested
its equity share of 74.46% to Indian Oil Corporation
Limited ( IOCL) in March, 2001 and hence BRPL
became the subsidiary Company of IOCL on 29th
March, 2001.
Numaligarh Refinery
Limited (NRL)
Numaligarh Refinery, Popularly known as “Assam
Accord Refinery” had been set up as a grass-root
refinery at Numaligarh in the District of Golaghat
(Assam) in fulfillment of the commitment made
by Government of India in the historic “Assam
Accord”, signed on 15th august, 1985 for
providing the required thrust towards industrial
and economic development of Assam. Both the Refinery
and its adjacent Marketing Terminal were completed
within the approved project cost of Rs.2724 crore.
Commissioning process of Numaligarh Refinery was
completed in June 2000 and commercial production
commenced from 1st October, 2000.
Mangaore Refinery & Petrochemicals Limited
(MRPL)
Mangalore Refinery and Petrochemicals Limited
(MRPL), first joint venture company for setting
up a crude petroleum Refinery in India was formed
in 1987 jointly by Hindustan Petroleum Corporation
Limited alongwith Indian Rayon and Industries
Limited and its associate companies (A.V. Birla
Group). The refinery project was commissioned
in March, 1996 with an actual capacity of 3.69
MMTPA. The expansion project of MRPL, having capacity
of 9.69 MMTPA, was commissioned in April, 2001.
The refinery is located at Mangalore on the western
coast of India, primarily conceived to maximize
middle distillates, such as kerosene and diesel.
The refinery is designed to process light to heavy
and sour to sweet crude. The performance of MRPL
started deteriorating after dismantling of APM
for refineries in April, 1998 and the Company
came very close to becoming a sick company by
2002-03.
With the approval of the Government, ONGCacquired
the entire stake of Aditya Birla Group in MRPL
for Rs.59.43 crore and also infused additional
equity capital of Rs.600 crore in March, 2003
as part of the approved debt restructuring plan.
With this, ONGC acquired 51% stake in the equity
of MRPL. Thus, MRPL became a Government company
within the meaning and scope of Section 617 of
the Companies Act, 1956 and also a subsidiary
company of ONGC. In June / July 2003, ONGC acquired
35.80 crore equity shares held by banks and financial
institutions issued against part conversion of
their loans in terms of debt restructuring plan,
increasing its stake in MRPL to 71.62%.
MRPL is the first refinery in India to produce
Euro-III High Speed Diesel (HSD) and Euro-III
Motor Spirit (Petrol).
Other Undertakings/organisations
Directorate General of Hydrocarbons (DGH)
The Directorate General of Hydrocarbons (DGH)
was established under the administrative control
of Ministry of Petroleum & Natural Gas by
Government of India Resolution in 1993. Objectives
of DGH are to promote sound management of the
oil and natural gas resources having a balanced
regard for environment, safety, technological
and economic aspects of the petroleum activity.
DGH has been entrusted with certain responsibilities
concerning the
Production Sharing Contracts for discovered fields
and exploration blocks, promotion of investment
and monitoring of E&P activities including
review of reservoir performance of major fields.
In addition, DGH is also engaged in opening up
of new/unexplored areas for future exploration
and development of nonconventional hydrocarbon
energy sources.
Engineers India Limited (EIL)
Engineers India Limited (EIL) was established
in 1965 to provide engineering and related technical
services for petroleum refineries and other related
projects. Over the years, it has
diversified into and excelled in various fields.
EIL has emerged as Asia’s leading design,
engineering and turnkey contracting company in
Petroleum Refining, Petrochemicals, Chemicals
& Fertilizers, Pipelines, Offshore Oil &
Gas, Onshore Oil & Gas,Terminals & Storages,
Mining & Metallurgy and Infrastructure.Engineers
India is an ISO 9001:2000 accredited Company.
Balmer Lawrie & Co. Ltd. (BL)
Balmer Lawrie & Co. Ltd. (BL) was established
in 1867 as a Partnership Firm and was incorporated
as Private Limited Company in 1924. It was subsequently
converted into a Public Limited Company in the
year 1936 with its Registered Office at Kolkata.
Biecco Lawrie Limited (BLL)
Biecco Lawrie Limited (BLL), a Government
of India Enterprise, under the administrative
control of the Ministry of Petroleum & Natural
Gas (MOP&NG), was established in 1919 and
became a Government Company in 1972. This is a
medium sized Engineering Unit with diversified
activities having two factories located at Kolkata.
Oil Industry Development Board (OIDB)
The Oil Industry (Development) Act, 1974 was enacted
following successive and steep increase in the
international prices of crude oil and petroleum
products since early 1973, when the need of progressive
self-reliance in petroleum and petroleum based
industrial raw materials assumed great importance.
Oil Industry Safety Directorate (OISD)
The Oil Industry Safety Directorate (OISD) assists
Safety Council under Ministry of Petroleum &
Natural Gas (MOP&NG) headed by Secretary,
P&NG as Chairman and includes Additional /
Joint Secretaries, Advisors in MOP&NG, Chief
Executives of all Public Sector Undertakings (PSUs)
under the Ministry, Chief Controller of Explosives
(CCE), Advisor (Fire) of the Govt. of India, DGMS
and the Director General of Factory Advice Service
& Labour Institute etc. as members.
Centre for High Technlogy (CHT)
Centre for High Technology (CHT) was established
in 1987 as a specialized agency of the oil
industry to assess futuristic requirements, acquire,
develop and adopt technologies in the field of
refinery processes, petroleum products, additives,
storage and handling of crude oil, products and
gas.
Petroleum India International (PII)
Petroleum India International (PII) is a consortium
of Public Sector Companies in the petroleum, Petrochemicals
and engineering sector. The member companies include
Indian Oil Corporation Ltd., Bharat Petroleum
Corporation Ltd., Bongaigaon Refinery & Petrochemicals
Ltd., Chennai Petroleum Corporation Ltd., Engineers
India Ltd., Hindustan Petroleum Corporation Ltd,
Oil India Ltd and Indian Petrochemicals Corporation
Ltd. PII was established in 1986 with the common
objectives of mobilizing the individual capabilities
of its member companies into a joint endeavour
for providing technical managerial and other human
resources on a global basis.
Petroleum Planning & Analysis Cell (PPAC)
The Petroleum Planning & Analysis Cell (PPAC)
was created w.e.f. 1st April 2002 after dismantling
of the Administered Pricing Mechanism (APM) in
the petroleum sector and abolition of the erstwhile
Oil Coordination Committee (OCC). The Governing
Body under the chairmanship of Secretary (PNG)
and senior officials of MOPNG and Chief Executives
of major oil and gas PSUs as members provides
necessary supervision, guidelines in the functioning
of PPAC.
Investment Opportunities
- Petroleum products are
the single largest merchandise export from India.
- Improved Oil Recovery (IOR)
/ Enhanced Oil Recovery (EOR) techniques
- Crude oil production from
the deepwater block D6 in KG Basin
- Use of improved technology
- Extended oil field acquisition
activities
- Capacity utilization of
refineries
- Foreign company collaboration
- End-user market and Infrastructure
development
- Setting up oil & gas
courses at universities and training institutes
- Opportunities for world-class
service providers
Policy Initiatives
National Auto Fuel Policy
The Auto Fuel 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. The policy objectives
are:
(i) Ensure sustainable, safe, affordable and
uninterrupted supplies of auto fuels of right
quality to support social and economic development.
One of the key factors for meeting this policy
objective is to diversify the sources and reduce
dependence on any single source of supply.
(ii) Over the years, infrastructure for the import
of crude and crude products,x their processing
and production, and storage and transportation
has been created in the country. Considerable
investment has been made in developing this infrastructure
and the logistics for the distribution of petroleum
products in the country. The Auto Fuel Policy
is committed to an optimal utilization of such
an infrastructure.
(iii) Assess the future trends in emission and
air quality requirements from the view point of
public health, and establishment of a consistent
framework within which different policy options
to reduce emissions can be assessed. It is, therefore,
required that environmental objectives for air
quality be determined, emission reduction targets
be established, input data on costs and benefits
be collected and cost effective measures to reduce
emissions be identified. Appropriate institutional
arrangements to be put in place to where such
activities can be handled effectively.
(iv) Adopt such vehicular emission standards that
they together with other measures, will be able
to make a decisive impact on air quality, without
placing an undue burden on the people.
(v) Vehicular emission standards and auto fuel
quality should offer choice to the citizens and
equally a choice to automobile manufactures in
matters of technology selection. Principles of
widening the choice and promoting competition
amongst automobile technologies, within the limits
that are imposed by the availability of auto fuels
and security of their supplies.
(vi) As elsewhere in the world, the Government
should decide only the vehicular mission standards
and the corresponding fuel specifications without
specifying vehicle technology and the type of
fuel.
(vii) The requirement of investments to reach
vehicular technology and fuel quality of Euro
III equivalent levels throughout the country is
estimated in the range of Rs. 50,000 - Rs. 60,000
crore. Therefore, to achieve the air quality targets
by gradually improving emission standards and
a phased up gradation of fuel quality and vehicular
technology, taking note of the financial, technical
and institutional considerations as also the absorptive
capacity is required.
(viii) Administered fuel prices, carrying subsidies
and cross-subsidies, lead to distortions in fuel
usage pattern. Determination of fuel prices on
the principles of import parity and putting in
place a medium term fiscal regime as early as
possible are necessary for the sustainability
of fuel usage pattern.
(ix) In order to remain relevant, the Auto Fuel
Policy must undergo periodic revisions, preferably
at an interval of five years. This will allow
adjustments in the Policy that may become necessary
on account of the technological and other changes
that are inevitable in the country and the world.
It would also afford an opportunity to different
stakeholders to express their views in the light
of the changes that take place with time.
Full
text of the policy
FDI Policy
The present policy on FDI in the Petroleum &
Natural Gas sector vide Press Note No 5 (2008)
permits FDI up to 100% under the automatic route
in all activities other than refining and including
market study and formulation, investment/financing,
setting up infrastructure for marketing in Petroleum
and Natural Gas Sector subject to sectoral policy.
In Refining, FDI up to 49% in case of Public
Sector Undertakings, without involving any divestment
or dilution of domestic equity in existing public
sector undertakings through Foreign Investment
Promotion Board (FIPB) and FDI up to 100% is permitted
in case of Private companies under Automatic route
subject to sectoral policy.
Key Players
- Indian Oil
- Reliance
- Bharat Petroleum
- HP
- ONGC
- BP
- BG Group
- Gaz de France
- Chevron
Foreign Direct Investment
(FDI) Policy
The present policy on FDI in the petroleum &
natural gas sector vide press note no 5 (2008)
permits FDI up to 100% under the automatic route
in all activities other than refining, investment/financing,
setting up infrastructure for marketing in petroleum
and natural gas sector subject to sectoral policy
including market study and formulation.
In refining, FDI up to 49% in case of public
sector undertakings, without involving any disinvestment
or dilution of domestic equity in existing public
sector undertakings through foreign investment
promotion board (FIPB) and FDI up to 100% is permitted
in case of private companies under automatic route
subject to sectoral policy.
Policy framework
FDI
Policy for Oil and Gas Sector (.pdf)
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