India Country Market
Insights and Opportunities
Oil & Gas Sector
Overview: The Indian Petroleum industry is one of the oldest in the world, with oil being struck at Assam in 1867, nine years after Col. Drake's discovery in Titusville. India has one of the fastest growing economies in the world, and the demand for oil and gas is rising at a corresponding rate. Not only is India's market potential huge, but in recent years India has emerged as one of the most prospective regions in the world with major oil and gas discoveries, both onshore and offshore. Against a crude oil production of about 37 million tons per annum (MTPA), India's consumption currently exceeds 125 million tons. To provide energy security, the GOI is seeking investments in excess of $100 billion in both the upstream and the downstream sectors during the next 15 years.
India's petroleum product consumption has grown by 4-5 percent over the past 10 years and the oil demand in India is expected to rise to 368 MTPA by 2025. With the widening gap between demand and supply, both for oil and gas, the outlook for the upstream sector is extremely positive. While oil and gas will continue to play a substantial role in the total energy mix, the need for harnessing alternate energy sources like Coal Bed Methane (CBM) and gas hydrates will become crucial to balance the demand and supply.
The government of India announced the eighth round of bidding under the New Exploration Licensing Policy (NELP) on April 9, 2009, which includes 70 oil and gas blocks and 10 areas for extraction of coal bed methane (CBM) gas from below the coal fields under CBM-IV. The blocks include 24 deep-sea blocks, 28 shallow water blocks and 18 onland blocks. Of the blocks offered so far, 49 oil and gas discoveries have been made in Cambay onland, North East Coast and Krishna Godavari deep-water areas, asserting over 600 million tons of oil and equivalent gas reserves. Seeking a cut in oil import, India so far has awarded 203 oil and gas blocks in the previous seven rounds of NELP with over $11 billion committed in exploration. In the first six NELP rounds, 162 areas with an investment commitment of $ 8.33 billion have been awarded. Out of the $8.33 billion, $3.887 billion has already been spent by oil and gas till 2007.
Opportunities: The focus of oil refining companies has shifted to clean fuels as per current environmental standards. Clean fuel technology supplied by companies like UOP, Chevron and Axens is in great demand. Also, with greater liberalization and ensuing competition, oil-marketing companies are wooing the retail customer with more and more value-added services provided at retail outlets. In addition to new outlets, existing retail outlets are being modernized with refreshing signage, and the establishment of mini-malls. U.S. companies engaged in design of gas stations, vending machines and development of concessionaires will find clients among the downstream oil companies.
The Indian oil and gas industry has traditionally been more open to imports than other segments of the economy. To procure major equipment, the government oil companies float public tenders. The U.S. is the leader in the import market segment, with close competition from the U.K., Japan and Korea. Traditionally, the Indian oil and gas sector has been dependent on U.S. technology and equipment. Also, since India uses American Petroleum Institute (API) specifications, U.S. manufacturers have an edge over their foreign competitors. Promising sub-sectors include: Seismic & Drilling Equipment and Services; Refinery and Clean Fuels Equipment; and Pipelines and Gas-Field Equipment. India's first Fortune 500 company, Indian Oil Corporation Limited (IOC), India's largest upstream company, Oil and Natural Gas Corporation Limited (ONGC), and India's largest gas company are implementing projects in excess of $5 billion.