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Oil and Gas Industry in India

Indian oil and gas (O&G) sector marked its emergence way back in the late 19 th century, when the oil was first struck at Digboi in Assam in 1889. Since then, the sector has not seen back and has emerged as one of the core sectors for the country's economy. India is working towards self-reliance in O&G segment and has immense potential to achieve the same, as about 80 per cent of the country's sedimentary area is yet to be explored. Recent large-scale oil and gas discoveries in the Krishna Godavari and Rajasthan basins have further consolidated India's confidence to achieve the targets. The country's exploration and production sector is majorly dominated by public sector corporations wherein Oil and Natural Gas Corporation (ONGC) accounts for the highest market share. India is the sixth largest consumer of oil in the world and the ninth largest crude oil importer. Indias oil and gas sector contributes over 15% to the Gross Domestic Product (GDP). According to Ministry of Petroleum and Natural Gas, India have a total reserve of 1201 million metric tonnes of crude oil and 1437 billion cubic meters of natural gas as on 01 April 2010. However, due to huge demand-supply gap in oil and gas in India, it imports more than 60% of its crude oil requirement. Further, oil consumption in India is projected to enhance by 4-5% per annum to 2015, indicating a demand of 4.01 million b/d by 2015. As per the Business Monitor International (BMI) forecast, India will account for 12.4% of Asia Pacific regional oil demand by 2015, while satisfying 11.2% of the supply. Due to increasing refining capacities, exports of petroleum products are high in terms of the foreign currency amassed and accounts for 17% of the total exports. Indias expo rts of refined products stood at 0.95 million barrels per day as of June 2011 and US$ 4.6 billion worth of petroleum products were exported during July 2011. Vastness of this sector is corroborated by the fact that there were a total of 130,000 people employed in the petroleum industry in 2009-2010.

Diesel & Petrol

India's petroleum products' consumption grew by 0.1 per cent year-on-year (y-o-y) in November 2012, according to PPAC (Petroleum Planning and Analysis Cell). Cumulative growth for the period April November 2012 stood at 5.5 per cent The petrol consumption recorded highest monthly growth at 13.9 per cent in November 2012 while the high-speed diesel (HSD) recorded a growth of 1.7 per cent PPAC forecasts that India's petroleum production consumption would rise 6.1 per cent to 157.1 million tonne (MT) in FY13.

India's shale gas reserves are at about 290 trillion cubic feet (TCF), of which 63 TCF could be recovered, according to a study by US Energy International Agency. Shale gas is natural gas formed from being trapped within shale formations. Natural gas sector constitutes about 9.8 per cent of primary energy consumption which is projected to grow up to 20 per cent by 2025 as per Indian Hydrocarbon vision. About 65 per cent of natural gas consumption is accounted by power and fertilizer sectors. The demand for natural gas in India has been growing, and is expected to increase by 280 per cent from the current levels to 220 billion cubic meters (BCM) by 2020.

Oil & Gas - Key Developments and Investments

State-run oil major ONGC has partnered with Bharat Petroleum Corporation Ltd (BPCL) and Mitsui Group of Japan to invest about US$ 1 billion to set up a 5 MT LNG terminal in Mangalore. The company will soon sign a memorandum of understanding (MoU) with BPCL and is in talks with New Mangalore Port Trust for a location in the region The Anglo-Dutch oil major Royal Dutch Shell has plans to invest around US$ 1 billion to develop a floating LNG terminal off the coast of Kakinada in the state of Andhra Pradesh as early as 2014 through a joint venture (JV) with Reliance Power, India's biggest private sector power generation firm Shell currently has an LNG import plant in the state of Gujarat which has a capacity of 3.6 million tonnes. It is planned to be gradually upgraded to 10 million tonnes by the end of 2017 More recently, the British energy major BP Plc (BP) has announced a JV with Reliance Industries. The partnership intends to spend over US$ 5 billion in the next three to five years to boost the gas output from D6 block in Krishna Godavari basin. The two companies plan to extract 113.26 BCM of already discovered natural gas

Oil & Gas - Government Initiatives

India has been very active in O&G exploration and production activities on the global front and the Government has played vital role in sustaining the country's strategic position. Smt. P. Lakshmi, Minister of State for Petroleum & Natural Gas, has recently informed that India will soon send a delegation of experts to Niger for enhancing co-operation between two countries in the hydrocarbon sector. In response to the invitation by her counterpart Mr. Foumakore Gado, Minister of Energy & Petroleum of Niger, Smt Lakshmi said that Indian companies are interested to choose exploration blocks and invest in the oil Marketing infrastructure of the country. She also offered to provide training facilities by PSUs like ONGC, GAIL, IOC to the Niger's hydrocarbon sector workforce. The Indian Government is planning to introduce fuel-efficiency ratings for automobiles to encourage sale of cars that consume less petrol or diesel. Veerappa Moily, the Oil Minister, urged Petroleum Conservation Research Association (PCRA) to draw a proposal for the same. Moily also asked PCRA to start energy audit for conservation and optimum utilization of oil & gas in the country.

Market Highlights
The oil industry can be divided into three major components: upstream, midstream and downstream. The upstream segment comprises Exploration and Production (E&P) activities. The midstream segment is involved in storage and transportation of crude oil and natural gas. The downstream segment is engaged in refining and production of petroleum products, and processing, storage, marketing and transportation of commodities such as crude oil and natural gas.

In India crude oil is produced Onshore and Offshore. Onshore fields are in Assam/Nagaland, Arunachal Pradesh, Gujarat, and Tamil Nadu/ Andhra Pradesh. Oil India Limited (OIL) and Oil and Natural Gas Commission (ONGC) have the onshore field for crude oil production. Offshore production occurs at Bombay High run by ONGC and Private/Joint Venture companies. For natural gas, onshore fields are at Assam, Tripura, Gujarat, Tamil Nadu, Andhra Pradesh and Rajasthan. Offshore production of natural gas takes place at the Western area of Bombay High. India has 20 refineries out of which 17 are in the public sector and three in the private sector. The total number of retail outlets of Public Sector Oil Marketing Companies in 2010 was 36462. The total number of LPG consumers of Public Sector Oil Marketing Companies in 2010 was 114.952 million. Few of the SEZs in this sector are Reliance Petroleum SEZ, Mangalore SEZ in Karnataka, Gujarat Hydrocarbons and Power SEZ and Nagarjuna Oil Corporation in Tamil Nadu.

Major Players
Public sector corporations dominate the Indian exploration and production sector. In terms of the percentage share in total production Oil and Natural Gas Corporation (ONGC) accounts for the highest share. The second major player in the sector is also a public sector undertaking Oil India Limited (OIL). Both of these undertakings account for about more than 70% of the total market. The remaining share of the pie is cluttered with various private players in the market. Names of the key players in the oil and gas industry in India are Oil India Ltd., Oil and Natural Gas Commission, Indian Oil Corporation, Hindustan Petroleum Corporation Ltd., Bharat Petroleum Corporation Ltd., Gas Authority of India Ltd., Reliance Industries Ltd., Essar Oil, Adani Gas, Petronet LNG (Liquefied natural gas), Cairn Energy, Shell, British Gas and BP.

Oil & Gas - Road Ahead

Working towards the goal of self-reliance in O&G sector, the Indian Government is also looking to build storage capacity for about 18 MT of crude by 2020. The first phase of this strategic stockpile--5.33 MT--will be commissioned by April 2014. Indian Strategic Petroleum Reserves Ltd (ISPRL), a special purpose vehicle owned by the Oil Industry Development Board (OIDB), is now building storages in underground rock caverns at Visakhapatnam (1.33 MT), Mangalore (1.5 MT) and Padur, Kerala (2.5 MT). With this, India will become one of the first countries in Asia to have storage capacity in underground rock caverns. The Indian oil ministry has set targets to reduce energy import dependency from current 80 per cent to 50 per cent by 2020. The Government believes that it can be further reduced by 75 per cent in 2025 and we can achieve self sufficiency by 2030.

HPCL overview
HPCL is a mega Public Sector Undertaking (PSU) with a Navratna status. It is a Fortune 500 and Forbes 2000 listed Company which recorded an annual Gross Sale of INR 1,881,310 million during FY 2011-12. Our crude throughput and market sales (including exports) stood at 16.19 Million Metric Tonnes (MMT) and 29.40 MMT respectively. HPCL commands a 19.96% market share among oil PSUs with a strong market infrastructure spread across the country. HPCL runs two refineries producing a wide variety of petroleum products fuels, lubricants and specialty products. One refinery is based in Mumbai (west coast) with a capacity of 6.5 MMTPA, while the other is in Visakhapatnam (east coast) with a capacity of 8.3 MMTPA. HPCL also holds an equity stake of 16.95% in Mangalore refinery & Petrochemicals limited (MRPL), a state of the art refinery at Mangalore with 9 MMTPA (million metric tons per annum) capacity.

Supply chain integration

HPCLs Product Mixture

Liquefied petroleum gas Naphtha Motor Spirit Mineral Turpentine Oil Aviation Turbine Fuel Superior Kerosene Oil High Speed Diesel Light Diesel Oil Furnace Oil Low Sulphur Heavy Stock Bitumen

HPCL crude imports

Indian refiners have been compensating for lost Iranian volumes with crude from Iraq and Latin America. Iraq replaced Iran as the country's No. 2 supplier after Saudi Arabia in the year that ended in March 2012, as Tehran ceded a position it had held for five years. Sanctions on Tehran have also prompted its other major Asian clients - China, Japan and South Korea - to cut imports and secure a waiver which allows them continued access to the U.S. financial system. Refiners are already finding it difficult to import because of an EU ban on insuring vessels carrying Iranian oil. Moreover, under new U.S. sanctions from February 6, payments for Iranian crude must be held in a bank account in India in rupees, which are not freely traded on international markets. India is aiming to cut deliveries from Tehran by 10-15 percent in the year beginning in April after reductions of about 15 percent in the current year. Indian refiners, both private and state-run, have already cut imports by about 19 percent in April-December 2012 to around 270,700 bpd. HPCL operates the 166,000 bpd Vizag refinery in India and a 130,000 bpd plant in Maharashtra.

Petroleum Product Imports

HPCL imports products for meeting domestic market requirement. The products being imported by HPCL are: LPG Kerosene Gas Oil Gasoline Low Sulphur Fuel oil

Imports are finalized by tendering. Details regarding cargo size, product quality, discharge port etc. are

covered in the specific tenders. Parties registered with HPCL only can participate in these tenders. The parcels are received at various coastal locations in India.

Petroleum Product Exports

HPCL exports products and intermediate streams from its refineries. The products being exported by HPCL are: Fuel Oil High Sulphur Gas oil Naphtha Packed Bitumen Food grade Hexane Lube oil base stock

The exports are finalized by tendering. Only parties registered with HPCL can participate in these tenders. Details regarding cargo size, product quality, load port etc. are detailed in the specific tenders.