Oil & Gas Industry Analysis - India

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Oil and Gas India
An Overview

Sahil Jain 11/17/2012

India imports roughly 75 percent of its total oil consumption and the remaining 25 percent is primarily produced by National Oil Companies (NOCs). Concerned by the alarming increase in our oil import bill, the government has taken several steps to reduce our dependency on imported oil. But even after more than a decade of introduction of policies like the New Exploration Licensing Policy (NELP, 1997-98) and allowing 100 percent FDI in Exploration and Production (E&P), the supply of indigenously produced oil has not been able to keep-up with the rapidly increasing demand.

Indicator Life Cycle Stage Capital Intensity Industry Assistance Concentration Level Regulation Level Technology Change Barriers to Entry Revenue Volatility

Rating Mature High High High High Low High Low

Comment The Indian Oil production is growing steadily but at a low rate of 1.78% while natural gas is at 7.39% High capital requirements The share of Petroleum sector in total Govt. subsidy has been increasing and so is the under-recoveries by Oil companies ONGC produces 75% of India's Crude Oil, while OIL produces another 10%. The average HHI over has been 0.65 for the period 2002-10 Prices of transportation fuel (Petrol and Diesel), PDS Kerosene and domestic gas are controlled by the govt. The per person productivity has shown a very slow growth in the past years High capital requirements, Delay in approvals from various ministries Growth in production of oil has almost been linear while that of natural gas has shown sharp uptrend in the last couple of years

The industry remains regulated as the price of transportation fuel, PDS Kerosene and Domestic LPG is controlled by the government, though the government has shown interest in coupling domestic prices with the global oil prices.

Crude Oil Productivity
270.00 260.00 Tonnes per person 250.00 240.00 230.00 -3.26% 220.00 -8.65% 210.00 2004 2005 2006 2007 Year Productivity (Tonnes per person) YoY Productivity change (%) 2008 2009 2010 2011 -10.00% -2.95% -5.00% 3.57% -0.10% 0.00% 7.93% Percentage 5.00% 15.00%

10.30% 10.00%


Source: http://petroleum.nic.in

Data shows that there had not been any major technological change in the first decade of the century; however, productivity has begun to increase in the recent years. It would be hard to say if this uptrend would continue in future.

Govt. Subsidies and Oil Co. Under-recoveries
60,000.00 50,000.00 40,000.00 Rs. Crore 30,000.00 20,000.00 10,000.00 2005-06 2006-07 2007-08 Year PDS SKO Fiscal Subsidy by Govt. Domestic LPG Fiscal Subsidy by Govt. PDS SKO Under Recovery by Oil Cos. Domestic LPG Under Recovery by Oil Cos. 2008-09 2009-10 2010-11*

Source: http://petroleum.nic.in

Subsidies in Indian Petroleum Industry
180,000.00 160,000.00 140,000.00 120,000.00 Rs. Crore 100,000.00 80,000.00 10.00 60,000.00 40,000.00 20,000.00 2007-08 2008-09 Year Total Central Govt. Subsidies Pol Products Pol Subsidy as % of Total Subsidy 2009-10 2010-11 RE 5.00 Percentage 15.00 20.00 25.00

Govt. subsidy bill and Oil companies’ under-recoveries increase trend is expected to continue until the government completely decontrols the petroleum prices. With general elections 2014 round the corner, this is an unlikely event.

Company classification in the Oil and Gas Industry
    Exploration for crude petroleum and natural gas (Upstream activity) Crude oil and natural gas extraction (Upstream activity) Refining of crude Oil into various petroleum products (Downstream activity) Distribution and marketing of petroleum products (Downstream activity)

India Demand v/s Supply
As per the US Energy Information Administration (EIA), oil consumption in India is expected to grow at an average rate of 3.5% annually for the period 2008-2035, while production is expected to grow at a rate of 0.8% only. For natural gas, both consumption and...