Oil & Gas Industry Report - India

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The oil and natural gas sector comprises of exploration and production of crude oil, natural gas, refining and marketing of the petroleum products, which are classified as upstream, downstream and midstream.

Industrial Research on India - Oil & Gas Sector
July 2012, BIM Trichy
Arjun Venugopal, Divakaran, Revathy Prasad, Sreejesh N, Vincent

Ministry of Petroleum & Natural Gas

Government of India

Domestic Production Natural Gas (52.22 bcm) Petroleum (37.7 MMT)

Imports Natural Gas (13 bcm) Petroleum (87.97 MMT)

Upstream Pipelines (174.96 MMTPA, 19300 km)

Refineries (200.02 MMTPA)

Petroleum Products (206 MMT)

Petrochemicals (15.54 MMT) Midstream

Natural Gas

Downstream

Users

Figure 1: India - Oil & Gas Sector - Snap shot BIM Trichy | INDUSTRY RESEARCH – OIL & GAS 1

INDUSTRY OVERVIEW
The oil and natural gas sector comprises of exploration and production of crude oil, natural gas, refining and marketing of the petroleum products. The oil and natural gas are classified under primary, nonrenewable, commercial sources of energy. Crude oil and Natural gas are found under the earth’s surface between folds of rocks and in areas that are porous. Natural gas is lighter than air and is mostly made up of methane gas. Natural gas is usually found underground near petroleum reserves. Crude oil is measured in barrels (one barrel=159 litres) whereas Natural gas is measured in Billion Cubic Metres. The crude oil is classified into different types based on specific gravity expressed in degrees and sulphur content by API (American Petroleum Institute). Based on API degrees, the crude oil is classified as light, heavy and intermediate. Based on the sulphur content, the crude oil is classified as sweet if low and sour if high. Two crude oils which are traded were Brent and Western Texas Intermediate (WTI). WTI crude oil is light (39.6 degrees of API gravity) and contains only 0.24 percent of sulphur. Brent Crude is light and sweet but not light and sweet as WTI containing 0.37 percent of sulphur. The Indian crude oil basket companies comprise Oman-Dubai sour grade and Brent crude in the ratio of 62.3:37.7. The industry’s value chain is divided into three components: upstream, midstream and downstream. Exploration and production are considered upstream activities, while storage and transportation is midstream. Downstream comprises refining, processing and marketing of oil and gas. The Indian oil and gas market is characterized by the presence of large, diversified companies with highly vertically integrated operations throughout the value chain. Most companies are state-owned, while private companies are marking their presence with the government following the de-regulation path.

Exploration and Production
The first step in crude oil exploration is identifying the prospective site for oil production. For this, companies use of variety of techniques. Amongst are core sampling technique (physically removing and testing the sample of a rock) and Seismic Testing, where return vibration from shockwaves are measured and calibrated. After these exploratory tests, companies drill to confirm the presence of oil. But an actual well test or a drill stem test is considered as the most effective method for confirming the presence of oil. The naturally occurring pressure in an underground reservoir is the important determinant of whether it is economically viable. The pressure varies with the characteristic of the trap, the reservoir and the production history. Initially, most crude oil is produced by the natural lift production method- the pressure in the underground is high enough to pump the crude oil to the surface. However, the underground pressure in the old reservoir eventually dissipates and the crude oil no longer reaches the surface naturally and hence artificial lift is used to pump the crude oil to the surface. Development includes location, drilling, completion and installation of equipment in the...
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