Oil & Gas

As per a recent report, the oil and gas industry in India is anticipated to be worth US$ 139,814.7 million by 2015. With India’s economic growth closely linked to energy demand, the need for oil and gas is projected to grow further, rendering the sector a fertile ground for investment.

To cater to the increasing demand, the Government of India has adopted several policies, including allowing 100 per cent foreign direct investment (FDI) in many segments of the sector, such as natural gas, petroleum products, and refineries, among others. The government’s participation has made the oil and gas sector in the country a better target of investment. Today, it attracts both domestic and foreign investment, as attested by the presence of Reliance Industries Ltd (RIL) and Cairn India.

Market size
India is the fourth-largest consumer of oil and petroleum products in the world. Its energy demand is projected to touch 1,464 million tonnes of oil equivalent (Mtoe) by 2035 from 559 Mtoe in 2011. Furthermore, the country’s share in global primary energy consumption is anticipated to double by 2035. Oil consumption is estimated to reach 4 million barrels per day (MMbpd) by FY16, expanding at a compound annual growth rate (CAGR) of 3.2 per cent during FY08-16.

According to data released by the Department of Industrial Policy and Promotion (DIPP), the petroleum and natural gas sector attracted foreign direct investment (FDI) worth Rs 31,501.55 crore (US$ 5.13 billion) between April 2000 and July 2014.

Reliance Industries Ltd (RIL) plans to invest US$ 2 billion in its three shale assets in the US. The company also, along with its partner British Petroleum (BP), plans to invest about Rs 800 crore (US$ 130.35 million) for exploratory drilling in an offshore block in the Bay of Bengal.

ONGC Videsh Ltd (OVL) has signed Production Sharing Contracts (PSCs) for two blocks in Myanmar. ONGC will also invest over Rs 5,700 crore (US$ 928.73 million) to push up production by 6.9 MT of crude oil and 5 billion cubic metres (bcm) of gas by 2030 from its Mumbai High (North) oil and gas field.

Indian Oil Corporation Ltd (IOCL) through its wholly owned affiliate IndOil Montney Ltd, Canada, has signed transaction agreements with Progress Energy Canada Ltd and PETRONAS Carigali Canada BV for acquiring a 10 per cent interest in Progress Energy Canada’s LNG-destined natural gas reserves in northeast British Columbia and the proposed Pacific NorthWest LNG Ltd (PNW LNG) export facility in Canada’s West Coast.

GAIL (India) Ltd has entered into an agreement with Japan-based Chubu Electric Power Co for collaboration in the area of joint LNG procurement.

Road Ahead
By 2015-16, India’s demand for gas is set to touch 124 MTPA against a domestic supply of 33 MTPA and higher imports of 47.2 MTPA, leaving a shortage of 44 MTPA, as per projections by the Petroleum and Natural Gas Ministry of India. Moreover, Business Monitor International (BMI) predicts that India will account for 12.4 per cent of Asia-Pacific regional oil demand by 2015, while satisfying 11.2 per cent of the supply. This is not to say that the gap cannot be met.