As per Ministry of Petroleum & Natural Gas, India’s projected oil demand is likely to grow at CAGR 4% during 2016-2030 against the world average of 1% though the projected oil demand will be much lower as compared to the US and China. During 2018, India consumed 204.92 MMT petroleum products and 58.64 BCM natural gas whereas the domestic production of crude oil and natural gas has almost stagnated. The import dependency of crude oil and LNG during the year was 82.59% and 45.89% respectively which is likely to increase in days to come. The Government of India is aiming to reduce the dependency on Oil by 10 per cent by the year 2022. This will be achieved by increasing the domestic production of oil and gas. Sandeep Sharma takes a look at the Oil and Gas sector in India… CHALLENGES Due to rapid economic growth in the past few years, the energy requirement of India is increasing at a faster pace. The rapid industrialisation coupled with rising urbanisation has led to increased pressure on the available energy resources. The burgeoning population and the rising aspirations of the people have created a lot of concern for India’s energy scenario. India has 0.5% of the oil and gas resources of the world and 15% of the world’s population. This makes India heavily dependent on the import of the crude oil and natural gas. During 2018, the petroleum import amounted to `7028.37 billion) was 23.42% of total gross import (`30010.2 billion) of the nation. India’s crude oil production has not shown significant growth in the last 10 or more years whereas its refining capacity has grown by more than 20% over the last 5 years. Oil consumption is growing at approximately 4.1% per year and Oil and Gas sector in India has a wide range of challenges to face along with opportunities available across the upstream, midstream, downstream and oilfield services sectors. Ministry of Petroleum and Natural Gas is working in collaboration with various Central Government Ministries with the aim to reduce the dependency on import from oil and gas. The five-pronged strategy of the government, broadly comprises increasing domestic production of oil and gas, promoting energy efficiency and conservation measures, giving thrust on demand substitution, capitalizing untapped potential in biofuels and other alternate fuels/ renewables and implementing measures for refinery process improvements. GOVERNMENT INITIATIVES The Government of India has taken several steps to enhance exploration & production of oil and gas in the country. The policy initiatives include: Discovered Small Field Policy, Hydrocarbon Exploration and Licensing Policy, Policy for Extension of Production Sharing Contracts, Policy for early monetization of Coal Bed Methane, Appraisal of Unappraised areas in Sedimentary Basins, Setting up of National Data Repository, Re-assessment of Hydrocarbon Resources, Policy framework to streamline the working of Production Sharing Contracts in Pre-NELP and NELP Blocks, Policy to Promote and Incentivize Enhanced Recovery Methods for Oil and Gas, Policy framework for exploration and exploitation of Unconventional Hydrocarbons under existing Production Sharing Contracts, Coal Bed Methane contracts and Nomination fields etc. In February 2019, the government approved major reforms in exploration and licensing policy to enhance exploration activities, attract domestic and foreign investment in unexplored/unallocated areas of sedimentary basins and accelerate domestic production of oil and gas from existing fields. The policy reforms inter-alia aim to boost exploration activities with greater weightage to work programme, simplified fiscal and contractual terms, bidding of exploration blocks under Category II and III sedimentary basins without any production or revenue sharing to Government, early monetization of discoveries by extending fiscal incentives, incentivizing gas production including marketing and pricing freedom etc. Apart from the above initiatives, the government is expanding the coverage of City Gas Distribution (CGD) network in the country. The use of alternative fuels like ethanol and bio-diesel are being promoted through Ethanol Blending in Petrol (EBP) Programme and Bio-diesel blending in diesel. E&P OPPORTUNITIES Vedanta Ltd in a press release has informed that the company has been successfully awarded 10 exploration blocks in sedimentary basins throughout India pursuant to the Indian Open Acreage Licensing Policy (OALP) at a total bid cost of US$245 million. OLAP is a government-led initiative organised by the Directorate General of Hydrocarbons of the Government of India. The 10 blocks awarded to the Company comprise 7 onshore blocks and 3 offshore blocks. The Company will enter into 10 revenue sharing contracts with the Government of India to effect the transaction. Following the signing of the RSCs, a licence permitting exploration, development and production operations of all types of hydrocarbons will be granted pursuant to the terms of the relevant RSC in relation to each Block. The exploration period shall consist of two phases: (i) the Initial Exploration Phase; and (ii) the Subsequent Exploration Phase. In total, the exploration period will be a duration of six years for all Blocks, subject to any extension granted. The development and production period of each contract will be a maximum of 20 years from the date of grant of the petroleum mining lease following discovery of previously unknown deposits of hydrocarbons and approval of the relevant field development plan, subject to any extension granted. Under OALP Bid Round –III, Oil India Ltd has bagged 6 blocks comprising RJ-ONHP-2018/2, MN-ONHP-2018/5, AA-ONHP-2018/2, AA-ONHP-2018/3, AA-ONHP-2018/5, and KK-OSHP-2018/1. ONGC could win 7 exploration blocks comprising CY-ONHP-2018/2, CY-ONHP-2018/3, BP-ONHP-2018/1, AA-ONHP-2018/4, MB-OSHP-2018/1, MB-OSHP-2018/2. and MN-DWHP-2018/1. granted. Under OALP Bid Round –II, Oil India Ltd has bagged 6 exploration blocks comprising MN-ONHP-2018/1, MN-ONHP-2018/2, MN-ONHP-2018/3, MN-ONHP-2018/4, AN-OSHP-2018/1, and AN-OSHP-2018/2, ONGC, IOCL, and BP Exploration (Alpha) Ltd (40.0%) + Reliance Industries Ltd (60.0%) combine has won one block each comprising CB-ONHP-2018/2 block, CY-ONHP-2018/1, and KG-UDWHP-2018/1 respectively. The blocks auctioned under OLAP round II and III are projected to fetch an investment of around Rs.1.4-1.5 lakh crore. INDUSTRY UPDATES Oil India Ltd has decided to invest Rs 3.50 billion for exploratory drilling and testing of hydrocarbons at seven locations in Assam’s Tinsukia district. Indian Oil Corporation Ltd (IOCL) is laying underground pipeline for supply of gas to domestic, industrial or commercial premises and CNG stations within the limits of Chas Municipal Corporation of Bokaro district in the state of Jharkhand. Petronet LNG Ltd has recently expanded its Dahej import terminal capacity to 17.5 million tonnes per annum from current 15 million tonnes. Hindustan Petroleum Corporation Ltd, Indian Oil Corporation and Bharat Petroleum Corporation Ltd have inked a pact to form a joint venture company for implementation and subsequent operation of India’s largest LPG pipeline project from Kandla in Gujarat to Gorakhpur in Uttar Pradesh. The LPG pipeline will cover a length of 2,757 km covering 1,063 km in Gujarat, 611 km in Madhya Pradesh, and 1,083 km in Uttar Pradesh. Bharat Petroleum Corporation Ltd (BPCL) plans modernise its Mumbai refinery complex by replacing the old Catalytic Cracking Unit and Fluidised Catalytic Cracking Unit with a new, Petro Resid Fluidized Catalytic Cracking Unit and associated facilities. The investment planned is Rs.6,877 crore. ONGC’s R&D arm, Keshava Deva Malaviya Institute of Petroleum Exploration (KDMIPE), has made some progress in its quest for identifying microbes that can convert residual oil in oil wells into methane that can flow to the surface easily. The bio-methanisation in oil wells can help to recover methane in place of the residual oil left at the surface. Reliance Industries plans to remove production bottlenecks at its Vadodara Manufacturing Division at a cost of Rs.2,270 crore as part of its plan to increase petrochemical output. GLOBAL INSIGHTS According to the EY Global Capital Confidence Barometer, the majority (85%) of oil and gas executives see the state of the economy within their sector improving. Strong growth earnings in 2018, in the US especially, further supports their positive outlook for 2019. Oil prices continue to rise (notwithstanding the last quarter of 2018), and executives are seeing the payoff on cost and capital efficiency measures initiated during the oil price downturn. 85% of oil and gas executives are anticipating between 6% and 15% revenue growth in 2019. On the downside, nearly one-third of executives cite slowing economic activity as a key risk, given its impact on the demand for oil and gas. Oil and gas executives are also sensitive to geopolitical risks, including production losses from Iran and Venezuela, as well as production cuts by OPEC. Monthly Production Report for May, 2019 Crude Oil Crude oil production during May,2019 was 2800.12 TMT which is 3.37% lower than target and6.91% lower when compared with May 2018.Cumulative crude oil production during April-May, 2019 was 5518.61 TMT which is 1.92% lower than target for the period and 6.82% lower than production during corresponding period of last year. Unit-wise crude oil production for the month of May, 2019 and cumulatively for the period April-May, 2019 vis-à-vis same period of last year has been shown in following Table-1 and month-wise in Figure-1. Unit-wise production details with reasons for shortfall are as under: Natural Gas Natural gas production during May, 2019 was 2738.92 MMSCM which is 0.4% higher when compared with May, 2018 but 4.81% lower than the target for the month. Cumulative natural gas production during April-May, 2019 was 5394.81 MMSCM which is marginally higher by 0.07% than the production during corresponding period of last year but 4.56% lower than target for the period. Unit-wise natural gas production for the month of May, 2019 and cumulatively for the period April-May, 2019 vis-à-vis same period of last year has been shown in Table-2 and month-wise in Figure-2. ► Natural gas production by ONGC during May, 2019 was 2082.39 MMSCM which is 5.09% higher when compared with May, 2018but 2.34% lower than the monthly target. Cumulative natural gas production by ONGC duringApril-May, 2019 was 4120.10 MMSCM which is 4.21% higher than the production during the corresponding period of the last year but 2.52% lower than the cumulative target. ► Natural gas production by OIL during May, 2019 was 230.89 MMSCM which is 1.52% higher than May, 2018 but 19.61% lower than the monthly target. Cumulative natural gas production by OIL during April-May, 2019 was 455.38 MMSCM which is target 1.45% higher than the production during the corresponding period of last year but 19.23% lower than the cumulative.Major reason for lower production is loss of potential in Deohal area due to presence of CO2 in production stream and blockade in operational areas. ► Natural gas production by Pvt/JVs during May, 2019 was 425.64 MMSCM which is 7.06% lower than the monthly target and 17.99% lower when compared with May, 2018. Cumulative natural gas production by Pvt/JVs during April-May, 2019 was 819.34 MMSCM which is 4.98% lower than the cumulative target and17.11% lower than the production during the corresponding period of last year. Refinery Production (in terms of crude oil processed) Refinery production during May, 2019 was 21577.85TMT which is 0.51% lower than the target for the month and2.98% lowerwhen compared with May, 2018. Cumulative production during April-May, 2019 was 42280.91 TMT which is 1.61% higher than the target for the period and0.44% higher than the production during corresponding period of last year. Unit-wise production is given at Annexure-III. Company-wise production for the month of May, 2019 and cumulatively for the period April-May, 2019 vis-à-vis same period of last year has been shown in Table-3 and month-wise in Figure-3 Table 3: Refinery Production (TMT)
CHALLENGES Due to rapid economic growth in the past few years, the energy requirement of India is increasing at a faster pace. The rapid industrialisation coupled with rising urbanisation has led to increased pressure on the available energy resources. The burgeoning population and the rising aspirations of the people have created a lot of concern for India’s energy scenario. India has 0.5% of the oil and gas resources of the world and 15% of the world’s population. This makes India heavily dependent on the import of the crude oil and natural gas. During 2018, the petroleum import amounted to `7028.37 billion) was 23.42% of total gross import (`30010.2 billion) of the nation. India’s crude oil production has not shown significant growth in the last 10 or more years whereas its refining capacity has grown by more than 20% over the last 5 years. Oil consumption is growing at approximately 4.1% per year and Oil and Gas sector in India has a wide range of challenges to face along with opportunities available across the upstream, midstream, downstream and oilfield services sectors. Ministry of Petroleum and Natural Gas is working in collaboration with various Central Government Ministries with the aim to reduce the dependency on import from oil and gas. The five-pronged strategy of the government, broadly comprises increasing domestic production of oil and gas, promoting energy efficiency and conservation measures, giving thrust on demand substitution, capitalizing untapped potential in biofuels and other alternate fuels/ renewables and implementing measures for refinery process improvements.
GOVERNMENT INITIATIVES The Government of India has taken several steps to enhance exploration & production of oil and gas in the country. The policy initiatives include: Discovered Small Field Policy, Hydrocarbon Exploration and Licensing Policy, Policy for Extension of Production Sharing Contracts, Policy for early monetization of Coal Bed Methane, Appraisal of Unappraised areas in Sedimentary Basins, Setting up of National Data Repository, Re-assessment of Hydrocarbon Resources, Policy framework to streamline the working of Production Sharing Contracts in Pre-NELP and NELP Blocks, Policy to Promote and Incentivize Enhanced Recovery Methods for Oil and Gas, Policy framework for exploration and exploitation of Unconventional Hydrocarbons under existing Production Sharing Contracts, Coal Bed Methane contracts and Nomination fields etc.
In February 2019, the government approved major reforms in exploration and licensing policy to enhance exploration activities, attract domestic and foreign investment in unexplored/unallocated areas of sedimentary basins and accelerate domestic production of oil and gas from existing fields. The policy reforms inter-alia aim to boost exploration activities with greater weightage to work programme, simplified fiscal and contractual terms, bidding of exploration blocks under Category II and III sedimentary basins without any production or revenue sharing to Government, early monetization of discoveries by extending fiscal incentives, incentivizing gas production including marketing and pricing freedom etc.
Apart from the above initiatives, the government is expanding the coverage of City Gas Distribution (CGD) network in the country. The use of alternative fuels like ethanol and bio-diesel are being promoted through Ethanol Blending in Petrol (EBP) Programme and Bio-diesel blending in diesel.
E&P OPPORTUNITIES Vedanta Ltd in a press release has informed that the company has been successfully awarded 10 exploration blocks in sedimentary basins throughout India pursuant to the Indian Open Acreage Licensing Policy (OALP) at a total bid cost of US$245 million. OLAP is a government-led initiative organised by the Directorate General of Hydrocarbons of the Government of India. The 10 blocks awarded to the Company comprise 7 onshore blocks and 3 offshore blocks. The Company will enter into 10 revenue sharing contracts with the Government of India to effect the transaction. Following the signing of the RSCs, a licence permitting exploration, development and production operations of all types of hydrocarbons will be granted pursuant to the terms of the relevant RSC in relation to each Block. The exploration period shall consist of two phases: (i) the Initial Exploration Phase; and (ii) the Subsequent Exploration Phase. In total, the exploration period will be a duration of six years for all Blocks, subject to any extension granted. The development and production period of each contract will be a maximum of 20 years from the date of grant of the petroleum mining lease following discovery of previously unknown deposits of hydrocarbons and approval of the relevant field development plan, subject to any extension granted. Under OALP Bid Round –III, Oil India Ltd has bagged 6 blocks comprising RJ-ONHP-2018/2, MN-ONHP-2018/5, AA-ONHP-2018/2, AA-ONHP-2018/3, AA-ONHP-2018/5, and KK-OSHP-2018/1. ONGC could win 7 exploration blocks comprising CY-ONHP-2018/2, CY-ONHP-2018/3, BP-ONHP-2018/1, AA-ONHP-2018/4, MB-OSHP-2018/1, MB-OSHP-2018/2. and MN-DWHP-2018/1.
granted. Under OALP Bid Round –II, Oil India Ltd has bagged 6 exploration blocks comprising MN-ONHP-2018/1, MN-ONHP-2018/2, MN-ONHP-2018/3, MN-ONHP-2018/4, AN-OSHP-2018/1, and AN-OSHP-2018/2, ONGC, IOCL, and BP Exploration (Alpha) Ltd (40.0%) + Reliance Industries Ltd (60.0%) combine has won one block each comprising CB-ONHP-2018/2 block, CY-ONHP-2018/1, and KG-UDWHP-2018/1 respectively. The blocks auctioned under OLAP round II and III are projected to fetch an investment of around Rs.1.4-1.5 lakh crore.
INDUSTRY UPDATES Oil India Ltd has decided to invest Rs 3.50 billion for exploratory drilling and testing of hydrocarbons at seven locations in Assam’s Tinsukia district.
Indian Oil Corporation Ltd (IOCL) is laying underground pipeline for supply of gas to domestic, industrial or commercial premises and CNG stations within the limits of Chas Municipal Corporation of Bokaro district in the state of Jharkhand.
Petronet LNG Ltd has recently expanded its Dahej import terminal capacity to 17.5 million tonnes per annum from current 15 million tonnes.
Hindustan Petroleum Corporation Ltd, Indian Oil Corporation and Bharat Petroleum Corporation Ltd have inked a pact to form a joint venture company for implementation and subsequent operation of India’s largest LPG pipeline project from Kandla in Gujarat to Gorakhpur in Uttar Pradesh. The LPG pipeline will cover a length of 2,757 km covering 1,063 km in Gujarat, 611 km in Madhya Pradesh, and 1,083 km in Uttar Pradesh.
Bharat Petroleum Corporation Ltd (BPCL) plans modernise its Mumbai refinery complex by replacing the old Catalytic Cracking Unit and Fluidised Catalytic Cracking Unit with a new, Petro Resid Fluidized Catalytic Cracking Unit and associated facilities. The investment planned is Rs.6,877 crore.
ONGC’s R&D arm, Keshava Deva Malaviya Institute of Petroleum Exploration (KDMIPE), has made some progress in its quest for identifying microbes that can convert residual oil in oil wells into methane that can flow to the surface easily. The bio-methanisation in oil wells can help to recover methane in place of the residual oil left at the surface. Reliance Industries plans to remove production bottlenecks at its Vadodara Manufacturing Division at a cost of Rs.2,270 crore as part of its plan to increase petrochemical output.
GLOBAL INSIGHTS According to the EY Global Capital Confidence Barometer, the majority (85%) of oil and gas executives see the state of the economy within their sector improving. Strong growth earnings in 2018, in the US especially, further supports their positive outlook for 2019. Oil prices continue to rise (notwithstanding the last quarter of 2018), and executives are seeing the payoff on cost and capital efficiency measures initiated during the oil price downturn. 85% of oil and gas executives are anticipating between 6% and 15% revenue growth in 2019. On the downside, nearly one-third of executives cite slowing economic activity as a key risk, given its impact on the demand for oil and gas. Oil and gas executives are also sensitive to geopolitical risks, including production losses from Iran and Venezuela, as well as production cuts by OPEC.
Monthly Production Report for May, 2019
Crude Oil
Crude oil production during May,2019 was 2800.12 TMT which is 3.37% lower than target and6.91% lower when compared with May 2018.Cumulative crude oil production during April-May, 2019 was
5518.61 TMT which is 1.92% lower than target for the period and 6.82% lower than production during corresponding period of last year. Unit-wise crude oil production for the month of May, 2019 and
cumulatively for the period April-May, 2019 vis-à-vis same period of last year has been shown in following Table-1 and month-wise in Figure-1.
Unit-wise production details with reasons for shortfall are as under:
Natural Gas Natural gas production during May, 2019 was 2738.92 MMSCM which is 0.4% higher when compared with May, 2018 but 4.81% lower than the target for the month. Cumulative natural gas production during April-May, 2019 was 5394.81 MMSCM which is marginally higher by 0.07% than the production during corresponding period of last year but 4.56% lower than target for the period. Unit-wise natural gas production for the month of May, 2019 and cumulatively for the period April-May, 2019 vis-à-vis same period of last year has been shown in Table-2 and month-wise in Figure-2.
► Natural gas production by ONGC during May, 2019 was 2082.39 MMSCM which is 5.09% higher when compared with May, 2018but 2.34% lower than the monthly target. Cumulative natural gas production by ONGC duringApril-May, 2019 was 4120.10 MMSCM which is 4.21% higher than the production during the corresponding period of the last year but 2.52% lower than the cumulative target.
► Natural gas production by OIL during May, 2019 was 230.89 MMSCM which is 1.52% higher than May, 2018 but 19.61% lower than the monthly target. Cumulative natural gas production by OIL during April-May, 2019 was 455.38 MMSCM which is target 1.45% higher than the production during the corresponding period of last year but 19.23% lower than the cumulative.Major reason for lower production is loss of potential in Deohal area due to presence of CO2 in production stream and blockade in operational areas.
► Natural gas production by Pvt/JVs during May, 2019 was 425.64 MMSCM which is 7.06% lower than the monthly target and 17.99% lower when compared with May, 2018. Cumulative natural gas production by Pvt/JVs during April-May, 2019 was 819.34 MMSCM which is 4.98% lower than the cumulative target and17.11% lower than the production during the corresponding period of last year.
Refinery Production (in terms of crude oil processed) Refinery production during May, 2019 was 21577.85TMT which is 0.51% lower than the target for the month and2.98% lowerwhen compared with May, 2018. Cumulative production during April-May, 2019 was 42280.91 TMT which is 1.61% higher than the target for the period and0.44% higher than the production during corresponding period of last year. Unit-wise production is given at Annexure-III.
Company-wise production for the month of May, 2019 and cumulatively for the period April-May, 2019 vis-à-vis same period of last year has been shown in Table-3 and month-wise in Figure-3 Table 3: Refinery Production (TMT)