Oil & Gas Sector 2003

Oil & Gas Sector

Presented By Minhas kalani (19) Hetal Mehta (31) Nilesh Solanki (60)

INTRODUCTION • The operation of Oil & Gas Industry can be divided into 3 phases – Upstream or extracting – Mid-Stream or refining – Downstream or marketing • Oil and Gas Industry in India is a 110 billion USD industry • The India oil & gas demand ranks it sixth in the world • 70% of the petroleum oil requirements of India are met by the imports.

MAJOR PLAYERS • Public Sector Undertakings (PSUs): – ONGC - Oil & Natural Gas Corp (exploration and production) – OIL - Oil India Limited (exploration & production) – IOC - Indian Oil Corporation (refining & marketing) – BPCL - Bharat Petroleum Corporation Ltd (refining and marketing)

• Private Oil & Gas companies in India – RIL - Reliance Industries Limited (Indian Oil & gas company) – ESSAR (Indian Oil & Gas company) – Cairns Energy India

PRE-GLOBALISATION • India's petroleum industry was not always controlled by the Government • At the time of independence, India’s domestic oil production was just 250,000 tonnes per annum • Industry nationalized. • Most activities of the Petroleum Value Chain controlled by various state owned oil companies • India had adopted Administered Pricing Mechanism in 1976. • by the late 1970s- need for private investment • Exploration blocks were offered to international oil companies in 1979 to attract investment and technology.

POST GLOBALISATION • • • •

Dependent-foreign capital, expert personnel, and technology Foreign involvement in the various important stages Various measures taken by Govt. Changes in Exploration and Production – Change in legal status of the Oil and Natural Gas Commission (ONGC) by converting it into a Corporation – The Directorate General of Hydrocarbon (DGH) was set up in April 1993 – Involvement of private and foreign companies in the development of already discovered fields – From 1991 to 1996, the government had held five rounds of bidding for exploration – A new Exploration Licensing Policy (NELP) was formulated by the government in 1997-98 to provide a 'level playing field'

INCENTIVES BY GOVT. • No custom duty on imports required for petroleum operations. • No minimum expenditure commitment during the exploration period. • No mandatory state participation. • No carried interest by National Oil Companies • Freedom to sell crude crude oil and natural gas in domestic market at market related prices. • Biddable cost recovery limit upto 100% • No cess on crude oil production • Royalty payment: 12.5% for onland areas,10% for offshore and 5% for deep water areas. • Liberal depreciation provisions • Seven years tax holidays from the commencement of production.

Cont… • Refining – no major changes – From 1998, delicensed • Marketing – Eligibility for marketing petroleum products – By April 2002, APM(Adminitered Price Mechanism) was fully dismantalled

IMPACT OF SLOWDOWN • Liquidity constraints • Cash-rich companies are expected to follow the inorganic growth route • The valuation of oil and gas companies has decreased – opportunity for Indian company to buy

• Aggressive competition • International analysts forecast oil prices to be $ 75115/bbl • Refineries- performing well – the average capacity utilization of our refineries has been 104%. • OMCs – combined under-recovery 93000 crore • The OMCs have declared a combined loss of

CONCLUSION • Industry is stagnant • Lack of technology, personnel, finance • Foreign collaborations to bring technology, personnel & finance • Professional practice for optimum utilization of resources • Resultant growth & development of oil & gas industry