Transcript Gautam Sen, ED,ONGC

Energy Conclave 2006
“Challenges of the Oil Sector”
Gautam Sen
Executive Director, ONGC
New Delhi
26th July 2006
Since the dawn of the Oil-age, we have consumed
about 950 billion barrels…
.... 280 billion barrels (30%) in last decade only
Estimates of oil still in the ground are suspect…
The figures quoted are 1.2 trillion barrels
Agenda
 Ever growing hunger for Energy
 Global Scenario
 Indian Scenario
 E&P Scenario…thrust areas
 Global Scenario
 Indian Scenario
 Pricing
 Global Scenario
 Indian Scenario
 The issues of concern
1400
10
1200
Population (Billions)
12
1000
World
Population
8
6
800
World Energy 600
Consumption 400
4
2
200
0
1900
1950
2000
2050
Energy Consumption (Qbtu / yr)
Growing hunger…Global
0
2100
Year
Source: IEA
1 QBTU (Quadrillion BTU) = 1015 BTU
Growing hunger…India
350.0
300.0
250.0
200.0
150.0
100.0
50.0
0.0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
China
India
2005: World consumed 3.84 Billion Tons of oil and
in India consumption was 116 Million Tons
15% of the World’s population
0.5% of the World’s Oil & Gas reserves
Source: BP Statistical Review, 2006
Growing hunger…India
Demand for Primary Energy to rise up to 1633 MTOE
by 2031-32 (GDP rate :8%)
1500
1000
500
2006-07
2011-12
Hydro
2016-17
Nuclear
2021-22
Coal
Oil
2026-27
Natural Gas
Source: Draft Report of the Expert Committee on Integrated Energy Policy
0
2031-32
E&P Scenario
E&P Scenario…Global
Reserve accretion … trickling down
“The last time a major oil province was
discovered was in the 1970s.”
“The last time the oil industry discovered
more oil in a year than was used was a
quarter of a century ago.”
“Half of the world’s production which comes
from the 100 biggest fields, almost all of
these are more than 25 years old”
Source: The G forces of Energy Insecurity; C D Ruppel, 2006
E&P Scenario…Global
… growing gap
Average annual growth of world oil demand
• 1991-2002: Less than 1.0 million bpd
•
2003: 1.5 million bpd
•
2004: 2.6 million bpd
Discovery of Giant Fields (> 500 million barrels)
•
2000: 16
2001: 9
• 2002: 2
• 2003: NONE
•
Out of 85 million bpd oil production
today, only 15 million bpd is coming from
New fields
Source: The G forces of Energy Insecurity; C D Ruppel, 2006
E&P Scenario…Global
Reserve replacement…
Source: http://www.hubbertpeak.com/curves.htm
E&P Scenario…Global
Discovery Trend & Peak Oil
•
•
About 80% of oil produced today comes from fields discovered before 1973.
Most of these fields are declining
Every 12 days one billion barrels of oil is produced and consumed.
Source: http://www.hubbertpeak.com/curves.htm
E&P Scenario…the Hubbert’s way
“Prediction is difficult, especially of the future.”
Niels Bohr
Source: http://www.hubbertpeak.com/curves.htm
E&P Scenario…Global
Oil & Gas Basins

43,000 Oil and Gas Fields

575 World Sedimentary Basins
360 non-productive
215 known productive
90% of world oil & gas production
comes from 10% of these basins
E&P Scenario…Global
Oil Reserves…end 2005
1200.7
Middle East
742.7
Asia Pacific
40.2
N- America
59.5
*Source: BP statistical review-2006
S-America
Africa
Europe &
Eurasia
103.5
114.3
140.5
E&P Scenario…Global
Dubious reserve
In 1986 and 1987
OPEC countries markedly increased their reserves!
The point of this graph
is that they ALL increased
and ALL in the same
time period.
The day…
when OPEC linked one’s production quota to its reserve!!
E&P Scenario…Global
New Areas
Difficult terrain…difficult sources
Tar sands of Alberta
Heavy oil of Venezuela
Tar sands found in over 70 countries, but three quarters of the world's
reserves are in two regions; Venezuela (~1.8 trillion bbl) and Alberta,
Canada (~1.7 trillion bbl)
Venezuela's Orinoco heavy oil belt is the best known example of this kind of
unconventional reserve. Estimated reserves: 1.2 trillion barrels
Source: http://en.wikipedia.org/wiki/Tar_sands
E&P Scenario…Global
Difficult terrain…difficult sources
Tar sands of Alberta
Heavy oil of Venezuela
Prospects at Polar regions
Shale oil of Arunachal
Arctic Oil: “How much” depends on “Who’s talking”
Proponent says: 16 billion bbl
billion
India has enough oil Opponent
trapped in says:
shale 3and
coalbbl
deposits in Assam and
Arunachal Pradesh to produce 140 million tonnes (mt) of oil per year for
100 years…view of C. Ratnam, Former C&MD of OIL
Source: http://forum.atimes.com
E&P Scenario
Indian perspective
The Challenges
E&P Scenario…India
India’s total reserve (~1812 MMT*)
0.56% of World Reserve
ONGC Reserves (MTOE)
As on 1.4.2006
Oil
Gas
O+OEG
Initially In-place
4,564
1,688
6,252
Ultimate Reserves
1,288
942
2,230
Cumulative Production
726
419
1,145
Reserves
562
523
1,085
650 MMT of in-place reserve (O+OEG) added by ONGC
in last 5 Years
*Source: BP statistical review-2006
E&P Scenario…India
Oil Production & consumption
Dependence on import increased
from 51% in 1994 to 69% in 2005
120
MMT --->
100
80
60
40
20
1
2
3
Production
4
5
6
7
Consumption
8
9
10
11
Import %
12
E&P Scenario…India
Oil Import…major FE outgo
27% of India’s total imports (Rs 6,356 Billion)
2000
Rs Billion
1,717
1600
1,341
1200
800
400
854
715
668
2000-01
2001-02
546
915
0
1999-00
2002-03
Source: PPAC Ready Reckoner, May 2006 and www.rbi.org.in;
2003-04
2004-05
---------Provisional
2005-06
E&P Scenario…India
Total Sedimentary area – 3.13 Million Sq. Km
•
Up to 200m Isobath
– 1.78 Million Sq. Km
• Onshore – 1.39 Million Sq. Km
• Offshore – 0.39 Million Sq. Km
•
Deep-waters
– 1.35 Million Sq.Km
Exploration
initiated
37%
Poorly
Explored
22%
Moderate/
well explored
19%
Unexplored
22%
Source: Petroleum Exploration & Production Activities, India, 2004-05, DGH
E&P Scenario…India
1000
Production hovering around 36.0 MMT
R/P stationery around 20
Proved Reserves in’MT
750
50
R/P
500
250
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
25
50
Production in’MT
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
25
India’s total reserve (~1812 MMT)
0.56% of World Reserve
Source: BP Statistical Review of World Energy 2006
0
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
E&P Scenario…India
More deregulation & increasing private participation
Licensed Domestic Exploration Area
(2005)
Leased Domestic Production Area
(2005)
HOC
Cairn
3%
3%
Reliance
Oil India
30%
24%
Oil India
ONGC
4%
58%
Cairn
Others
2%
3%
 Exploration is dominated by ONGC with 58%
of the total area licensed by the GOI
Source: Directorate General of Hydrocarbons, 2004-05 report
BG
ONGC
14%
56%
Others
3%
 ONGC holds the largest portion of leased
acreage for oil and natural gas production,
accounting for 56% of the area
E&P Scenario…ONGC
ONGC operates ~568,300 sq. km. of exploration area, which is more than 58% of
total area under exploration in India.
Himalyan Foreland and Ganga
Valley
Area operated: 59,267
ONGC operated: 34,637(58.4%)
Rajasthan
Area operated: 29,688
ONGC operated: 1,772 (6.0%)
Assam-Arakan
Area operated: 47,730
ONGC operated: 24,274 (51.0%)
Mahanadi-Bengal
Area operated: 15,211
ONGC operated: 7311 (48.1%)
Cambay
Area operated: 22,056
ONGC operated: 8,922 (45.5%)
Satpura-Pranhita-Godavari
Area operated: 31,227
ONGC operated: 9,377 (30.0%)
Kutch – Saurashtra
Area operated: 1,550
ONGC operated: NIL
Krishna – Godavari
Area operated: 5,057
ONGC operated: 5,057 (100.0%)
Western Offshore
Area operated: 467,898
ONGC operated Areas (68.2%)
Mumbai Offshore: 108,570
Kutch-Saurashtra: 83,278
Kerala-Konkan: 127,347
Cauvery
Area operated: 5,665
ONGC operated: 4,985 (88.0%)
Eastern Offshore
Area operated: 257,955
ONGC operated Areas (46.6 %)
Krishna-Godavari: 38,413
Cauvery: 22,064
Mahanadi-Bengal: 59,638
Source: DGH Annual Report-2004
Andaman – Nicobar Offshore
Area operated: 23,485
ONGC operated: 23,485
(100.0%)
E&P Scenario…ONGC
Exploration blocks on nomination basis are to
reduce drastically gradually
PEL Block Holdings
112
93
71
19
2006
2007
2008
2009
7
3
3
0
2010
2011
2012
2013
Status of exploration blocks awarded to ONGC on nomination basis
E&P Scenario…ONGC
PEL Block Holdings
112
Market dynamics encouraging more
exploration acreage through NELP
93
71
19
2007
2008
2009
3
3
0
2010
2011
2012
2013
120
112
100
93
PEL/ Existing NELP
2006
7
90
80
71
70
60
50
46
40
28
20
30
23
15
19
9
0
0
2006
2007
2008
PEL
2009
7
3
3
1
2010
2011
3
0
2012
0
2013
Existing NELP Blocks
0
2014
0
2015
0
2016
0
2017
0
2018
0
2019
0
2020
Future NELP/Open Acreages
0
2021
New Oil
domestic
E&P Scenario…ONGC
Thrust areas
Deepwater & Frontier basin thrust areas
Early monetization of new discoveries
Technology solutions for improving Recovery Factor
Expeditious development of small & marginal fields
Refurbishment of surface facilities
Technology induction
Domain Experts
E&P Scenario…ONGC
Thrust areas: Marginal fields
WTI $/bbl against time
80.0
Economics have changed
70.0
Oil Prices
60.0
50.0
… Marginal fields
are no longer marginal
40.0
30.0
20.0
10.0
0.0
4/4/02
10/21/02
5/9/03
11/25/03
6/12/04
12/29/04
7/17/05
2/2/06
8/21/06
Date
• 153 marginal fields (Onshore: 79, Offshore:74)
–
–
–
–
38 fields monetized (Onshore:36, Offshore:2)
11 fields on service contract (Onshore:8, Offshore:3)
94 fields under monetization (Onshore:39, Offshore:55)
Balance 21 fields planned for monetization (Onshore:4, Offshore:17)
• Ultimate Reserves: 184 MMT O+OEG
• Investment: Rs 12,700 Crore
• Terminal year of XI Plan would see marginal fields contributing
50,000 bbls/ day &10 MMm3/day gas
E&P Scenario…ONGC
Major E&P Projects of ONGC
Projects
Approx. Project cost
(Rs. Crore)
For Direct Production
Marginal fields*
12,700.00
G-1 & GS-15 Development
1,263.00
East Coast Hub Development*
5,500.00
D-1 Development
507.00
Vasai (East) Development
1,688.00
Addl. Dev. Bassein field
2,937.00
Dev. of SB-11, Bassein
245.00
Addl. Dev A-1 layer in MHN
911.00
For Producing Facilities
Assam Renewal Plan*
2,570.00
Other Revamping Projects
3,492.00
Total
* Yet to be approved
31,813.00
E&P Scenario…ONGC
Thrust areas: Improving Recovery factor
8 IOR/ EOR projects completed (Rs 1,703 Crore)
10 under implementation (Rs 12,138 Crore)
26
Contribution of IOR/ EOR Schemes in 15 major fields
24.08
22.5
22.65
23.49
21.64
19.67
19.93
20.77
21.60
21.63
19.56
19
15.5
12
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
ONGC has identified 25 IOR Projects other medium fields
E&P Scenario…ONGC
Thrust areas: New technology
Seismic data Acquisition, Processing &
Interpretation
Drilling & related services
Logging, Well Stimulation, Well Control
Info-com applications
Facilities & Logistics
E&P Scenario…ONGC
Strategic Petroleum Storage
Under ground storage of crude oil in
Salt Cavern studied to be the most
economical & secured.
Underground salt deposits North of
Bikaner identified to be the most
appropriate location
DFR to be ready in 2007.
Pilot Project with 2 MMT Crude oil
capacity
New Oil
equity
Equity oil…OVL
OVL: Sourcing 6.621 MTOE of Equity Oil & Gas
21 Projects (31 Blocks) in 13 Countries
Energy beyond boundaries
Qatar 1
Russia 1
Egypt 1
Syria
1+1
Iraq 1
Libya 3
Iran 1
Cuba 8
Operator
Iran, Farsi
Iraq, Bl 8
Qatar, Na Nj
Vietnam 127
Vietnam 128
Cuba 34
Cuba 35
Libya 81-1
Brazil 1
Nigeria 1 in JDZ
Joint Operator
Sudan GNOP
Egypt Bl. 6
Producing Assets
Sudan 3
Development
10
8
6
MMT
4
2
0
Gas
Oil
2003
2004
2005
2006
2007
(Budget)
2010
(Projected)*
0.07
0.523
1.349
1.71
1.708
1.9
0.183
3.345
3.714
4.73
4.513
6.1
Myanmar 2
Vietnam 3
Exploration
Equity Oil…OVL
A
Investment
Destinations
B
Big Leap Vs
Insignificant
Scattered
Presence
C
Enabling
Environment
Equity Oil…OVL
Road blocks
The opportunities dry out fast
– Buyers exercise spot decisions and shut opportunity
windows
– Buyers laden with Mandate to compliment the decisions
– China and Korea aggressive & empowered
– High secrecy in deals
OVL needs Empowerment
Prices…hot…hotter
Oil Prices
WTI $/bbl against time
80.0
70.0
Oil Prices
60.0
50.0
40.0
30.0
20.0
10.0
0.0
4/4/02
10/21/02
5/9/03
11/25/03
6/12/04
Date
12/29/04
7/17/05
2/2/06
8/21/06
Oil Prices
Rig rates v Oil price
Rising E&P expenditure
Oil Price Vs. Rig rates over time
80.0
600000
70.0
500000
60.0
50.0
40.0
300000
30.0
200000
20.0
100000
0
4/4/02
10.0
0.0
10/21/02
5/9/03
11/25/03
6/12/04
12/29/04
7/17/05
2/2/06
8/21/06
Date
5th Gen
4th Gen
3rd Gen >750m
3rd Gen <750
2nd gen >750m
2nd Gen<750m
Jack up
Oil Price
Oil Price
Rig rates
400000
Oil Prices
Oil prices & Project Management
Oil price Vs Project Mgmt cost/hr over time
80.0
250
70.0
Project mgmt $/mhr
200
60.0
50.0
150
40.0
100
30.0
20.0
50
10.0
0.0
0
4/19/01
11/5/01
5/24/02
12/10/02
6/28/03
1/14/04
8/1/04
2/17/05
9/5/05
Date
Labour
Oil Price
3/24/06
10/10/06
Oil Prices
Energy Return On Energy Invested
…is diminishing as we resort to going after the
hard-to-get oil:
Before 1950 it was about 100 to 1
In the 1970s it was down to 30 to 1
Now (2005) it’s about 10 to 1
The Tar Sands have an EROEI of about 4 to 1
“The Party’s Over”, Richard Heinberg
Issues of concern
Issues of concern
NOC’s now hold over 75% of world hydrocarbon
reserves
Reference India
– Socio-economic drivers to play
– Value propositions for NOCs required to
supplement energy security/ independence
– Durable, strategic & interdependent relationship
Issues of concern
– “One road” beyond boundaries
– New avenues: CBM, UCG, SCG etc.
– New Energy resources “at cost” - comforts to
Companies
– “Controlled Prices” vs “Concern for Conservation”
Thank You