Transcript Oil Industry Future Challenges by Shri. B.K. Bakhshi 1

Oil Industry Future Challenges
by
Shri. B.K. Bakhshi
1
Oil - Price Peaks & Effect on Indian
Economy
Sr
No
Year
GDP
Inflation
Growth (+/-)
Event
1.
1973
- 0.3 %
20 %
2.
1979
- 5.2 %
17 %
3.
1990
+ 1.3 %
14 %
Yom Kippur
War oct 73
Iranian
Revolution
1st Gulf War
4.
2008
- From
expected
9% to less
than 8%
12 % +
From Katrina
Onwards
2
CRUDE OIL PRICES
(Indian Basket)
Sr No. Year
1.
March 2003
Price ($/BBL)
23
2.
2005
52
3.
2006
63.35
4.
2007
70.06
5.
2008 (avg 1st 6 months)
110.52
• Peak – July 08 - $142/BBL
3
VERTICAL INTEGRATION HELPS OIL MAJORS
• Integrated International Majors profits go down when crude
price go down and profits go up when crude price are up.
Examples:
• The slump in crude prices to less than $15 per bbl in 1998 led
to mergers – such as Exxon Mobil, Philips Conoco, etc.
• When crude prices rose from $33 per bbl in April 2004 to
70.25 per bbl in Aug 2005 – 2 weeks after Katrina Hurricane.
Gasoline prices in USA peaked to $3.06 per USG. The
combined net income of Exxon Mobil, BP, Royal Dutch, Shell
& Conoco Philips totaled $ 32.8 Billion during the quarter
ending Sept 2005 on a revenue of $ 378 Billion.
* Source Black Gold by George Orwell, page 147
4
Journey so far
Government’s liberalization drive hastened the pace of
hydrocarbon market development in India
.
1950
1990
2007-08 Comments
Population (bn)
0.36
0.84
2
GDP Growth Rate (%)
3.9@
5.58$
3
Crude Production
(MMT)
0.26
32.6
34
Almost stagnant since 1990
4
NG Prodn (MMSCMD)
NA
49.3
91
Bulk production from Mumbai High field
5
Refining Capacity
(MMT)
0.25
51.85
149
6th largest refining capacity in world
6
Crude import (MMT)
3.05*
20.7
122
29% & 44% of total import & export in
value
7
Pipelines (kM)
37^
9,945
31,061
World’s longest operating LPG pipeline
8
Product Consumption
(MMT)
3.3
55
129
>11% growth in MS/HSD & 14% in ATF
last yr
9
Product Export (MMT)
0
2.6
39.3
20.2% growth in POL export over 2006-07
(32.7 MMT)
NA
14,264
34,696#
10 Retail Outlets
*1955 figure
1.13
2nd most populous country
1
Around 9 >8% for last four years
@1950-60 Avg
Catering to more than 80 mn motor
5
vehicles
#As on 1.4.07 $1990-200 Avg ^Product pipeline
Sectoral Overview – Upstream
Upstream sector in India is a relatively unexplored market with reserves
estimated in only 15 of the 26 sedimentary basins.
Key Facts
• 26 sedimentary basins: 3.14 mn sq kM
(44% onland and 56% offshore)
• Prognosticated Hydrocarbon reserves: 28
BTOE (<25% established) ~ 200 bn
barrels
• Crude oil production - 34 MMT
• Upstream NOCs dominate
production/acreage
• Directorate General of Hydrocarbons
(DGH) vested with upstream regulatory
functions
• New Exploration Licensing Policy (NELP)
6
Sectoral Overview – Upstream
NELP rounds have opened up large sedimentary areas for
exploration to private and JV companies leading to decrease in
unexplored or poorly explored areas from 67 to less than 37%
Out of total 205 bn bbl of prognosticated resources in 15 basins, 66 bn bbls
have been established since 1947. 15 bn bbl in-place reserves were added
during last 7 years
•Exploration Acreage –
April ’96
Poorly
Explored
18%
Moderate to
well
explored
16%
•Exploration Acreage –
April ‘07
Poorly
Explored
21%
Sedimentary Area
Unexplored
15%
Yet to offer
32%
Unexplored
49%
Exploration
initiated
17%
Moderate to
well
explored
20%
Exploration
initiated
44%
Area under
License
68%
Source: Directorate General of Hydrocarbon
7
Overall Demand-Supply Gap (MMSCMD)
Natural Gas
2008-09
2009-10
2010-11
2011-12
Domestic
120
140
147
170
LNG
34
52
70
70
Total
154
192
217
240
Demand
197
222
265
282
43
30
48
42
14.9
9.9
15.84
13.9
Supply
GAP
MMSCMD
MMT
8
LNG Terminals
Rated Capacity
Company/Location
2008-09
2009-10
2010-11
2011-12
Petronet-Dahej
5.00
10.00
10.00
10.00
Shell-Hazira
2.50
3.50
3.50
3.50
-
2.90
5.00
5.00
7.50
16.40
18.50
18.50
RGPPL-Dabhol
Total
9
Expected Share of Natural Gas in the Energy Basket in India
(Hydrocarbon Vision 2025)
Year
2006-07
2011-12
2024-25
Coal
50
53
50
Oil
32
30
25
Gas
15
14
20
Nuclear
1
1
3
Hydel
2
2
2
100
100
100
10
Sectoral Overview – Downstream
India’s downstream sector is dominated by NOCs.
Major Downstream Players as on April 1, 2008
Refining capacity (MMTPA)
• 19 refineries with 149 MMTPA installed capacity
Essar,
ONGC, 10.5, 7%
9.8, 7%
• 105% capacity utilization in 2007-08
• Refined product consumption – 129 MMT
IOC, 60.2,
40%
HPCL,
13.0, 9%
Key Facts
• Refined product consumption: 7% annual growth
• Refined product net exports – 39 MMT, Gross
BPCL,
22.5, 15%
exports $26.8 bn 07-08 (50% growth over 2006-07)
RIL, 33.0,
22%
Source: MoPNG
Market Share of sale of Petroleum Products (in Vol
sales excl. CNG & LNG)
Pvt
Other 10%
(PSUs)
2%
HPCL
19%
BPCL
21%
• Product pipelines stretch over 9,500 km
• New entrants in the oil marketing business include
RIL, Shell, EOL, MRPL and NRL
• Domestic auto sales 14.1% CAGR (’06-07 over ’01-
02); petroleum products consumption jumped by
7% from last year
IOC
48%
• Over 34,000 retail outlets
Source: Monthly IPR
11
Sectoral Overview – Downstream
Refining industry in India is poised for rapid growth with additional
investments planned over the next decade supported by GoI’s intention
to promote India as an integrated refining and petrochemical export hub.
Developments
•
241 MMTPA refining capacity by 2012
•
38 MMTPA addition in the Pvt sector
•
Private investments from Chevron/Mittal
•
RIL/Essar/IOC venturing abroad (Kuwait, Africa,
Turkey etc.)
•
Crude import and product exports expected to
jump
Refining Capacity Vs. Crude Import in MMT
as on April 1
225.88
240.96
210.21
195.49
194.7
170.41
150.51
148.9
120.37
107.27
Investments
•
Investment of over $22 bn estimated for creating
new refining capacity
•
Refinery upgradation projects to require
investments of the order of $2.5 bn
2008
2009
Source: XI FYP, MoPNG
2010
2011
2012
12
Oil Companies Under Recoveries 2007-08
– On price controlled products
Sr. 2007-08
No.
1.
LPG
UnderRecovery
(Rs Crs)
15,000
2.
MS
7,000
3.
4.
SKO
This is BORNE By
Sr. Agency
No.
(Rs Crs)
1
Upstream
Companies
26,000
2.
OIL Bonds
35,000
3.
OIL
Companies
16,000
Total
77,000
19,000
HSD
35,000
Total
77,000
13
High Taxes on Transport Fuel
Sr. Item
No
MS
1.
Basic Price
(Rs/KL)
23,149.33 50.9%
2.
Custom/Exchange 22,370.67
Sales/Other Taxes
(Rs/KL)
3.
Total Retail Price
Rs/KL
Percentage
HSD Percentage
23,241.11
73.18%
49.1%
8518.89
26.82%
45,520.00 100%
31760.00
100%
14
SHARE OF OIL REVENUE IN TOTAL REVENUE IN 2002-05
Year
Accrued to
Oil Revenue
(Rs. Crs)
Total Revenue
(Rs. Crs.)*
Share of Oil
Revenue in Total
Revenue (%)
2002-03
Centre
64595
236936
27.3
States
32156
178001
18.1
Total
96751
414937
23.3
Centre
69195
263027
26.3
States
35180
203746
17.3
Total
104375
466773
22.4
Centre
77692
300904
25.8
States
43254
235283
18.4
Total
120946
536187
22.6
2003-04
2004-05
*Centre’s revenue is taken as net of transfers to States. States’ revenue is the total receipts of own tax and nontax revenue.
Source: Report of the Standing Committee on Petroleum & Natural Gas in Parliament, Government of India;
15 State
Finances, A study of Budget of 2004-05, RBI, Government of India; Budget documents, Government of India.
Renewable Energy Sources Potential
Source/
Technology
Units
Potential/
Availability
Potential Exploited
Units
Percentage
Biogas Plants
Million
12
3.2
26.8
Biomassbased Power.
MW
19,500
384
1.9
Efficient wood
stoves.
Million
120
33.9
28.2
Solar Energy.
MW/Sq. Km
20
1.7
8.7
Small Hydro
MW
15,000
1,398
9.3
Wind Energy.
MW
45,000
1,367
3.0
Energy
Recovery from
Wastes.
MW
1,700
16.2
0.9
Hydel.
MW
148,700
16,083
10.8
16
* Table 7.3.3/7.3.16 10th plan document
Biofuels Activities
• JV under formation with Chhattisgarh
Government to produce 30,000 MTPA
Biodiesel
• 2000 ha revenue wasteland allotted by
Government of M.P. In Jhabua district for
energy crop plantation. Investment approval
being obtained
• 10% ethanol blends in MS by 2012 (The end
of the 11th plan)
• Discussions with U.P. and Rajasthan
Government for creating Biodiesel units.
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Status - Hydrogen Activities of IOC
 IOC R&D had set up the India’s first Hydrogen Dispensing
Station in October, 2005 which is being used for fueling test
vehicles.
 A similar Hydrogen-CNG Dispensing Station is being set up at
Delhi in Dwarka by IndianOil which will be commissioned by
end of 2008.
 IOC R&D working closely with SIAM members under an
MNRE project for optimisation of various vehicles to
Hydrogen-CNG.
 IOC R&D planning further projects related to Hydrogen
production, development of codes & standards etc.
18
Planning Cycle – Key Corporate Activity
Vision
Annual Plan
Perspective
Plan
Long Term
Plan
5 Year Plan
19
Knowledge Explosion
• Knowledge Doubling
itself every 5-7 years
Rate of
Change of
Everything is
Hyperbolic
• The importance of
R&D escalating
exponentially
Years
20
Formula for Organisational Perpetuity
1.
Creativity – Without which no new Technologies
products goods & services can
emerge.
2.
Continuity – Without which in a changing environment
the sense of purpose and/or directions may
get lost and develop aberrations.
3.
Discontinuity – The essence of discontinuity / change
is to discard the irrelevant / obsolete on a
continuous basis. Without it no forward
progress can take place.
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