India Oil & Gas Overview & Opportunities: April 13, 2006

Petroleum Federation of India
India Oil & Gas Overview & Opportunities

April 13, 2006
Deepak Mahurkar
Oil & Gas Industry Practice

Agenda
Macroeconomic & Energy Indicators

Overview of India’s Petroleum Sector
Destination India
Opportunities in Upstream Sector
Opportunities in Downstream Sector
Opportunities in Natural Gas Sector
Opportunities in Services Sector
Destination Philippines
PetroFed: India Oil & Gas Overview & Opportunities

PricewaterhouseCoopers Page 2
Macroeconomic and Energy Indicators
India is a unique economy. Energy challenge is of fundamental

importance to India’s economic growth imperatives.
Population : 1.1 bn to 1.47 bn in 2031 CAGR 1.1%
Energy consumption : 304 to 1,112 kgoe/capita in 2031 CAGR 5.1%
Two Wheelers : 0.6 mn to 41.5 mn over 30 years CAGR 15.3%
Cars : 0.54 mn to 5.71 mn over 30 years ending 2002 CAGR 8.2%
Electricity : absent in 84 mn households in 2000 44.2% of total
Renewables in use. GHG emissions low. ~ 3% of Globe

India has an ambition of high Economic Growth Rate.

Energy intensity and elasticity are on downtrend already. Future

growth would need relatively more energy.
GDP Elasticity GDP Intensity

2.5 0.30
Intensity (MMTOE/Rs. '000 Cr.)

2 0.25
0.20
1.5
0.15
1
0.10
0.5
0.05
0 0.00
'68-74 '74-79 '84-89 '89-94 '94-99 '99-04 '68-69 '75-76 '82-83 '89-90 '96-97 '03-04
Energy Oil (Q) Energy Oil Gas
Source : MoPNG, CSO, PwC Analysis
Despite fuel prices being high on PPP basis, import dependent R&M
companies seek to raise consumer prices to recover costs and remain
financially strong. Domestic production is therefore a thrust area.
UK Netherlands
Germany UK
Netherlands Germany
Hong Kong France
Japan Japan
West Bank & Gaza Israel
Mongolia India
Lao PDR Cambodia
Korea, North New Zealand
Tajikistan Sri Lanka
USA Myanmar
Singapore Lao PDR
Myanmar Armenia
Russia Pakistan
Kyrgyz Republic Jordan
Sri Lanka Diesel Price Nov 2004 Russia Gasoline Price Nov 2004
New Zealand
in US Cent per Litre Thailand in US Cent per Litre
Thailand Philippines
Bangladesh Vietnam
Uzbekistan China
Oman Azerbaijan
Malaysia Uzbekistan
Brunei Oman
Indonesia Indonesia
Syria Saudi Arabia
Yemen Yemen
Iran Venezuela
Iraq Turkmenistan
0 50 100 150 0 50 100 150

PetroFed: India Oil & Gas Overview & Opportunities Source : GTC, International Fuel Prices 2005
Agenda

Destination India

Overview of Petroleum Sector
Coal was the primary source of commercial energy and diesel

was the highest consumed refined fuel in 2004-05
Commercial Energy (333 MMTOE) POL and Gas (158 MMTOE)
4%
3%
18%
HSD & LDO
28%
LPG
39% Kerosene
7% Petrol
Naphtha
6% ATF
46% LSHS &FO

2% 7%
Bitumen
9% Others
6%
RBF
2%
8% 6%
9% NG
PoL (Incl RBF) Natural Gas Coal

Lignite Others
Source : MoPNG, PwC Analysis

Robust hydrocarbon demand imparts element of necessity of sector

development for sustained economic growth and the GoI recognizes
latter would be compromised if supply challenges are not met.
CAGR Multiple in
CAGR of Products and NG upto 2030 under BAU & HOG Scenario, per cent
(%) 27 years
4 2.9
10%
9.1%
4.5 3.3
8.3%
8.0%
8% 5 3.7
6.9% 6.9% 5.5 4.2
6.2% 6.3%
6.0% 6.0%
6% 5.6% 6 4.8
5.1%
4.5% 4.7% 6.5 5.5
4.0%
4% 7 6.2
7.5 7.0
1.8%1.8%
2% 8 8.0
8.5 9.0
0%
9 10.0
NG + NG POL excl. HSD, LDO LPG and LPG Petrol LSHS and ATF Bitumen
equivalent of Naphtha Equivalent Equivalent of Equivalent HFO
Naphtha SKO
Source : PetroFed projections by PwC-IRADe

Oil & gas sector is crucial to Indian economy. Apart from fuelling
it, the fiscal contributions by sector are significant.
Largest contributor to exchequer in 2004-05 USD 27 bn
Sixth largest crude oil consumer in the world 119.3 MMT
Crude imports as total imports exports & imports 33 & 31% resp.
All 5 Indian companies in F500 operate in the Oil & Gas sector
Ranks 6th in world refining with 3% capacity. 3rd largest refinery.

Overview of Petroleum Sector - Upstream
Attractive fiscal and contractual terms with recently demonstrated

prospectivity is fast changing investor’s perception about India’s
upstream sector
Key Facts NELP Success
• 26 sedimentary basins: 3.14 mn sq kM (1.39 • 110 PSCs signed in the last 5 rounds
mn sq kM onland and 1.75 mn sq kM offshore • NELP VI – 55 O&G and 10 CBM blocks on
offer
• Hydrocarbon resources: 28 BTOE (<25%
• Exploration coverage has trebled from 0.35
established)
mn sq kM in 2000 to 1.04 mn sq kM in 2005
• 22% area unexplored with another 22% area • World class O&G discoveries by RIL, Cairn
poorly explored and GSPC
• Directorate General of Hydrocarbons (DGH) • $US 5 bn committed under NELP I to V
invested with upstream regulatory functions
Major Upstream Players - Production
• Crude oil prodn – 29.36 MMT (April’05 – Feb’06) Pvt/JV
14% • RIL, BG, GSPC, HOEC,
• E&P interests in 13 countries of OVL and in
more by other PSUs/ Pvt companies OIL Cairn Energy, Niko
10%
Resources, Hardy,
Jubilant Enpro
PetroFed: India Oil & Gas Overview & Opportunities ONGC
76% Page 11
PricewaterhouseCoopers
Overview of Petroleum Sector - Downstream
India is refining surplus and plans to be an export hub leveraging on

capability to operate at high refining margins
Major Downstream Players Key Facts
Refining capacity (MMTPA) • No. of refineries - 18
ONGC
8% • Installed refining capacity – 127.37 MMT (’04-05)
HPCL
10%
• Total Crude Throughput – 124.30 MMT (’04-05)
IOC
42%
BPCL • 99.8% capacity utilization in 2004-05
14%
• Petroleum product consumption – 111.71 MMT
RIL
26% • Petroleum product consumption registered over
3.5% yoy growth for last 3 years
Market Share of Petroleum Products (in Vol) • Petroleum product exports – 8.7 MMT
Pvt. ,
15.2% • New entrants in the oil marketing business include
RIL, Shell, EOL, MRPL and NRL
IOC,
Other(PS
Us), 6.2%
43.0% • Auto sales 14.2% CAGR (’04-05 over ’00-01)
HPCL, • Over 31,500 retail outlets including private

17.1% companies
BPCL,
18.5%
Overview of Petroleum Sector – Natural Gas
Natural gas market is supply constrained and needs to be developed.
GAIL’s Proposed National Gas Grid Supply scenario
• In-place reserves up by 50% in last 2 ½ years
• Natural Gas prodn – 29.39 BCM (April’05 – Feb’06)
• New domestic discoveries – RIL, GSPC and

ONGC on the east coast
• 2 operational LNG terminals at Dahej (5 MMTPA)
& Hazira (2.5 MMTPA) on west coast
Major Market Players

Production : ONGC, OIL, RIL, BG, NIKO, GSPC
Transmission : GAIL, GSPL, GSPL
City Gas : IGL, MGL, GGCL, AGCL, BGL
LNG : PLL, Shell

Agenda

Destination India

Destination India
India is poised to grow in energy consumption. Share of hydrocarbons
is expected to be constantly high. Combined with this, India has very
attractive investment environment.
Urbanization and higher energy penetration

Growing economy with Industrial, Services
and Agriculture – all three heavily dependent
The Facilitators
Young Talent Pool (>50% population <50 yrs age)
Growing income levels and therefore
Growing Business Opportunities

Stable Political Environment
Strong Govt. Owned and Private Oil Companies
The Demand Drivers
Attractive Income Tax Regime (Sec 44BB including)

Rise in energy intensity
Progressive Indirect Tax Regime Fast Maturing

on petroleum sector.
disposable incomes
VAT with credits

Goods & Services Tax with cross credits
Reduction in Customs Duty
Very attractive SEZ Act 2005
Cost competitive work force
    100% FDI allowed* in Petroleum Sector investments
Agenda

Destination India

Destination India – Opportunities in Upstream Sector
Foreign Direct Investments are allowed in Indian petroleum

sector. Upstream sector signifies complete liberalization
achieved. Various avenues are available for investors.
• Acquisition of Blocks under periodic bidding rounds - NELP
• Farm-Ins
• Technology tie-ups with PI with Indian oil companies
• Service contracts for Marginal Fields
• IOR/EOR projects – ONGC
• Open Acreage Licensing – the future way
• Acquisition of CBM blocks in periodic rounds

Agenda

Destination India

Destination India – Opportunities in Downstream Sector
Refinery investments are being planned by India for exports and

for petrochemical feed-stock purposes. Major oil companies can
participate in the activity.
• Refinery expansions and upgradation
• Grass-root refineries
• Integrated complexes – petrochemical & VA products
• Tankages and strategic storage
• Pipelines – crude and products
IOCs interested in retail marketing segment use refining or LNG investment

opportunities to help cross the minimum investment condition for retail market entry

Agenda

Destination India

Destination India – Opportunities in Natural Gas Sector
The allied infrastructure needs strengthening. Gas demand and

supply imbalance would call for import infrastructure.
• Gas grid connecting producing and consuming locations
• LNG regasification terminals
• Gas Distribution networks
• Fractionators / Extractions
• Petrochemical and VA products

Agenda

Destination India

Destination India – Opportunities in Services Sector
More than 800 wells are committed for blocks awarded upto
NELP V. The number would go up with ensuing rounds and with
discoveries. Service sector is to be in demand.
900
800
700
600
500
400
300
200
100
0
2005 & 06 2007 & 08 2009 & 10 2011& 12 Total
ONGC RIL Others Total
Government of India has recognized need for quality, timely and cost optimal
services for upstream sector and is ready to offer best investment environment
to companies.
Agenda

Destination India

Destination Philippines – Opportunities
In many ways the petroleum sector is well liberalized in

Philippines offering opportunity to Indian companies. The
delegation may guide the industry accordingly.
• PNOC stake sale in Malampaya. Opportunity?
• Refineries at 80% capacity. Opportunity for new refineries?
• Development of upstream resources. September rounds?
• Deregulation caused retail market rush. Space for new entrant?
• Market determined pricing. New Players’ Association active?
• LNG supply by BP yet to be binding. Scope of gas distributors?
• City gas & CNG transports. Opportunity for Indian companies?

Thank you
India Oil & Gas Practice

PricewaterhouseCoopers Pvt. Limited
Sucheta Bhawan
11- A, Vishnu Digamber Marg
New Delhi – 110 002
Hotline: +91 (11) 23216023
Fax: +91(11) 2321 0594/6
deepak.mahurkar@in.pwc.com
© 2006 PricewaterhouseCoopers LLP. All rights reserved. "PricewaterhouseCoopers" refers to PricewaterhouseCoopers

LLP (a Delaware limited liability partnership) or, as the context requires, other member firms of PricewaterhouseCoopers
International Ltd., each of which is a separate and independent legal entity. *connectedthinking is a trademark of
PricewaterhouseCoopers LLP.

Upstream
Upstream sector in India is a relatively unexplored market with reserves

estimated in 15 of the 26 sedimentary basins.
NELP
• Policy approved in Feb 1997
• International competitive bidding
• Single window ECS approval mechanism
• Up to 100% foreign participation
• Fiscal stability provision
• Level playing field – NOCs vs. Pvt companies
• Contract finalization based on MPSC
• Freedom to market O&G in domestic market
• No signature, discovery or production bonus


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Petroleum Federation of India

India Oil & Gas Overview & Opportunities

Macroeconomic & Energy Indicators

PetroFed: India Oil & Gas Overview & Opportunities

India is a unique economy. Energy challenge is of fundamental

Population : 1.1 bn to 1.47 bn in 2031 CAGR 1.1%

Energy consumption : 304 to 1,112 kgoe/capita in 2031 CAGR 5.1%

Two Wheelers : 0.6 mn to 41.5 mn over 30 years CAGR 15.3%

Cars : 0.54 mn to 5.71 mn over 30 years ending 2002 CAGR 8.2%

Electricity : absent in 84 mn households in 2000 44.2% of total

Renewables in use. GHG emissions low. ~ 3% of Globe

India has an ambition of high Economic Growth Rate.

PetroFed: India Oil & Gas Overview & Opportunities

Energy intensity and elasticity are on downtrend already. Future

GDP Elasticity GDP Intensity

Intensity (MMTOE/Rs. '000 Cr.)

0 50 100 150 0 50 100 150

Macroeconomic & Energy Indicators

PetroFed: India Oil & Gas Overview & Opportunities

Coal was the primary source of commercial energy and diesel

46% LSHS &FO

PoL (Incl RBF) Natural Gas Coal

PetroFed: India Oil & Gas Overview & Opportunities

Robust hydrocarbon demand imparts element of necessity of sector

Source : PetroFed projections by PwC-IRADe

Largest contributor to exchequer in 2004-05 USD 27 bn

Sixth largest crude oil consumer in the world 119.3 MMT

Ranks 6th in world refining with 3% capacity. 3rd largest refinery.

PetroFed: India Oil & Gas Overview & Opportunities

Attractive fiscal and contractual terms with recently demonstrated

India is refining surplus and plans to be an export hub leveraging on

HPCL, • Over 31,500 retail outlets including private

Natural gas market is supply constrained and needs to be developed.

GAIL’s Proposed National Gas Grid Supply scenario

• In-place reserves up by 50% in last 2 ½ years

• Natural Gas prodn – 29.39 BCM (April’05 – Feb’06)

• New domestic discoveries – RIL, GSPC and

Major Market Players

PetroFed: India Oil & Gas Overview & Opportunities

Macroeconomic & Energy Indicators

PetroFed: India Oil & Gas Overview & Opportunities

Urbanization and higher energy penetration

Growing Business Opportunities

Attractive Income Tax Regime (Sec 44BB including)

Progressive Indirect Tax Regime Fast Maturing

VAT with credits

Macroeconomic & Energy Indicators

PetroFed: India Oil & Gas Overview & Opportunities

Foreign Direct Investments are allowed in Indian petroleum

• Acquisition of Blocks under periodic bidding rounds - NELP

• Technology tie-ups with PI with Indian oil companies

• Service contracts for Marginal Fields

• IOR/EOR projects – ONGC

• Open Acreage Licensing – the future way

• Acquisition of CBM blocks in periodic rounds

Macroeconomic & Energy Indicators

PetroFed: India Oil & Gas Overview & Opportunities

Refinery investments are being planned by India for exports and

• Refinery expansions and upgradation

• Integrated complexes – petrochemical & VA products

• Tankages and strategic storage

• Pipelines – crude and products