Oil and Gas

Summary
  • The Oil and Gas industry in India is set for a sea change with recent developmental ambitions of the Government of India – 175 GW of installed capacity of renewable energy by 2022, the aim to achieve 100 smart cities mission, 10% reduction of oil and gas import dependence by 2022 and provision of clean cooking fuels. 1
  • India is the third-largest consumer of fuel in the world but will soon reach the top as the per capita consumption in the country is on the rise.28
  • India is currently using only 6% of the world’s primary energy and the per capita consumption of energy is still one-third of the global average.20
  • The Petroleum products which have recorded positive growth during August 2021 vis-à-vis August 2020 are 144.6%
  • The estimated conventional hydrocarbon resources in 26 sedimentary basins stood at 41.87 bn tonnes (oil and oil equivalent of gas), an enormous increase of about 49% in comparison to the earlier estimate of 28.08 bn tonnes. 3
  • India is the second-largest refiner in Asia after China. It is emerging as a refinery hub with refining capacity exceeding demand. 3 The country’s refinery capacity has increased to 247.57 MTPA. 4
  • The demand for energy is expected to grow at a Compound annual growth rate (CAGR) of 4.2% from 2017-2040. 
  • By 2023-24, India is going to be 20% blending ethanol in our petrol products. Government promoting use of ethanol produced from sugarcane and food grains under EBP Programme.
  • India has now emerged as the key centre for global energy demand and is expected to become the world’s largest energy consumer soon. The total consumption of energy resources in 2019-20(P) has increased as compared to 2018-19 for Natural Gas (5.51%) and Electricity from Hydro, Nuclear and other renewable sources from utilities (6.74%)
  • Exports of Petroleum Products values at USD 4913.73 mn in September 2021 and covers 14.69% of total exports of the country.
Reasons to Invest
  • The growing economy and population growth are the main drivers for oil & gas demand, increasing every year.
  • Government aims to double the gas pipeline network from about 19,000 kms in 2021 in next 5 years.
  • India is one of the fastest-growing energy consumers. It is the third-largest consumer in the world after China and the USA. 5
  • In 2018, the Government of India launched the Bid Round-I under Open Acreage Licensing Policy (OALP) forbidding through International Competitive Bidding (ICB) process. About 55 Blocks having an acreage area of 59,282 sq km were awarded in Bid Round-I. 5
  • National Data Repository (NDR) was set up on 28 June 2017, at the Directorate General of Hydrocarbons (DGH), to make the entire Exploration and Production (E&P) data available. This is mainly for commercial exploration, research and development and academic purposes. 5
  • National Gas Grid: India targets to have a gas-based economy and increase the share of natural gas in the primary energy mix of the country from 6.2% to 15%. The Government has approved a capital grant of INR 5,176 crore under Pradhan Mantri Urja Ganga to provide clean energy in the eastern part of the country. 5
  • Under the PMUY scheme, 5.90 crore LPG connections have been released as on 31st December 2018 bringing cleaner energy and better health across the nation. 5 
  • OMCs have delivered 1413.38 lakh refills to PMUY beneficiaries under this Scheme as on 30.11.2020 and more than 7.5 Cr PMUY beneficiaries have availed free cylinders under the scheme.23
  • Supportive Government Regime — ease of doing business moved to industry-specific policy HELP (Hydrocarbon Exploration & Licensing Policy). The Policy has provisions for a single License for exploration and production of conventional as well as nonconventional Hydrocarbon resources, pricing and marketing freedom and reduced rate of royalty for offshore blocks among other benefits. 5 
  • India is a net exporter of petroleum products since FY 2001-02 and also the largest exporter of petroleum products in Asia since August 2009. 5
  • Two world-class gas hydrate reservoirs have been discovered under National Gas Hydrate Project-2 (NGHP-2). This has opened new avenues for alternative resources. 5
  • Investment opportunities are in the upstream sector, gas pipeline, city gas distribution (CGD) network, LNG terminal, development of underground coal gasification, coal to liquids, petrochemical and refinery. 5
  • India has agreed to release 5 mn barrels of crude oil from its Strategic Petroleum Reserves to control oil prices.

 

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Recent Announcements

20th October 2021: PM invites the CEOs and experts to partner with India in exploration and development of the oil and gas sector in India. 

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11th August 2021: Ministry of Petroleum & Natural Gas taking steps for promotion of CNG services in the country.

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10th August 2021: PM launched Ujjwala 2.0 (Pradhan Mantri Ujjwala Yojana - PMUY) by handing over LPG connections, at Mahoba UP. The objective of the scheme is to issue deposit-free LPG connections to one crore additional families.

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09th August 2021: Government continues to modulate the effective price to consumers for Subsidized Domestic LPG for F.Y. 2021-22 subsidy is INR 12,995 cr.

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09th August 2021: Under the Ministry of Petroleum and Natural Gas the Ethanol suppliers have contracted to supply 343.16 cr litres of ethanol to Public Sector OMCs for the ongoing Ethanol Supply Year 2020-21.

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Statistics
  • The Oil and Gas industry in India ranks amongst India's 8 core industries.
  • India is the 3rd largest consumer of oil in the world, after the United States & China. 5
  • India has an estimated reserve of 1380.63 BCM of Natural Gas (as of 1st April 2019). 7
  • India has 247.57 MTPA of refining capacity with a surplus refining capacity of about 15%, making it the second-largest refiner in Asia after China. 8
  • In the Month of May, more than 3.9 lakh new LPG connections were issued. As on 31st May, 2021, 27.23 crore LPG consumers are availing subsidy under PAHAL scheme. 
  •  Exports of Petroleum Products has grown by 240.23% during October 2021 vis-à-vis October 2020 
  • Ethanol Blending has Improved from 1.53% during Ethanol Supply Year 2013-14 to 7.93% ongoing ESY 2020-21.
  • Crude Oil Processed during July 2021 was 19383.64 TMT, which is 9.64% higher than July 2020
  • Natural Gas production (weight: 6.88 per cent) increased by 18.9 per cent in July, 2021over July, 2020. Its cumulative index increased by 21.0 per cent during April to July, 2021-22 over the corresponding period of the previous year.
  • Natural Gas production (weight: 6.88 per cent) increased by 27.5 per cent in September 2021 over September 2020. Its cumulative index increased by 22.1 per cent during April to September 2021-22 over the corresponding period of previous year.
  • Crude Oil production (weight: 8.98 per cent) declined by 1.7 per cent in September 2021 over September 2020. Its cumulative index declined by 2.9 per cent during April to September 2021-22over the corresponding period of previous year.
  • Petroleum Refinery production (weight: 28.04 per cent) increased by 6.0 per cent in September 2021 over September 2020. Its cumulative index increased by 11.2 per cent during April to September 2021-22over the corresponding period of previous year.
Growth Drivers
  • The Natural Gas Grid (NCG) has promoted the usage of natural gas as a fuel/feedstock across the country to move towards a gas based economy. The development of additional 13500 km long gas pipeline is under way to complete the NGG. 9  
  • The Government of India has extensively boosted the expansion of City Gas Distribution (CGD) network coverage across the country to make natural gas available for the public. CGD networks ensure the supply of cleaner fuel (i.e. PNG) to households, Industrial & commercial units and transportation fuel (i.e. CNG) to vehicles. 9
  • The Direct Benefit Transfer Kerosene (DBTK) Scheme has been launched to bring reforms and better subsidy management in allocation and distribution of Public Distribution System (PDS) - Superior Kerosene Oil (SKO) distribution system9  
  • Under the National Policy on Biofuels 2018, biofuels have been categorised as “Basic Biofuels’ viz. First Generation (1G) bio ethanol & biodiesel and “Advanced Biofuels’ – Second Generation (2G) ethanol, bio-CNG and other similar fuels. The categorisation is done to provide appropriate financial and fiscal incentives under each category9  
  • On 21st December, MOU was signed between CSIR-Indian Institute of Petroleum and Vietnam Petroleum Institute to promote cooperation in petroleum research and training.22
  • Initiatives which are driving growth in the Exploration and Production sector include: 9  
    • Gas pricing reforms
    • Policy framework for early monetization of Coal Bed Methane (CBM)
    • Discovered Small Field (DSF) Policy
    • Reform Initiatives to enhance Domestic Production
    • Hydrocarbon Exploration and Licensing Policy (HELP) coupled with operationalization of Open Acreage Licensing Policy (OALP)
    • Monetization of the Ratna offshore field
    • Permission of Extraction of Coal Bed Methane (CBM) to Coal India Limited (CIL) & its subsidiaries in Coal Mining area
    • Policy for the Grant of extensions to Pre-NELP Discovered fields and Exploration Blocks
    • Hydrocarbon Vision 2030 for North East
    • National Seismic Programme of Un-appraised areas
    • National Data Repository (NDR)
    • Policy framework to permit exploration and exploitation of unconventional hydrocarbons in existing acreage of Production Sharing Contracts (PSCs), Coal Bed Methane (CBM) contracts and Nomination fields
    • Policy framework for streamlining the working of PSCs
    • A policy framework to incentivise enhanced recovery methods for oil and gas
  • The Government is taking steps to enable the growth of the CGD sector in the country including allocating domestic natural gas to the CGD sector as a top priority under the no-cut category.26
FDI Policy
  • The government has allowed up to 100% Foreign Direct Investment (FDI) under the automatic route, in the following: 10
    • Exploration activities of oil and natural gas fields,
    • Infrastructure related to marketing of petroleum products and natural gas,
    • Marketing of natural gas and petroleum products, petroleum products' pipelines, natural gas pipelines,
    • LNG regasification infrastructure, market study, formulation and petroleum refining in the private sector,
    • The policy of the government or private participation in the exploration of oil and the discovered fields of natural oil companies
  • 100% FDI under the automatic route for petroleum refiners and in those without any disinvestment or dilution of domestic equity in the existing PSUs at 49%.
  • To promote the usage and distribution of Liquefied Natural Gas (LNG), the Government has put LNG imports under Open General Licensing (OGL) category and the establishment of LNG infrastructure, including LNG terminals, is also under 100% FDI (automatic route).29
  • The cumulative FDI equity inflow in the Petroleum and Natural Gas is USD 7,958.91 mn during the period April 2000 to June 2021. This constitutes almost 1.45% of the total FDI inflow received across sectors.30

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Sector Policy

Hydrocarbon Exploration & Licensing Policy (HELP) 11

The new Hydrocarbon Exploration & Licensing Policy (HELP) has replaced the previous policy regime for exploration and production of oil and gas, known as New Exploration Licensing Policy (NELP). HELP provides a uniform licensing system to explore and produce all hydrocarbons such as oil, gas, coal bed methane, shale oil/gas, etc. under a single licensing framework.

Open Acreage Licensing Policy (OALP) 11

The Open Acreage Licensing Policy (OALP) was notified in 2017 by the GoI as a part of the Hydrocarbon Exploration and Licensing Policy (HELP). Under OALP, potential investors/ companies can view the surface and sub-surface geological, geophysical and other technical data on the National Data Repository (NDR) and submit Expressions of Interest round the year.

National Data Repository (NDR) 11

National Data Repository (NDR), a pre-requisite for making OALP operational is set up at the Directorate General of Hydrocarbons (DGH) to make the entire Exploration and Production (E&P) data available for commercial exploration, research and development and academic purposes.

Discovered Small Field Policy 11

With an aim to monetize hydrocarbon resources locked-in for years, the GoI approved the Discovered Small Field Policy. As an opportunity to increase domestic production of oil and gas, a total of 30 contracts for 43 discovered small fields were signed with 20 companies in March, 2017 under the first round of bidding. Under the second round, 59 discovered small fields/ unmonetized discoveries clubbed into 25 new contracts were offered for bidding in 2018.  These fields are estimated to have 194.65 MMT Oil and Oil equivalent gas.

National Policy on Biofuels 2018

With a target of 20% blending of ethanol in petrol by 2030, the National Policy on Biofuels 2018 has been notified by the Government of India. The policy is expected to boost the Biofuel programme of the country and has also widened the scope of raw material for ethanol procurement. 11 

According to the National Policy on Biofuel 2018 envisages a target of 20% blending of ethanol in Petrol by 2030. 

Following benefits are expected out of the new policy: 12

  • Reduce Import Dependency
  • Cleaner Environment
  • Health benefits
  • Municipal Solid Waste Management
  • Infrastructural Investment in Rural Areas
  • Employment Generation
  • Additional Income to Farmers

Mission Purvodaya19

Mission Purvodaya emphasized harnessing the untapped potential of this region to fuel the next wave of national growth. This will drive Eastern India towards self-reliance and contribute in the making of an Aatmanirbhar Bharat. India is developing gas infrastructure including pipelines, LNG terminals and CGD network.

SATAT (Sustainable Alternative Towards Affordable Transportation)20

The target is to have 5000 compressed biogas plants of 15 MMT per year with an investment potential of US $ 20 bn.

The SATAT scheme aims to set up Compressed Bio-Gas production plants and make CBG available in the market for use as a green fuel.' SATAT’, launched on 1.10.2018, envisages targeting production of 15 MMT of CBG from 5000 plants by 2023.

 

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Financial Support
  • The Oil Industry Development Board, established under the Oil Industry (Development) Act, 1974 provides financial including loans and grants for development of the Oil Industry in India. 13
  • The National Policy on Biofuels 2018 indicates a viability gap funding scheme for 2G ethanol Bio refineries of INR 5000 crore in addition to tax incentives13
  • The Government of India has approved policy framework to promote Enhanced Recovery (ER), Improved Recovery (IR) and Unconventional Hydrocarbon (UHC) production methods/ techniques for Oil and Gas. The framework provides fiscal incentives in the form of partial waiver of royalty and cess13
  • To provide financial assistance to sugar mills for enhancement and augmentation of ethanol production capacity, the Department of Food & Public Distribution has introduced a Scheme which aims to infuse INR 1,332 crore via Interest Subvention route13
  • The Ethanol Blended Petrol (EBP) programme is being implemented by the government through Oil Marketing Companies (OMCs) under which OMCs sell ethanol blended petrol with percentage of ethanol up to 10%. To support this initiative, the government has reduced the GST rate from 18% to 5% on ethanol meant for EBP programme13
Investment Opportunities
  • Under the Hydrocarbon Exploration & Licensing Policy (HELP), the exploration acreage has now reached to about 2,15,000 sq. km. after 4 successful bidding rounds of Open Acreage Licensing Programme (OALP). The future exploratory work commitment comprises of the following: 14
    • 29,270 line km of 2D Seismic Survey
    • 43,272 square km of 3D Seismic Survey
    • 369 Exploratory Wells
    • 290 core analysis to establish Shale Resources

These commitments have a potential to generate an investment of about USD 2.35 Bn in exploratory work alone. 14

  • Under the 2G Ethanol Programme, Oil Marketing Companies (OMCs) are in the process of setting up 12 2G bio-refineries for production of ethanol with an investment of about USD 1.33 Bn. 15
  • The Oil Industry Development Board provides financial and other assistance for development of Oil Industry in India. Strategic Petroleum Reserves Ltd. (ISRPL), a wholly owned subsidiary of Oil Industry Development Board (OIDB) has been mandated to build and operate strategic crude oil reserves15
  • Under Phase I of Strategic Petroleum Reserve (SPR) programme, the government (through ISRPL) has built SPR facilities with a total capacity of 5.33 MMT. For Phase II of the programme, Union Cabinet has already given “In Principle’ approval to establish 6.5 MMT Strategic Petroleum Reserves under PPP mode15
  • Shale Gas and Oil Exploration has immense opportunities in India and is also promoted of the government. The resources can be found in number of sedimentary basins (Gangetic plain, Gujarat, Rajasthan, Andhra Pradesh and other coastal areas) in India, including the hydrocarbon bearing ones – Cambay, Assam-Arakan and Damodar15
  • During the last 3 years, Indian companies have acquired strategic stakes in overseas assets in UAE, Oman, Israel and Russia.17
  • From April - December 2019 , equity oil and gas from overseas assets is 18.513 MMTOE.17 

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Foreign Investors
  • British Petroleum (UK)
  • Cairn Energy (India)
  • Shell (UK)
  • Niko Resources (Canada)
  • OILEX Limited (Australia)
  • Hardy Oil & Gas Plc. (UK)
Agencies
Key Achievements
  • India is the fourth-largest refiner in the world with a total refining capacity of 247.57 MMTPA. 15
  • The target of providing LPG connections to 5 crore women belonging to the Below Poverty Line (BPL) under the “Pradhan Mantri Ujjwala Yojana” was achieved 8 months ahead of the schedule. 15
  • A total of 32 blocks covering approximately 59,000 sq. km area have been awarded under OALP bid Rounds II and III during the year 2019. Under bid round IV of OLAP, 7 Blocks with an area of approximately 18500 sq. km have been awarded. 16
  • 26.79 cr LPG customers are availing subsidy under PAHAL Scheme and nearly 9 lakh customers have joined this scheme in the month of September, 2020. As on 30.09.2020, more than 1.08 cr customers have given up LPG subsidy under the “Give it Up” initiative.18
  • The 2655 km Jagdishpur – Haldia&Bokaro – Dhamra Pipeline Project (JHBDPL) is being executed by GAIL at an investment of INR 12,940 crore, which includes 40% capital grant (i.e. INR 5,176 crore). JHBDPL will cater to the energy requirements of five states, namely Uttar Pradesh, Bihar, Jharkhand, Odisha and West Bengal. 16
  • Under the City Gas Distribution Bidding, 86 Geographical Areas (GAs) in the 9th round and 50 GAs in the 10th round have been authorized. 16
  • L&T Hydrocarbon Engineering (LTHE) has been ranked as the ‘Top EPC Contractor in the Middle East’ by Oil & Gas Middle East magazine, the region’s leading publication focused on the upstream oil and gas industry.
  • Hon’ble PM dedicated Gasoline Desulphurization (GDS) Unit under CPCL-fuel Quality up-gradation project to the nation to boos the use of Gas.
Sources
  1. "Energizing India", Niti Aayog, https://niti.gov.in/writereaddata/files/Energising-India.pdf 
  2. “Energy Statistics 2020”, Ministry of Statistics and Programme Implementation, http://www.mospi.gov.in/sites/default/files/publication_reports/ES_2020_240420m.pdf 
  3. Annual Report 2018-19, Ministry of Petroleum & Natural Gas, http://petroleum.nic.in/sites/default/files/AR_2018-19.pdf 
  4. “Energy Statistics 2020”, Ministry of Statistics and Programme Implementation, http://www.mospi.gov.in/sites/default/files/publication_reports/ES_2020_240420m.pdf
  5. Annual Report 2018-19, Ministry of Petroleum & Natural Gas, http://petroleum.nic.in/sites/default/files/AR_2018-19.pdf
  6. Snapshot of India’s Oil & Gas data, Petroleum Planning & Analysis Cell, https://www.ppac.gov.in/WriteReadData/Reports/202002190443145145160SnapshotofIndiasOil&Gasdata,January2020.pdf
  7. “Energy Statistics 2020”, Ministry of Statistics and Programme Implementation, http://www.mospi.gov.in/sites/default/files/publication_reports/ES_2020_240420m.pdf
  8. Annual Report 2018-19, Ministry of Petroleum & Natural Gas, http://petroleum.nic.in/sites/default/files/AR_2018-19.pdf
  9. Annual Report 2018-19, Ministry of Petroleum & Natural Gas, http://petroleum.nic.in/sites/default/files/AR_2018-19.pdf
  10. Consolidated FDI Policy, https://invest-india-revamp-static-files.s3.ap-south-1.amazonaws.com/2020-04/FDI%20Policy%202019%20revised_19%20April%202020.pdf
  11. Annual Report 2018-19, Ministry of Petroleum & Natural Gas, http://petroleum.nic.in/sites/default/files/AR_2018-19.pdf
  12. Cabinet approves National Policy on Biofuels – 2018, Ministry of Petroleum & Natural Gas, PIB, https://pib.gov.in/Pressreleaseshare.aspx?PRID=1532265
  13. Ministry of Petroleum & Natural Gas, Annual Report 2018-19, http://petroleum.nic.in/sites/default/files/AR_2018-19.pdf
  14. “Ministry of Petroleum and Natural Gas signs Contracts for 7 Blocks Awarded under Open Acreage Licensing Programme (OALP) Bid Round – IV”, PIB, https://pib.gov.in/PressReleseDetailm.aspx?PRID=1598294
  15. Ministry of Petroleum & Natural Gas, Annual Report 2018-19, http://petroleum.nic.in/sites/default/files/AR_2018-19.pdf
  16. Year End Review - 2019 of Ministry of Petroleum & Natural Gas, PIB, https://pib.gov.in/PressReleseDetail.aspx?PRID=1596830 
  17. Ministry of Petroleum & Natural Gas, Annual Report 2018-19, http://petroleum.nic.in/sites/default/files/AR_2018-19.pdf
  18. PIB Release, https://www.pib.gov.in/PressReleasePage.aspx?PRID=1673979
  19. Ministry of Petroleum & Natural Gas, Monthly Summary http://petroleum.nic.in/sites/default/files/monsumm_oct20.pdf
  20. PIB Release, https://www.pib.gov.in/PressReleasePage.aspx?PRID=1677636
  21. PIB Release, https://pib.gov.in/PressReleseDetail.aspx?PRID=1685110
  22. PIB Release, https://www.pib.gov.in/PressReleasePage.aspx?PRID=1682468
  23. PIB Release, https://www.pib.gov.in/PressReleasePage.aspx?PRID=1685110
  24. Ministry of Petroleum & Natural Gas, Monthly Summary, http://petroleum.nic.in/sites/default/files/summrepdec2020.pdf
  25. PIB Release, https://www.pib.gov.in/PressReleasePage.aspx?PRID=1690790
  26. PIB Release, https://www.pib.gov.in/PressReleasePage.aspx?PRID=1703234
  27. PIB Release, https://www.pib.gov.in/PressReleasePage.aspx?PRID=1704803
  28. PIB Release, https://www.pib.gov.in/PressReleasePage.aspx?PRID=1705113
  29. PIB Release, https://www.pib.gov.in/PressReleasePage.aspx?PRID=1705401
  30. FDI Factsheet from DPIIT for April 2000 and June 2021, https://dpiit.gov.in/sites/default/files/FDI_Factsheet_June2021.pdf

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