Team Tesla:

Arpan Kumar Patra

Ayush Agarwal
Preetam Smit Nayak
Sarthak Chand
Soumya Surabhi

Sumit Tyagi

Team TESLA

Stratanalysis: Energy Sector (Oil and Gas)

Import and Domestic oil production in

India (in mbpd)
5
4
3
2
1
0

Oil and Gas Current Market Position

1.

2.

3.
FY FY FY FY FY FY FY FY
08 09 10 11 12 13 14 15
Oil Production

Oil Imports

Import and Domestic gas production in

India (in bcm)

4.

3%

India is the worlds fourth-largest energy consumer; oil

and gas account for 37 per cent of total energy
consumption
Demand for primary energy in India is to increase
threefold by 2035 to 1,516 million Tonnes of Oil
Equivalent from 563 million Tonnes of Oil Equivalent in
2012
About 136,347 people were employed in the petroleum
industry at the end of FY13
The University of Petroleum and Energy Studies in
Dehradun, Uttarakhand, is Asias first and only energy
university

5%

Coal

Natural gas
Hydro-electric

2.

BPCL
45%

40

HPCL
MRPL

20
26%

0
FY FY FY FY FY FY FY FY
08 09 10 11 12 13 14 15

3.

CPCL
Others
10%

4.

The government allows 100 per cent Foreign Direct

Investment (FDI) in upstream and private sector
refining projects
The FDI limit for public sector refining projects has
been raised to 49 per cent without any
disinvestment or dilution of domestic equity in the
existing PSUs
Government has enacted various policies such as
the New Exploration Licensing Policy (NELP) and
Coal Bed Methane (CBM) policy to encourage
investments
Oil demand: 4.0 million barrels per day; Gas
demand: 165.2 billion cubic metres.

Gas Production

Team TESLA

55%

29%

Renewables and
Nuclear Energy

1.

IOCL

7%

8%

Oil

7%

60

5%

Government Policies

Share in Indias total refining capacity

100
80

Energy Consumption pattern in 2013 (in %)

Source: www.ibef.org

Stratanalysis: Energy Sector (Oil and Gas)

Threat of
New
Entrants
(Low)

Bargaining
Power of
Customers

Competitive
Rivalry (Low)

(Low)

SUBSTITUTE PRODUCTS

THREAT OF NEW ENTRANTS

Threat is low, as other sources of

energy like solar, wind, coal and
hydro electric power are less
developed. Pressure from alternative
sources might rise in future

Threat of new entrants continues to

be low, due to the capital intensive
nature of the industry and
economies of scale

COMPETITIVE RIVALRY

Substitute
Products

Competitive rivalry is low as just one-two players operate in Upstream, Midstream and
Downstream segments

(Low)

Although a few private operators have entered the industry in the last couple of years,
they do not pose any major threat as of now

BARGAINING POWER OF
CUSTOMERS

BARGAINING POWER OF SUPPLIERS

Bargaining
Power of
Suppliers
(Medium)

Team TESLA

Bargaining power is medium as

despite few players operating,
government at times delays subsidy
payment to oil companies, thereby
increasing losses

Customers have low/non existent

bargaining power
Customers are price-taker not a price
maker

Stratanalysis: Energy Sector (Oil and Gas)

The introduction of the New Exploration and Licensing Policy, large investments in the oil & gas sector for capacity augmentation, quality upgrades, & increasing demand in the petrochemical sector have given
impetus to the countrys oil and gas sector. But, the sector is plagued by challenges like declining domestic production, talent shortage, aging workforce, burgeoning employee retirement, poor infrastructure etc.

Challenges in Oil Sector

Pricing

Import Dependence

The current pricing system

Due to Indias growing
posits problems to all
demand for oil & since India
stakeholders
in the sector &
is a price taker in the global
results
in
huge
financial &
oil market, so international
administrative
burdens
on
price hike has a direct impact
government
&
state
oil
on Indias current account
companies & most of all,
which lead to depreciation of
discourages private
Indian currency, pushing up
investment..
the import bill

Talent Shortage & Aging

Workforce
Average workforce in the
Indian Oil sector is high.
Majority due to retire in the
next 5-10 years. Industry is
likely to require around
25,000 additional
professional in the next 5
years.

India's Oil Supply, 1990-2035 (mb/d)

8
7
6
5
4

6.8

3
1
0

Import (in million barrels per day)

2.7

Production (in million barrels per day)

0.4
0.7

0.9

0.6

1990

2012

2035

Year
Source: http://www-935.ibm.com/services/us/gbs/bus/pdf/g510-3882-meeting-challenges-oil-gas-exploration.pdf

Declining Domestic Production

Affordability

The uncertain medium-term future of Indian

domestic gas production has cascading
effects on the overall role of gas in the
countrys energy sector.

The 2 largest gas consumers, power &

fertiliser, are highly price sensitive as they
operate in tightly regulated output markets.
However, for other potential customers
affordability is considered high.

Challenges in Gas
Sector
Gas Utilisation Policy
This policy negates the right of NELP
producers to sell gas on purely commercial
basis. It also limits upstream investments as
the high cost of off-shore exploration cannot
be recovered from the priority sectors that
are price sensitive.

Team TESLA

Opportunities in Oil & Gas Sector

Upstream Segment exploration &
production

Midstream Segment storage &

transportation

Downstream Segment refining,

processing and marketing

Locating new fields for exploration:

78% of Indias sedimentary area is
yet to be explored

Expansion in the transmission

network of gas pipelines

India is already a refining hub with

21 refineries & expansions planned
for tapping foreign investment in
export oriented infrastructure,
including product pipelines & export
terminals

Development of unconventional
resources: CBM fields in the deep
sea
Infrastructure

India is still far away from having a fully

integrated national gas grid. Due to lack of
connectivity & regional infrastructure, many
potential consumers are unable to access
the gas.

Opportunities for secondary/tertiary

oil producing techniques
Higher demand for skilled labour &
oilfield services & equipment

Increase in LNG imports leading to

boost in production capacity
In light of mounting LNG
production, huge opportunity lies
for LNG terminal operation,
engineering, procurement &
construction services

Stratanalysis: Energy Sector (Oil and Gas)

Development in City Gas

Distribution networks
Expansion of Indias petroleum
product distribution network

Some Examples in India:

Expansions:

Investments:

Companies in India setting up bases in

newer geographies like Africa.

Enhancing
production
redevelopment plans.

Also forming JVs and strategic tie ups

with foreign companies.

Diversification
Oil companies focusing on vertical
integration for next stage of growth.
Diversifying into alternative energies
such as wind power, solar and bio-fuels.

Strategies
Adopted
By
Oil & Gas
Companies

through

Pumping up money in R&D to focus on

gasification technology and bio energy.

More focus upon small companies

Major discoveries by smaller companies
such as the Gujarat State Petroleum
Corporation hold some potential to
diversify the country's production.

Expansion: ONGC Videsh Limited (OVL), which is ONGC's subsidiary, has

acquired significant space in Africa.
Diversification: Oil India Ltd is planning to build and operate refineries, while
Indian Oil is planning to enter oil & gas exploration.
Investment in R&D: ONGC in Mumbai High achieved success through
redevelopment plans to increase recovery rates of hydrocarbon from oil wells.
Small companies: Gujarat State Petroleum Corporation and Andhra Pradesh
Gas Infrastructure Corporation have made major discoveries in the Barmer
basin in Rajasthan and the offshore Krishna-Godavari basin.

Success Story: Oil and Natural Gas Corporation Ltd (ONGC)

ONGC Revenue Growth (USD Billions)

ONGC is the largest upstream oil

company in India.
Accounts for 59 per cent of India's total
crude oil output and 57 per cent of
total gas production (FY13).

ONGC expanded its global operations

through subsidiary OVL (ONGC Videsh
Ltd).
Sizeable capital investments and
presence in Vietnam, Sakhalin (Russia),
Myanmar and Sudan.

Registered highest-ever oil production.

Domestic crude production up 2.1 per
cent.
Highest reserve accretion in the last
two decades 83.5 million toe.

Reported net profit of USD3.9 billion in

2011.
Recorded net profit of USD4.5 billion in
2013.
Recorded net profit of USD4.4billion in
2014.

Employed advanced technology: like

Increased Oil Recovery (IOR) and
Enhanced Oil Recovery (EOR),.
Also adopted modern technology of
Virtual Reality Interpretation to
enhance oil recovery.

Registered highest-ever oil production.

Domestic crude production up 2.1 per
cent.
Highest reserve accretion in the last
two decades 83.5 million toe.

Team TESLA

30.8

29.8

28.7

FY12

FY13

FY14

25.8

24.1

22.9

21.5

FY08

FY09

FY10

FY11

Source: Company reports, BMI, Aranca Research.

Notes: TOE Tonne of Oil Equivalent. - Revenue fallen due to negative
translation effect.

Stratanalysis: Energy Sector (Oil and Gas)

Robust Domestic Market;

Expected to Expand
Increasing Demand for Natural
Gas
Abundant Raw Material

Favourable policies

Huge investments

Skilled labour
Massive gas pipeline network
Natural gas discoveries

Team TESLA

India is the worlds fourth-largest energy consumer

India is the fifth-largest importer of LNG
Oil consumption is expected to rise by 42.5 per cent during 201020
Several industries are increasing the usage of natural gas in operations; this has boosted natural gas demand in India
Some of the main industries that use natural gas are pulp and paper, metals, chemicals, glass, plastic and food processing
Oil reserves amounted to 5.7 Billion barrels
Natural gas reserves stood at 1.4 TCM in 2013
India has nearly 800 MMT of proven oil reserves

100% FDI allowed in E&P projects/companies; and 49% in refining under the automatic route from the earlier approval route
Introduced policies to promote investments such as New Exploration Licensing Policy (NELP) and Coal Bed Methane (CBM)

Investments worth USD 75 billion is expected across the oil & gas value chain under the 12th Plan (201217)
FDI worth USD 5.5 billion has been invested in Indias petroleum and natural gas sector during April 2000March 2014

India offers abundant skilled labour at much competitive wages compared to other countries
The University of Petroleum and Energy Studies in Dehradun, Uttarakhand, is Asias first and only energy university

India natural gas pipeline network was over 15340 km in 2013.

Proposed expansion of 30000 km is envisaged by 2018-19.

Domestic companies-ONGC, Reliance and Gujarat State Petroleum, have found natural gas in deep waters
This offers significant expansion opportunity over the next decade.

Stratanalysis: Energy Sector (Oil and Gas)

Team TESLA

Stratanalysis: Energy Sector (Oil and Gas)