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Oil & gas - Future is where gas is

India’s growing oil consumption (8 per cent year-on-year)and almost stagnant domestic production has resulted in increasing dependence on imports.

Indias oil consumption growing
Indias oil consumption growing
India’s growing oil consumption (8 per cent year-on-year)and almost stagnant domestic production has resulted in increasing dependence on imports.

To address this and ensure energy security, the Indian government has embarked on a two-pronged strategy of increasing exploration and development of domestic basins (through successful NELP I-VI rounds) as well as acquiring oil equity.

While the country is deficient in crude oil, it is surplus in refining capacity and is a net exporter of petroleum products.

Additional capacities being planned by companies such as IOC, HPCL, Reliance Industries and Essar will further position India as a regional refining hub.

 

Going forward, gas is expected to emerge as one of the fastestgrowing fuels and will attract significant investor interest. The increasing global interest in the Indian oil and gas sector was evident by the heightened M&A activity.

A study of recent deals in the oil and gas sector by PSUs, private companies, overseas service companies and financial investors indicate increased interest across the oil and gas value chain.

Corporate impact

  • ONGC: The announcement on the seventh round of bidding under the New Exploration Licensing Policy (NELP) is a plus for the company. It is into exploration in a big way

     
    Subir Raha, Executive Vice Chairman, Hinduja Group, India
     “The decision to change from ad valorem to specific duty on regular gasoline and diesel should also have been made applicable to cooking gas and kerosene”

    Subir Raha
  • RIL: India’s largest private sector company is banking on the exploration business in a big way. It is expected that the next round of bidding will attract investments in the range of $3.5-8 billion

  • IOC: Extremely keen on the exploration business though players like ONGC and RIL are ahead of it. The abolition of the ad valorem component on petrol and diesel is a positive

  • BPCL: Like most of the other players, this announcement augurs well. It remains to be seen how much it can capitalise on exploration as a business

  • HPCL: Has a subsidiary for the exploration business. The next round of bidding will be for 57 exploration blocks and HPCL may look at it. Like IOC, it will benefit from the change in the ad valorem component

Sectoral impact

  • Reduced customs duty on project imports will boost development of infrastructure in oil and gas sector like pipelines

  • Tax holiday withdrawal for refining activities would adversely impact the sector. The government should clarify its position regarding availability of tax holiday on production of natural gas

  • Demand for infrastructure status to upstream activities and removal of service tax on exploration services still not considered