Hydrocarbons in India

Story Staff Reporter Photograph Prasad

India’s energy sector India, the world’s largest democracy, ranks as the third largest economy in terms of gross domestic product (GDP) in purchasing power parity (PPP) terms after United States and China. Healthy GDP growth rates of more than 7 per cent per annum from 2003-04 have resulted in a surging demand for energy and hydrocarbon sources. In 2007, India was the fifth largest consumer of energy in the world, after the United States, China, Russia and Japan. Total primary energy consumption in 2007 was 404.4 million metric ton oil equivalent (MMTOE) or 3.6 per cent of global primary energy consumption.

With one sixth of the world population, India’s per capita energy consumption in 2005 was 490 kilograms of oil equivalent (kgoe). Although per capita energy consumption is expected to more than double to about 1,124 kgoe to 1,266 kgoe in 2031-32, it will still continue to be significantly lower than the current world average of 1,780 kgoe.

Oil Sector At 5.6 billion barrels of oil, India’s proven oil reserves are a meager 0.5 per cent of the world’s total, placing India at 22nd position in the world. More than 50 per cent of India’s proven oil reserves are located in the western offshore Mumbai High and in the onshore northeast of the country. Recently discovered substantial reserves are located in the offshore Bay of Bengal, Krishna Godavari basin and in onshore Rajasthan - see chart 2.

With a reserves : production (R:P) ratio of 22 years, India’s existing domestic production of about 0.7 million barrels of oil per day (BOPD) is much less than its current consumption of 2.8 million BOPD, thus creating a wide gap to be met through imports. The volume of crude oil imports has been increasing steadily with India importing 78.8 per cent of its total crude oil requirement in 2006-07 - see chart 3.

Crude oil made up approximately 32 per cent of India’s entire imports in 2006-07 against a 24 per cent rise in non oil imports. As per projections made by the Report of the Working Group on Petroleum and Natural Gas Sector for the Eleventh Plan in November 2006, domestic demand for petroleum products is forecast to increase from 116.1 million metric tons (MMT) in 2007- 08 to 131.8 million tons in 2011-2012. Projection for petroleum products in next 5 years is likely to be on higher side as actual petroleum consumption of 2007-08 was registered at 129 MMT.

In addition to importing greater quantities of crude oil, the government has increased its focus on enhancing reserves and production through increased domestic exploration activity as well as securing equity oil overseas. Domestic oil production is currently dominated by the state owned exploration companies Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL), which together accounted for about 86 per cent of India’s crude oil production in 2006-2007. The contribution from private and joint venture producers is expected to increase in the near future as production from significant discoveries made by Cairn Energy and Reliance Industries begins.

Natural Gas Sector Natural gas currently occupies approximately 9 per cent of India’s total energy basket, which is well below the world average of 24 per cent. India’s proven gas reserves currently stand at 1.08 trillion cubic metres (TCM), which are 0.6 per cent of the world’s total proven gas reserves - see chart 4. This gives the country a ranking of 26th in the world in terms of proven gas reserves. At existing production levels of 88 million standard cubic metres per day (MMSCMD), the country has a gas R:P ratio of 33 years.

Exploration and Production India has 26 sedimentary basins covering an area of 3.14 million km², of which only 20 per cent has been moderately to well explored. Exploration efforts have been initiated in 44 per cent and 36 per cent remains poorly to completely unexplored - see chart 5.

India’s exploration potential can therefore be deemed to be untapped. About 1.39 million km² of India’s total sedimentary basin is in the onshore zone and 1.75 million km² in offshore zones, with 43 per cent of the total area falling in the deepwater offshore zone. Earlier concerns of the prospectivity of India’s sedimentary basins have been offset by large discoveries in the eastern offshore Krishna Godavari (KG) basin by Reliance in 2002 and Gujarat State Petroleum Corporation (GSPC) in 2006. As a result, the KG basin is now viewed as one of the most exciting exploration provinces in the world and is becoming the hub of exploration activity in India. The hydrocarbon bearing potential of India’s onshore acreage is also underlined by Cairn Energy’s Rajasthan oil discovery in 2004, which has yielded oil and gas reserves of more than one billion barrels. Participation by foreign exploration companies has increased since the NELP-I bidding round in 1999. It is anticipated that this trend will continue as more discoveries are announced by existing licensees.

Coal Bed Methane (CBM) India has estimated prognosticated CBM resources at 4.6 TCM spread over twelve Indian states covering an area of 35,400 km². CBM exploration activities have already been initiated in 54 per cent of the area, which is located in India’s major coal and lignite bearing basins in the central and eastern parts of India. At present, 26 blocks have been awarded by the government comprising of 23 blocks through three rounds of CBM licensing, 2 blocks through nomination and 1 block through Foreign Investment Promotion Board (FIPB) route. These blocks cover an area of 13,600 km² with estimated in place reserves of 1,456 BCM. First commercial CBM gas production has commenced from July 2007 in a block in
West Bengal.

Global E&P Ventures In order to enhance energy supply security and augment domestic exploration efforts, India’s National Oil Companies (NOC) are seeking overseas oil equity through acquisition of E&P assets. ONGC Videsh Limited (OVL), the overseas arm of ONGC, has formed JVs with foreign companies and currently holds interests in 38 oil and natural gas projects in 18 countries spanning Africa, Asia, Latin America and the Middle East.

Import and Export of Petroleum and Oil Products Over the years, India has transformed from being a net importer of petroleum products (including naphtha, petrol, diesel and aviation turbine fuel) to being a net exporter. In 2005-06, the availability of these products from domestic refineries was higher than domestic demand, with the exception of liquefied petroleum gas (LPG), motor spirit (MS) and high speed diesel oil (HSD), which the country had to import due to the implementation of the new Auto Fuel Policy mandating use of cleaner vehicular fuels - see chart 6.

India’s refining sector has further potential for export, considering the expected increase in domestic refining capacity and the critical role played by refinery products in meeting energy demand all over the world. A cumulative 90 to 100 MMTPA refining capacity has been approved for implementation and commissioning over the next 5 years. The growing export potential of India’s refining is underlined, when the expected domestic demand of 131.8 to 141.8 MMT after five years is compared to the anticipated refinery capacity of about 241 MMTPA after the existing expansion projects are completed. The government has permitted Foreign Direct Investment (FDI) into the sector, which has up to now been dominated by the PSUs. In 2007, approval was granted for Hindustan Petroleum Corporation Limited (HPCL’s) refinery-cum petrochemical complex in Bhatinda, in North India with partnership of Mittal Investments. This can be viewed as the first step towards the involvement of international oil firms in greenfield refinery projects in India.

—Inputs from Energising India for Sustainable Growth (2008), Ministry of Petroleum and Natural Gas, Government of India.