Upstream Opportunities in India

&

Foray for equity Oil & Gas abroad

B.Basu , ONGC, New Delhi

11th Energy Summit, ASSOCHAMNew Delhi, 17 October, 2008

The Presentation

India: Energy Scenario

India: Opportunities in Upstream Sector

Foray for equity oil & gas abroad

3

16% of global population 0.5% of global Petroleum reserve 6.7% of world’s Coal reserve 8- 9% GDP growth rate target 4.5% CAGR in energy demand

the Challenges are apparent……

India: The Energy contextIndia: The Energy context

India's energy sector requires investment to the tune of $120-150 billion over the next 5 years to build increased capabilities and upgrade technology, says an industry report.

4

2361

1863

692

517404

311 322255 234 216

USA China Russia Japan India Germany Canada France South Korea UK

India: Energy scenarioIndia: Energy scenario

• India: the 5th largest energy consumer– CAGR (1996-2006): 4.5% (global CAGR: 2.1%)– Per Capita energy consumption projected to rise from 375 Kgoe in 2007 to about 1200 Kgoe in

2030

Source: BP Statistical Review 2008

Primary Energy Consumption (MMToe)

3.6% of total

5

Nuclear6%

Hydel6%

Gas24%

Oil35%

Coal29%

India: Energy ScenarioIndia: Energy Scenario

Source: BP Statistical Review 2008

World India

• Gas consumption in India increasing at a CAGR of >6.1% (Global: 2.6%)– next only to China in Asia Pacific(13%) in last decade

Nuclear1%

Hydel7%

Gas9%

Oil32%

Coal51%

6Source: BP Statistical Review 2008

India: Energy ScenarioIndia: Energy Scenario

943

368

229128 126 112 108 102

USA China J apan India Russia Germany S.Korea Canada

• India: 4th largest consumer of Oil (3.3% of total)– Oil consumption increased at CAGR of 4% (1997-2007)

against the world CAGR of 1.4%.

Growing Primary Energy demand … India

Growing Primary Energy demand … India

0

500

1000

1500

2007* 2011 2016 2021 2026 2031

Coal Oil Natural Gas Hydro Nuclear

*Source: BP Statistical Review 2007 figure Source: Integrated Energy Policy

• With development of East Coast, new & marginal fields of West coast, CBM, UCG, and likely trans-national gas trunk lines- the gas demand seems to be achievable

• For oil, though importer for over 25 years, considering the dramatic rise in volume demand, the balance of trade for oil is a critical issue

404MTOE

1633MTOE

CAGR= 6%

Gas CAGR= 7.9%

Oil CAGR= 5.2%

India: Oil ScenarioIndia: Oil Scenario

• Import dependence increased from 69.5% in 2002-03 to 74.9% in 2007-08

• Import dependence may rise to 80-90% around 2030

0

20

40

60

80

100

120

140

1975 1980 1985 1990 1995 2000 2005 2006 2007

Production Import Consumption

Growing Import

Demand –Supply gap in Oil to existDemand –Supply gap in Oil to exist

MMT

Growing Dependence on Imports

• Over dependence on oil & gas leading to import dependence from 70-85%

• 92% Import dependent on geo-politically sensitive Middle East and Africa

» 37% of total M-East crude comes from Iraq & Iran

» About 45% of total African crude comes from volatile Nigeria

• Over dependence on oil & gas leading to import dependence from 70-85%

• 92% Import dependent on geo-politically sensitive Middle East and Africa

» 37% of total M-East crude comes from Iraq & Iran

» About 45% of total African crude comes from volatile Nigeria

Region w ise India's oil import

73%

19%2%4%2%

M-East Africa FSU Asia Pac Latin Am

Source: PPAC

Source: BP Statistical Review 2008

India: Gas ScenarioIndia: Gas Scenario• Gas constitutes ~9% in Primary energy basket; likely to

increase, thanks to Gas strikes at East coast• Situation to improve by 2012. • Demand-supply gap to exist

0

5

10

15

20

25

30

35

40

1975 1980 1985 1990 1995 2000 2005 2006 2007

Production Import Consumption

MTOE

11

Opportunity in supply… GasOpportunity in supply… Gas

Sector wise Gas Consumption projection (mmscmd)

SECTOR 2008-09 2009-10 2010-11 2011-12

Power 91 103 114 127

Fertilizer 43 52 80 79

City Gas 13 14 15 16

Industrial 16 17 18 20

Petrochemicals/ Refineries/ Int. Con.

27 29 31 33

Sponge Iron/ Steel 6 7 7 8

Total 196 222 265 283

• Only about 110 mmscmd available (80 Prodn. + 30 Import) against demand of 196 mmscmd

• Energy demand growth ~5%, gas demand growth~7%• Power sector poised for more gas based generation• Other industries, using liquid fuels, to shift to gas

Upstream OpportunitiesUpstream Opportunities

Indian Oil & Gas BusinessIndian Oil & Gas Business

Opportunity in E&P

• India has 4% sedimentary basins of the world (3.14 million

sq. km)» About 80% area yet to be explored extensively

» Out of 26 basins, exploration yet to be Initiated in 11.

» Favorable open NELP regime

» Abundant opportunities- New bidding, Farm-in

• India has 4% sedimentary basins of the world (3.14 million

sq. km)» About 80% area yet to be explored extensively

» Out of 26 basins, exploration yet to be Initiated in 11.

» Favorable open NELP regime

» Abundant opportunities- New bidding, Farm-in

Unexplored15%

well explored20%

Poorly Explored

21%

Exploration initiated

44%

14

NELP: The success storyNELP: The success story

Opportunity in E&P

Total Blocks offered: 256, Awarded: 207

15

Discovery to Development … NELPDiscovery to Development … NELP

Total Discoveries : 66

Discoveries under evaluation/appraisal : 42 Commerciality under evaluation : 6 Commerciality established : 18

Development Plan to be submitted : 7 Development Plan approved : 5 Development Plan under evaluation : 6

IOGIP ( commercial discoveries) : 5.86 Bbbls

As on : September, 2008. Source: DGH

Opportunity in E&P

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NELP: Attracting InvestmentNELP: Attracting Investment

• USD 3.9 Billion invested in NELP till March, 07– 30% by NOCs, 61% by Domestic Pvt & 9% by Foreign

Investors

• USD 3.33 billion committed for NELP-VI

 Committed Investments in NELP (US$ million)

Round Phase-I Phase-II Phase-III Total

NELP-I 244.14 413.83 493.66 1150.53

NELP-II 287.85 241.2 246.5 775.5

NELP-III 414.5 335.1 388.9 1038.5

NELP-IV 466.15 367.2 301.7 1135.1

NELP-V 412 238 268 917

NELP-VI 2087 1230 - 3317

TOTAL 3911.64 2825.33 1698.76 8333.63

Opportunity in E&P

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The future: Open Acreage Licensing Policy(OALP)

Possible broad framework

The future: Open Acreage Licensing Policy(OALP)

Possible broad framework

Opportunity in E&P

User defined blocks with certain constraints – 1st party envisaging interest in the area any time

Two types of bid

Reconnaissance – short term, exit with no cost recovery Exploration – parallels NELP

Exploration bid wins over a Reconnaissance bid every time

If reconnaissance company loses subsequent exploration bid, it shall have some options to participate/recover cost as a prior right

India has a potential of becoming E&P

technology & services hub. With significant

increase in E&P activities there is need for

high quality & cost effective technology,

goods and other related services in the full

value chain of E&P sector.

India has a potential of becoming E&P

technology & services hub. With significant

increase in E&P activities there is need for

high quality & cost effective technology,

goods and other related services in the full

value chain of E&P sector.

Opportunity in E&P

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Investment EnvironmentInvestment Environment• Stable Political Environment and Growing Business Opportunities

• Competitive and transparent Fiscal regime with equal opportunity for NOCs and Global Investors

Attractive Income Tax Regime (Sec 44BB including) VAT with credits, Goods & Services Tax with cross credits Reduction in Customs Duty, Very attractive SEZ Act 2005 Cost competitive work force

• Liberal policy for FDI in E&P

• Open to partnerships in India as well as for overseas opportunities

• Excellent Tax incentives in NELP projects

• Special Deep-water concessions

• High demand-driven market/ Freedom of marketing

• Skilled/ cost effective Manpower etc. (400 PG in Geosciences and Petroleum Engineering, 350,000 Engineers/Annum)

Opportunity in E&P

MA

RK

ET

SE

CT

OR

S

UPSTREAM

Exploration

MIDSTREAM DOWNSTREAM

ProductionDevelopment Power / LNGChemicals, Metals etc.

Engineering & Construction

Fabrication

Drilling, Wells & Rigs

Subsurface Services

Consulting and Professional Services

Operations Support & Production

Logistics (marine, water, land, air)

Opportunity in E&P

The value chain : Opportunities

Opportunity in E&P

Opportunities: Technology, Goods and Services

Exploration Technology : Geo-scientific survey, data processing, G&G – Conventional , state of the art Drilling Services: onland, offshore( shallow and Deep) , High Technology wells

Field development and Reservoir management : Engineering and processes, IOR/EOR

Information Technology : various Software applications

Goods and Services: Drilling & oil field chemicals, consumables, array of hardware

Management Services : financial , legal consulting and Project management

Opportunity in E&P

ONGC to spend Rs 82670 Crore ( $ 17.2 Billion) in the XI Plan period ( 2007- 08 to 2011-12)

$ 40 Billion investment expected up to 2012 by all players

Foray for Equity oil and Gas abroadForay for Equity oil and Gas abroad

24

OVL: ActivitiesOVL: Activities

38* Projects in 18 Countries

24 Exploration

6 Developmen

t

7 Producing

* 38th project is Sudan’s 741 km long completed Pipeline

Venezuela 1

Cuba 2

Colombia 3 1

Brazil 2 1

Libya 3

Nigeria 2

Nigeria J DZ 1

Congo Br 1

Sudan 1 2

Egypt 2

1 Russia

2 Myanmar3

1 Vietnam2

Turkmenistan1

Iran1

1 Qatar

Iraq1

1 Syria1

* 38th project is Sudan’s 741 km long completed Pipeline

Venezuela 1

Cuba 2

Colombia 3 1

Brazil 2 1

Libya 3

Nigeria 2

Nigeria J DZ 1

Congo Br 1

Sudan 1 2

Egypt 2

1 Russia

2 Myanmar3

1 Vietnam2

Turkmenistan1

Iran1

1 Qatar

Iraq1

1 Syria1

Reserve Base : 280 MMToe

IndiaIndia invites Partner in Progress invites Partner in Progress

for for

development & sustainability…development & sustainability…

27

Thank You