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India is one of the top 10 oil-consuming countries in the world. Oil and gas represent over 40 percent of the total energy consumption in India. The consumption of petroleum products in the country is on the rise and demand already far exceeds domestic supply. Therefore, the country depends largely on imports.
India’s existing annual crude oil production is peaked at about 32 million tonnes as against the demand for about 110 million tonnes. Crude is the single largest item on India’s import list. Estimates show that the demand is likely to grow at a faster pace over the decade if India is to maintain the GDP growth-target of 8 percent. This implies larger imports unless new domestic oil reserves are found. With this in view, the government announced the New Exploration Policy (NELP) in the year 2000. With a view to ensure long term energy security, the government is also building oil and gas equity abroad.
India’s refining capacity is currently at around 115 million metric tonnes per annum (MMTPA). The refinery sector has witnessed a capacity enhancement with the commissioning of the 27 million tonne Reliance Petroleum refinery going on-stream, as well as expansion of existing refineries belonging to the state-owned oil company, Indian Oil Corporation (IOC). The Reliance Petroleum Refinery at Jamnagar is the world’s largest single stream refinery. A number of refineries both in the public and private sectors are currently under construction.
Natural gas production in 2000-01 was 29.48 billion cubic metres and this increased marginally in 2001-02. Currently, public sector companies like Oil and Natural Gas Commission (ONGC), Oil India Limited (OIL), Gas Authority of India Limited (GAIL), IOC and others dominate gas production and marketing. The country does not currently import gas but is set to become a major LNG importer with the commissioning of LNG terminals in the state of Gujarat.
India has a very strong retail infrastructure comprising of over 17,000 petrol stations, around 6,500 kerosene depots and over 5,500 domestic LPG dealers.
The Reliance group which was awarded offshore blocks under the New Exploration Licensing Policy (NELP) has struck (October 2002) significant gas reserves of approximately 5 trillion cubic metres in the Krishna-Godavari Basin, which can produce about 40 MMSCMD. This was the largest gas find in the world in 2002 and the biggest in India in over a decade.
Opportunities
The entire gamut of exploration & production, refining, transportation & distribution and retail marketing activities present opportunities for Foreign Direct Investment. This includes:
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Production sharing contracts for oil and gas exploration under NELP;
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Supply of crude oil and of gas;
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LNG import and transportation;
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Setting up of refineries;
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Marketing petroleum products including LPG;
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Setting up petroleum infrastructure such as storage facilities, pipelines, etc; and,
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Retail marketing of transportation fuels.
As part of its disinvestment strategy, the government is likely to privatise some of the major public sector companies in the near future. This provides a good investment opportunity for entrepreneurs looking at investing in this sector, or entering the petroleum retail market.
Source: Ministry of External Affairs, Government of India
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