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Introduction

The oil and gas sector is one of the core industries in India and plays a major role in influencing decision making for all the other important sections of the economy. India’s economic growth is closely related to energy demand; therefore the need and importance of oil and gas is projected to grow more.

The Indian Petroleum industry is one of the oldest in the world, with oil being struck at Makum near Margherita in Assam in 1867- few years after Col. Edwin L. Drake drilled the world's first oil well in 1859 at Titusville, Pennsylvania, USA. References to rock-oil as 'shilajatu' are found in the Vedas. Early evidences of oil seeps were recorded along the banks of the Nampong river in upper Assam, in the 1820s by British army men and geologists.

The first commercial discovery of crude oil in India was made in 1889 at Digboi when a group of men erected a 20 meter high thatch covered wooden structure, marking the establishment of the first well at Digboi (Well No. 1 or the Discovery well). Thereafter, systematic drilling began in 1891, and in 1901, Asia's first oil refinery was setup. The AOC (Assam Oil Company) was formed in 1899 to look after the running of the oil business in this area.

Refining, transportation, followed with the discovery at Digboi. It is amazing how the oil was transported in elephant drawn carts across the jungles and then through the waterways to as far as the Malabar coast. Seismic surveys were carried out in the 19th century in jungles of Assam using elephant logistics.

After independence, India didn't lose much time in initiating geological and seismic surveys in search of oil in the Indian basins. One after the other, major refinieries were set up and infrastructure for distribution of the products expanded at a great pace. Unique challenges of reaching essential fuel, be it kerosene or LPG to far-flung, logistically challenging terrains across the vast geography of India were addresssed with amazing resilience. India's forays into offshore in the 1970s were also very early for a fledgling industry of a developing country. The bold initiative taken with faith in indigenous capabilities in an entirely new and technologies challenging area is a tribute to the Indian oil technologists of the day. But the faith was not misplaced as the oilmen did India proud by bringing the Mumbai high to production in a then world record time of 26 months from the day of discovery.

The years since independence have seen the rapid growth of the upstream and downstream oil sectors. The industry has come a long way since then. There has been optimal use of resources for exploration activities and increasing refining capacity as well as the creation of a vast marketing infrastructure and a pool of highly trained and skilled manpower.

The giant offshore structures, the ultramodern environment friendly refineries, the high-tech pipeline transportation facilities may appear dazzling. For nearly fifty years after independence, the oil sector in India, had seen the growth of giant national oil companies in a sheltered environment. A process of transition of the sector begun in the mid-nineties- from a state of complete protection to the phase of open competition. The move was inevitable if India had to attract funds and technology from abroad into the petroleum sector. With the consumption of hydrocarbons said to increase manifold in the coming decades, the liberalisation, deregulation and reforms in the petroleum sector is essential for the health and overall growth of India’s economy.

Advantage India

The sector in recent years has been characterized by rising consumption of oil products, declining crude production and low reserve accretion. India remains one of the least-explored countries in the world, with a well density among the lowest in the world. India is the fourth largest oil consumption zone, even though on a per capita basis the consumption is a mere 0.6 measured in tonnes of oil equivalent per head, amongst the lowest in the world. Thus India is bound to need tremendous amount of energy for growth and development- this makes the prospects of the Indian hydrocarbon industry even more exciting.

With more than a billion people, a structural demographic shift resulting in exploding consumption expenditure, full deregulation of a market growing at twice world averages, India represents one of the most exciting oil markets in the world, thereby making the sector quite conducive for investment. With 17% of the world's population, India's share of world's total energy consumption is a little over 4%. Oil consumption in India is slated to grow by over 4% during the next 10-15 years as compared to the global oil demand of only about 0.8%.

Useful Statistics

  • World’s fourth-largest energy consumer

India’s energy demand is expected to double to 1,516 Mtoe (Million tonnes of Oil Equivalent) by 2035 from 637 Mtoe in 2014. Moreover, India’s share in global primary energy consumption is projected to increase two fold by 2035

  • Second Largest Refiner in Asia

In FY15, India had 223.3 MMTPA of provisional refining capacity, making it the second largest refiner in Asia an. By 2017, the oil refining capacity of India is expected to rise and reach more than 310 million tonnes. Private companies own about 29.31 per cent of total capacity

  • Fourth-largest consumer of oil and petroleum products

In 2014, India consumed 3.85 mbpd oil, while the consumption is estimated to reach 4.0 mbpd by FY16 expanding at a CAGR of 3.2 per cent during FY08–16F. As per IEA estimates as on June 2015, India is expected to overtake Japan to become the third largest oil consumer in the world by the end of 2015

  • Fourth-largest LNG importer in 2015

LNG imports accounted for about one-fourth of total gas demand. India's gas demand is estimated to be more than double over the next five years • India increasingly relies on imported LNG; India is the fourth-largest LNG importer in 2015 (As of September 2015) and accounted for 5.68 per cent of global imports

  • Growing demand

India has become the third-largest energy consumer in 2015; 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 637 million Tonnes of Oil Equivalent in 2014. The transport (38%), residential (26%) and industrial (24%) sectors are the largest consumers of petroleum products

  • 2014
  • Oil Consumption in India- 3.85 Mbpd
  • Gas Consumption in India - 50.6 Bcm

 

  • 2016
  • Oil Consumption in India - 4.0 Mbpd
  • Gas Consumption in India - 119.05 Bcm
  • India's self- sufficiency in petroleum products

India's self- sufficiency in petroleum products has declined to less than 25% from 34% in 1997-98 and from 60% in 1985-86 resulting in a substantial growth in the import bill. However, India is aiming to achieve energy self-sufficiency by 2030 and also aims for complete end to oil imports that same year.
The  Indian  petrochemical  industry  has  grown  rapidly  in  the  last  10  years; capacity  expansions have led to  much  greater  self-sufficiency  for  major  petrochemical  building  blocks  such  as  ethylene, propylene, butadiene, and aromatics, amongst others. India has achieved self-sufficiency in refining with the present refining capacity.

  • Massive gas pipeline network

India’s natural gas pipeline network amounted to over 17,421 km in 2015 and a proposed expansion of 30,000 kms is envisaged by 2018-19

  • In 2015, oil production in India reached 0.75 mbpd as compared to 0.76 mbpd in 2014, registering a decline of 0.85 percent. In 2014, country had, 5.7 billion barrels of proven oil reserves
  • India had 1.4 tcm of gas proved reserves and produced 33.66 bcm of gas in 2015 which is expected to rise and reach 33.73 bcm in
  • Oil consumption is estimated to expand at a CAGR of 3.3 per cent during FY2008–16F to reach 4.0 mbpd by 2016
  • Due to the expected strong growth in demand, India’s dependency on oil imports is likely to increase further
  • Rapid economic growth is leading to greater outputs, which in turn is increasing the demand of oil for production and transportation
  • According to data released by the Department of Industrial Policy and Promotion (DIPP), the petroleum and natural gas sector attracted FDI worth US$ 6.62 billion between April 2000 and September 2015.


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