India’s time to capitalize on oil and gas sector
The dominance of oil, natural gas and coal in the global energy mix is being questioned by intensifying carbon policies, technological disruptions in mobility and, to an extent, changing energy geopolitics.
- India’s energy mix reflects a clear trend towards gas and renewables, but there is no imminent danger to demand for oil, forecast to grow at least until 2040.
- The major fossil fuels account for more than 90% of India’s total primary commercial energy supply (TPCES).
- At present, India’s import dependence in the oil and gas sector is significant and the Prime Minister has set a target to reduce dependence on crude imports by 10% by 2022.
- Oil companies are under pressure to prepare for a possible low-carbon future.
- There is a fear of being too late to embrace newer energy sources, matched by equally high risks in moving too fast.
- Oil companies are likely to take a two-pronged approach, diversify into new sources of energy while capitalizing on growth opportunities in conventional forms of energy.
- India needs to be aggressive in looking out for the best prices and competing supply sources
- With 3.14 million sq. km of potential reserves lying unexplored until 2016, India’s potential in the oil and gas sector is immense and there exists vast headroom for new discoveries
- Another area that calls for attention is enhanced oil recovery. With the global average recovery factor for a typical oilfield being around 40%, a substantial amount of identified oil ends up as leftover despite existing production infrastructure
- There is a need to enhance recovery from oilfields to reduce import dependence.
- Adoption of digitization, automation and robotics, which can substantially reduce operational costs and increase oilfield productivity.
Refining and re-gassing
- India has emerged as a refining hub in Asia, serving a massive domestic market for refined petroleum products and even exports.
- The government’s push towards a gas-based economy has given significant thrust to liquefied natural gas (LNG) imports, given the low domestic natural gas output.
- Both these elements present an opportunity for India’s downstream and midstream oil and gas sectors.
- The key to enhancing efficiency lies in the optimum utilization of resources and adoption of the latest technologies.
Strengthening sales and distribution networks
- The current distribution network is concentrated around a few producers, calling for the development of a strong network.
- With major fuels in India deregulated, retailers must focus on their sale and distribution networks, particularly with more companies entering a market earlier dominated by state-owned companies.
- Similar efforts should be made for petrochemicals. Strengthening the sales and distribution network for petrochemicals will ease margin pressures for distributors, while ensuring reliable supply for small to mid-sized distributors
- To sum up, Indian stakeholders need to adopt an aggressive but cautious approach to fully harness the opportunity created as a result of changing dynamics in the global oil and gas sector