Transcript 1 - Independent Petroleum Association of America

Independent Petroleum Association of America
“Mid-Year Meeting and Executive Conference”
India and the Global Energy Market
An Overview
Presented by
Juli A. MacDonald
Client Logo
Naples, Florida
June 14, 2006
Road Map
 India’s Energy Situation
 Indian Initiatives to Address its Energy Situation
 Strategic Significance of India’s Actions
 Commercial Opportunities in India
Filename/RPS Number
1
India’s Energy Situation
India and the Global Energy Market
India is a nation of a billion people and gross domestic product of
720 Billion USD in 2005 that still relies on traditional fuels such as
wood and waste for about 40% of its primary energy supply.
India
Population (Millions) and GDP (Billions 2000 USD)
(1990-2003)
1100
India
Total Primary Energy Supply* (Ktoe)
(1972-2002)
550
600,000
500,000
CAGR (Pop): 1.89%
(GDP): 5.57%
1000
450
400,000
300,000
900
350
200,000
100,000
800
250
90 91 92 93 94 95 96 97 98 99 00 01 02 03
19 19 19 19 19 19 19 19 19 19 20 20 20 20
Population
GDP
Coal
Oil
Gas
Hydro
Comb. Renew & Waste
Source: Population & GDP—EIA International Energy Annual 2003; Primary Energy Supply—IEA Energy Statistics 2004
2
India’s Energy Situation
India and the Global Energy Market
Demand for hydrocarbons increase as the Indian economy
modernizes and adds capacity.
14
India Hydrocarbon Consumption
(1015 BTU) 1990-2003
Gas
India Vehicle Sales (Thousand
Sales) 1990-2004
India “Golden Quadrilateral” Interstate
Highway (Scheduled 2007)
800
12
10
Oil
600
8
400
6
Coal
4
200
2
India Installed Electric Capacity
(Million Kilowatts) 1990-2003
20
04
20
02
20
00
19
98
19
96
19
94
19
92
19
90
20
02
20
00
19
98
19
96
19
94
0
19
92
19
90
0
India Industrial Production Index
(1993=100) 1993-2004
135
205
Manufacturing
Only
190
120
175
105
160
Industrial
Production
145
90
Share of Manufacturing in Total
Economic Output 2005
16%
35%
India
China
29%
31%
130
75
115
20
03
20
01
19
99
19
97
19
95
20
02
20
00
19
98
19
96
19
94
19
92
19
90
19
93
100
60
Korea
Malaysia
Source: Consumption & Electric Capacity—EIA International Energy Annual 2003; Vehicle Sales-Government of India
Ministry of Roads and Transport; Industrial Production Indiex—India Info Online (www. indiainfoline.com) 3
India’s Energy Situation
India and the Global Energy Market
India’s energy efficiency per dollar of GDP is below Western
standards. Domestic fuel subsidies are falling but price controls
limit efficiency gains at the expense of India’s state-owned refiners.
Energy Intensity per GDP (BTU / year
2000 USD) 1990-2003
Annual Fuel Subsidies (Million
Rupees) 2000-2004
70,000
750
60,000
650
50,000
550
40,000
450
Reported Loss per Liter (year 2000
USD) 2005
1
2.5
0.75
Combined
Loss: 51 Million
USD/Day
0.5
China
United States
Japan
Kerosene
05
20
20
04
20
03
0
20
02
02
20
20
19
19
19
19
19
India
0.25
20
01
50
20
00
0
00
150
98
10,000
96
250
94
20,000
92
350
90
30,000
LPG
Petrol
Diesel
Kerosene
LPG*
Note: * LPG loss reported as per cylinder, not liter.
Source: Energy Intensity—International Energy Agency International Energy Outlook 2005; Fuel Subsidies—Government of India
Ministry of Petroleum; Reported Loss—”Burnout: Oil Cos Lose $51m per day” Economic Times (May 18, 2006)
4
India’s Energy Situation
India and the Global Energy Market
Moderate increases in India’s domestic production of
hydrocarbons have not kept pace with increased consumption.
India Oil Reserves and Production &
Consumption (Billion Barrels and Thousand
Barrels /Day)1990-2003
10
India Natural Gas Reserves and
Production & Consumption (Trillion
Cubic Feet) 1990-2004
35
1.2
2350
9
30
8
1
2050
25
7
0.8
1750
6
20
5
1450
4
1150
3
0.6
15
0.4
10
2
850
5
550
0
0.2
1
0
19
90
19
92
19
94
19
96
19
98
20
00
20
02
Production
19
Reserves
0
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
Consumption
Source: EIA International Energy Annual 2003; Reserves estimates from Oil & Gas Journal
5
India and the Global Energy Market
Indian Initiatives to Address its Energy Situation
The Indian Government is pursuing a multi-pronged strategy to
address its energy security concerns.
Attract foreign investment to increase domestic production
Pursue internal and external measures to become a regional supplier of
refined products
Promote oil diplomacy as part of national foreign policy agenda
Reconfigure state-owned companies to pursue oil diplomacy objectives
Secure supply through investments in oil and gas projects around the world
6
India and the Global Energy Market
Indian Initiatives to Address its Energy Situation
India seeks to attract private investors to increase domestic
production of oil and natural gas.
Investors in India’s Oil and Gas Sector Through NELP
India inducted the New Exploration Licensing
Policy (NELP) in 1999 to attract greater private
investment in the exploration & production of oil
and natural gas
 Awarding NELP blocks to technically capable
companies that offer the best terms for
production sharing agreements
 Allowing 100% foreign ownership and offering
new tax incentives to investors
 Attracting private investors to develop oil and
gas resources (see Table)
 Paying off for investors--Cairn Energy and Niklko
Resources both reported major discoveries from
early investments
48
Company
Nationality
# of Fields
Active in
Mauritius
1
Cairn Energy
UK
11
5
ENI S.P.A
Italy
2
2
ENPRO Finance
US
2
2
Geoglobal
Resources
Canada
4
1
Hardy E&P
UK
13
Jubilant
Enterprises
US
4
1
Mosbacher
US
1
1
Nikko Resources
Canada
3
1
OAO Gazprom
Russia
1
1
Energy Focus
US
1
1
India
31
29
Company Name
Birckbeck
Investment
Reliance
# of Fields
Operating
Source: NELP investor data compiled from India’s Directorate General of Hydrocarbon’s website: http://www.dghindia.org/index.htm
7
India and the Global Energy Market
Indian Initiatives to Address its Energy Situation
India seeks to increase competition in its domestic retail markets for
refined products and to establish itself as a regional supplier of
refined products.
Reliance Industries
 Introducing competition in domestic retail market
 Increasing domestic refining capacity to supply
regional markets through private and state-funded
investments
 Pursuing interests in refining projects in Algeria,
Yemen, and Saudi Arabia
Jamnagar Refinery: 680,000 b/d capacity in the
process of adding 580,000 b/d new capacity.
Added 600 new domestic retail locations to existing
1,300 locations
Ras Issa Refinery (Yemen): 60,000 b/d refinery on
Red Sea
India Crude Oil Distillation Capacity
(Million Barrels / Day) 1990-2006
Operate 17 of India’s 18 refineries
2.2
2
1.8
1.6
State-Owned Companies
Will add 3,200 new retail locations in 2006. Already
own 29,300 locations (94% of the market)
269,700 b/d of
refined product
exports in 2002
ONGC likely to invest in Algeria’s Sonatrach refinery
1.4
1.2
Saudi Arabia may acquire stakes in Visakh and
Paradip facilities
20
06
20
04
20
02
20
00
19
98
19
96
19
94
19
92
19
90
1
Source: Distillation Capacity—EIA Compilation of Oil & Gas Journal Reports; Reliance—Reuters News (May 2006);
State-Owned—India Ministry of Petroleum and Natural Gas http://petroleum.nic.in/
8
India and the Global Energy Market
Indian Initiatives to Address its Energy Situation
Active oil diplomacy is a central component of India’s energy security
policy and an instrument of Indian national power.
National champions pursue oil diplomacy with major producers and Asian
consumers
– ONGC’s international subsidiary state-owned ONGC Videsh actively investing worldwide
– Indian government created a new international subsidiary for the state-owned company
OIL in December 2005
Energy diplomacy features MOUs/high-level agreements with major suppliers and
consumers and multilateral approaches
– MOUs signed with Iran, Indonesia, Myanmar, Nigeria, Saudi Arabia, Russia, and Nigeria
– Energy agreement with China (December 2005) to promote cooperation in the market
– Promoter of Asian grid for energy flows
– Convener of multilateral fora to discuss Asian energy markets and contracts
“Oil diplomacy is currently seen as a major tool for ensuring India’s energy security along with
acquisition of equity oil & gas overseas.”
Government of India Expert Committee on Integrated Energy Policy Draft Report (December 2005)
Source: OIL Videsh—The Economic Times (November 28, 2005); Oil Diplomacy—Financial Express (March 12, 2005)
9
India and the Global Energy Market
Indian Initiatives to Address its Energy Situation
Indian companies are investing globally to explore and develop oil
and natural gas assets.
India Overseas E&P Assets
2006
ONGC
Videsh
Ltd.
OIL
Videsh
Ltd.
Reliance
Industries
Source: Company Websites
10
Strategic Significance of India’s Actions
India and the Global Energy Market
India’s activities conflict with United States and European interests
in some regions.
Investments in Pariah States
India Investment in U.S. Designated
“Pariah” States
Indian companies investing in states subject to U.S.
sanctions
Attractive due to lack of competition from major
international oil companies
 India’s foreign policy interests at odds with the United
States’ in some regions
Cuba, Sudan, Iran, Myanmar
Asian Market Power
Middle East Oil Exports by Region (Million
Barrels /Day) 2002 & 2030
North
America
North
America
10
2
Europe
3
12
Europe
Vocal advocate of bundling market power of Asian
consumers to increase their influence with Middle East
suppliers and avoid paying premium
7
28
As Middle East importance grows as source of supply
in long-term, competition for access to Middle East
crude represents potential source of tension between
East and West
Asia
Asia
Source: Investments—Company Websites; Exports by Region-- International Energy Agency, World Energy Outlook 2004 .
11
India and the Global Energy Market
Strategic Significance of India’s Actions
In contrast to China’s perceived mercantilist approach, Indian
companies tend to rely on rather than distrust international markets.
India’s initiatives are market-oriented and official positions suggest comfort with
the market
Actions suggest faith in contracts and current system
– New futures market in Mumbai to provide instruments to hedge price risks
– Oil diplomacy often contract based (e.g., in Saudi Arabia)
Approach to overseas investments based on commercial interests
– Policy-makers stress bottom line and set profit requirement
– Recommended target of 66% of overseas projects financed with private capital
– Recommend policy of securitization of overseas assets to private investors to ensure
investments are commercially sound
“To the extent that India owns that oil abroad, whether it is brought to India or sold in the international
market, the value remains the same. Thus obtaining equity oil abroad should be mainly looked upon as a
commercial investment decision.”
Government of India Expert Committee on Integrated Energy Policy Draft Report (December 2005)
12
India and the Global Energy Market
Commercial Opportunities
India’s market-orientation presents opportunities for foreign
companies in Indian market.
Investors, Enhanced Oil Recovery, Offshore
Recent Major Oil and Gas Discoveries
India seeks bidders for its domestic industry.
– Investor Road Show stopped in London, Houston,
Dubai, Perth, and Calgary in early 2006.
Cairn Energy operates
Rajasthan exploration
discovered 380-700
million recoverable
barrels in 2005.
Indian companies seek to improve average oil recovery
rate of 25%.
India seeks to develop its offshore resources.
NELP VI
Oil
PFC Energy rated India a bright prospect for E&P
Natural Gas
Reliance operates
exploration (Niko
Resources partner) of
Krishna-Godavari
discovered 14 trillion cubic
feet natural gas in 2002
– Creation of a new petroleum and natural gas
regulatory board
– Promising gas and petroleum discoveries.
– Attracting interest of companies such as British Gas,
Shell, and Premiere Oil
Source: Company Interest—Lloyd’s List (April 11, 2006); Discoveries—India’s Directorate General of Hydrocarbon’s website
http://www.dghindia.org; Oil Recovery—Lloyd’s List (October 22, 2004); Offshore—Oil&Gas Journal (January 16, 2006)
13
Back-up
Filename/RPS Number
14
India and the Global Energy Market
Indian Initiatives to Address its Energy Situation
India seeks to attract private investors to enhance domestic
production of oil and natural gas.
India inducted the New Exploration Licensing
Policy (NELP) in 1999 to attract greater
private investment in the exploration &
production of oil and natural gas
Operators of NELP Issued Blocks
NELP Round
(# of Blocks)
-Sole/Consortium-
Company Name
I
II
III
IV
Birckbeck
Investment
Cairn Energy
1/0
53
48
Geoglobal
Resources
Hardy E&P
5
Y
0/2
2
Y
0/2
2
Y
0/1 0/2 1/1
1
Y
0/2 0/10
Jubilant Enterprises
0/1
Nikko Resources
0/2
OAO Gazprom
0/1
9/2
Y
1
Y
1
Y
1
N
1
Y
0/1
1
N
2/2 0/10 0/1 3/2
29
N
1/1
Phoenix Overseas
Reliance
0/1
0/1 0/2 0/1
Mossbacher
N
0/2 0/8
ENPRO Finance
Private
Companies
V
0/1
ENI S.P.A
State-Owned
Companies
Operate State
(#)
Partner
Source: NELP investor data compiled from India’s Directorate General of Hydrocarbon’s website: http://www.dghindia.org/index.htm
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India and the Global Energy Market
Indian Initiatives to Address its Energy Situation
Indian companies operate overseas in the exploration and
development of oil and natural gas assets.
Sakhalin 1: ONGC
development (Exxon
Operator)—250,000
b/d in 2006
India Overseas E&P Assets
2006
Syria: ONGC
development (Al Farat
Operator)—220,000
b/d in 2005
Iran: ONGC operates
Farsi Offshore
exploration—
540MMbbls estimated
Ivory Coast:
ONGC exploration
(Sinopec Operates)
Cuba: ONGC
exploration (Repsol
Operates) 6 Blocks
Venezuela: ONGC
development
(PdVSA Operates)
San Cristobal
ONGC
Videsh
Ltd.
Qatar: ONGC
operates Najwat
Najem exploration
Sudan: ONGC
development (CNPC
Operates)—3 MM
barrels/day
Libya: IOC & OIL Libya: ONGC
operate exploration of exploration (TPAO
Sirte Basin block Operates) NC188-89
OIL
Videsh
Ltd.
Reliance
Industries
Myanmar: ONGC
exploration (Daewoo
Operator)—4 TCF
Natural Gas
discovered 2004
Iraq: ONGC operates
exploration in Block 8
Yemen: Reliance
development
(CalValley Operates)
Block 9
Oman: Reliance
operates exploration
Block 18
Vietnam: ONGC
exploration (British Gas
Operator))—2 TCF
Natural Gas
discovered 2000
Source: Company Websites
16