upstream oil and gas

Upstream oil and gas Challenges and opportunities

2 Indian upstream sector

Contents

Foreword 4

Section 1: Global upstream sector overview 6

Section 2: Indian upstream sector overview 12

Section 3: Challenges and opportunities for players 16

Conclusion 20

About Informedia 22

References 24

Indian upstream sector 3

Foreword

5Indian upstream sector

As resource nationalism and India’s dependence on imported crude oil increase, so does the Indian government’s concern regarding energy security. The government is trying to mitigate supply-side risks by encouraging domestic exploration and production activities (through enhanced oil recoveries, exploration in marginal fields and frontier exploration), acquiring oil equities abroad and building strategic petroleum reserves. On the demand side, India is focusing on improving its energy efficiency, expanding its public-transport network and rationalizing fuel subsidies to optimize consumption of hydrocarbons. The development of alternative sources of energy is equally critical.

The Indian upstream oil and gas sector currently faces several challenges, including depleting conventional oil reserves and maturing fields, restricted access to, and intense competition for, oil and gas resources abroad, rising costs of production and a looming human capital shortage. While these challenges have limited the growth options for players, they have also resulted in opportunities.

Due to the ongoing global economic slowdown and the resultant crash in oil prices, oil and gas assets are expected to be available at low valuations abroad. It is an opportune moment for Indian upstream players to actively pursue the inorganic growth option, through innovative funding mechanisms. An attendant slowdown in global exploration and production activity is expected to relax the tight demand-supply situation prevailing in the oilfield services (OFS) space, which, in turn, should lower the finding and development (F&D) costs for companies.

The rising power of national oil companies (NOCs) has transformed the competitive landscape in the global upstream sector, and reduced the importance of international oil companies (IOCs). However, IOCs and Indian players can tap considerable growth opportunities by forging win-win partnerships with the NOCs of resource-rich nations.

Participation of IOCs is vital to the development of the domestic upstream sector, as IOCs posses advanced technologies and project-management skills. Government policy support will go a long way in attracting IOCs to the country.

6 Upstream oil and gas

The demand supply deficit for crude oil widened in 2007 In the last five years, the global economy has witnessed an unprecedented growth, which has, in turn, led to a higher consumption of hydrocarbon resources. In 2007, the global demand for crude oil was 85.7 million barrels per day (mbpd), up 1% over the 84.9 mbpd in 2006. Crude oil supply, on the other hand, remained flat at 84.4 mbpd in 2007. This created a deficit and inventory withdrawal in 2006, which increased in 2007 (Figure 1).

Section 1: Global demand-supply overview

Emerging economies drove the growth in oil demand The demand for oil received a major impetus from the emerging economies of non-OECD countries, especially China, India, Brazil and Saudi Arabia. In the last three years, oil consumption in non-OECD countries has shot up by 3.6 mbpd, while the demand for oil from OECD countries has decreased by 0.3 mbpd. China alone accounted for more than one-third of the incremental growth in the global oil demand. In the emerging economies, rapid economic growth – driven by expanding industrial and commercial activities – led to the expansion of transportation infrastructure. A population increase, coupled with rising disposable incomes and changing lifestyles led to a greater demand for vehicles and the increased use of plastics and glass packaging. These served as major catalysts for the consumption of oil.

Subsidized oil prices also drive upsurges in demand. Figure 2 reveals that non-OECD countries, where retail oil prices are subsidized, experience the highest average annual growth in oil consumption. Together, these countries account for approximately 30% of the global demand for oil.

The rising price of gasoline has brought down its consumption in non-subsidized fuel economies, while the demand for gasoline remained high in economies where oil prices are subsidized, as their oil consumption is shielded by subsidies. These subsidies are prevalent in major oil-producing nations and in emerging Asian economies, such as India and China.

Figure 1: Global crude oil demand-supply situation

Source: Energy Information Administration

88

2003 2004 2005 2006 2007

Demand Supply

84

86

82

80

mbp

d

78

76

Source: “Commodities Weekly”, Deutsche Bank, 28 May 2008, via Thomson Research

Figure 2: Average annual growth rate of oil consumption (2000-08)

7%

Indian upstream sector

-1%

Total worldNon-OECD subsidized

Non-OECD unsubsidizedNon-OECD unsubsidized (-50% of the world demand)

(~20% of the world demand)

(~30% of the world demand)

0% 1% 2% 3% 4% 5% 6%

7Upstream oil and gas

Prior to 2006, supplies were able to meet the incremental global demand for oil, as OPEC and non-OPEC supplies managed to compensate for each other’s production shortfalls (Figure 3). The demand-supply situation began to worsen from 2006, when OPEC cut its production (as it believed that the crude oil market was well-supplied based on the high level of crude stocks in OECD countries) and non-OPEC producers could not significantly increase their production (owing to various factors such as maturing basins, geopolitical tensions in producing countries, resource nationalism and shortage of essential services).

The demand-supply balance for natural gas continued to be stableGlobal gas demand is well supplied on account of higher supplies from Russia, which is home to one of the largest natural gas reserves. During 2003–07, global gas consumption and production grew at a CAGR of 3.1% and 2.9% respectively to 282.7 billion cubic feet per day (bcfd) and 284.5 bcfd respectively in 2007 (Figure 4). The US and Russia are the world’s leading gas consumers and together accounted for 37.6% of the global gas consumption in 2007. Gas consumption in the Middle East and the Asia Pacific has grown at a CAGR of 7.2% and 6.4% between 2003 and 2007. Latin America and Africa are also high-growth regions, each reporting a CAGR of approximately 6% in their gas consumption during the same period.

The US, Russia, Canada and Iran are the leading gas producers, cumulatively accounting for 45.6% of the global gas production in 2007. Meanwhile, Africa and the Middle East showed the fastest growth in gas production (a CAGR of approximately 8% each) during 2003–07. Production in Latin America and the Asia Pacific region also showed a promising CAGR of 6.6% and 5.4% respectively.

Gas is increasingly being considered as a substitute for oil in transportation and for coal in power generation and heating. The key factors behind this are: the abundant and geographically distributed gas reserves, lower pollution and emission levels and technological advancements increasing the applications of gas.

Cuts in OPEC production and slow growth in non-OPEC production constrained supply growth

-2

1998

mbp

d

Global demand growth OPEC supply Non-OPEC supply

OPEC forced to cut back

1999 2000 2001 2002 2003 2004 2005 2006 2007-1

0

1

2

3

Market needed more from OPEC Low non-OPEC growth

and decreased OPEC supply led to a tight demand-supply condition

Figure 3: Incremental changes in global oil demand and supply

Source: Energy Information Administration

Figure 4: Global gas demand-supply situation

2000100

150

200

250

300

2001 2002

Production Consumption

2003 2004 2005 2006 2007Billi

on c

ubic

feet

per

day

Source: BP Statistical Review of World Energy 2008


Crude oil prices crashed after hitting an all-time high

The price of crude oil is off its all-time high of USD147 dollar per barrel (WTI) and is currently trading below USD70 per barrel (Figure 5). The market has turned bearish as a fall-out of the global credit crisis and the resultant worldwide economic slowdown, strengthening of the US dollar and prospects for increased non-OPEC supplies in the coming year. The impact of the slowdown on worldwide oil consumption is expected to be strongly felt through the remaining part of 2008 and 2009.

Cause-effect analysis of historical price trends

The year 2003 marked the onset of an upward trend in the oil-price equilibrium, from the USD20—40 range (Figure 6). The unforeseen jump in hydrocarbon prices was largely driven by the depreciation of the US dollar, fears of a disruption in supply – aggravated by the falling OPEC spare capacity and geopolitical tensions – and increased demand for energy from emerging economies. In the last two years, crude prices have become increasingly volatile – the variation between high and low prices was approximately USD49 per barrel during 2007 and USD86 per barrel during 2008. With the global market so delicately poised on the scales of supply and demand, even modest changes caused substantial changes in crude oil prices. Another driving force behind higher prices is the rising cost of production. The F&D and lifting costs have increased significantly over the years.

The OPEC and governments of major crude-consuming countries also hold speculators responsible for this upsurge. Investments in commodities index funds have grown from USD13 billion to USD260 billion in the last five years. The number of energy hedge funds has increased more than six-fold to reach 630 from just 180 in 2004. Traders’ bets on oil futures increased from USD1.7 trillion in 2005 to USD8 trillion in 2007. The same period saw the capacity of oil futures on the New York Mercantile Exchange increase more than twofold. It was speculated that a weak dollar and equity-market losses increased the demand for commodities as safe havens.

The impact of higher crude oil pricesHigher crude oil prices resulted in reduced demand • and also changed the oil-consumption pattern in many countries, especially in OECD nations. For example, the sale of fuel-guzzling sports utility vehicles (SUVs) and trucks in the US has gone down due to the rising cost of gasoline. In 2008, Americans drove 30 billion lesser miles from November–April (driving season) as compared to the driving season of 2006—07.

Global upstream companies have utilized the increased • cash flows derived from higher oil and gas prices into exploration activities and acquisitions. According IHS Herold, Inc. and Harrison Lovegrove & Co. Limited, the cash flow of global upstream companies increased at a CAGR of 20.3% from 2003 to 2007. During the same period, expenditure on reserves acquisitions and exploration increased at a CAGR of 24.3%. Besides a higher capex, major integrated oil companies such as

Figure 5: Crude oil price trend

Source: Energy Information AdministrationNote: Crude oil prices are monthly averages

Jan60708090

100110120130140

Mar JuneFeb MayApr Jul Sept Oct

USD

per

bar

rel (

WTI

)

Figure 6: Historical oil and gas price trends (2000-07)

Source: Energy Information Administration (EIA)Note: Average prices

2000 2001 2002 2003 2004 2005 2006 2007

10 120 230 340 450 560 670 780 8

0 0

WTI

cru

de p

rices

USD

/bar

rel

Henry hub gas price U

SD/million Btu

Crude oil

Natural gas


ExxonMobil, Shell, Chevron, BP, Total and ConocoPhillips have increased the cash return to their shareholders through higher dividends and share buybacks.

The need to find substitutes for petrol, diesel and • aviation turbine fuel has intensified the demand for sustainable alternative energy. . The high price of crude oil has increased the economic feasibility of biofuels. With countries trying to imitate Brazil’s model of achieving fuel independence by using ethanol, green technology has received a huge fillip.

Costs of exploration and production have spiraled upwards The ever-increasing costs of production continue to plague the global oil and gas industry. The upsurge in exploration and production activities has dramatically increased the capital cost of, and competition for, essential materials (such as steel and concrete) and OFS.

According to IHS Herold, Inc. and Harrison Lovegrove & Co. Limited, F&D costs have doubled between 2003 and 2007, while reserve replacement costs (RRC) have increased at a CAGR of 22% during the same period (Figure 7).

The increase in offshore exploration activities has led to a greater demand for drilling rigs and has thereby narrowed the gap between the global demand and supply of offshore drilling rigs (Figure 8). Since 2006, the Asia–Pacific region has emerged as a major employer of offshore drilling rigs, mainly due to a higher degree of drilling activity. According to ODS-Petrodata, deep-sea drilling rigs are operating at almost full capacity for the last two years.

The shortage of offshore rigs, seismic services and offshore vessels is turning out to be a major boon for OFS companies. OFS companies are now able to negotiate higher day rates on longer terms for their services. Shortages in deep-sea drilling are acute, leading to higher day rates (Figure 9).

Figure 9: Average global day rates in USD

In feet (ft) June 2007 June 2008 % change

Semisubmersibles

3,000'-5,000' 188,991 269,181 42.4

5,001'-7,500' 287,286 347,471 20.9

> 7,000' 305,190 364,551 19.5

Drillships

5,000'-7,500' 176,646 231,589 31.1

> 7,500' 303,963 372,053 22.4

Source: ODS-Petrodata via “Industry Surveys, Oil & Gas: Equipment & Services,” Standard & Poor’s, 21 August 2008

The key implications of the trend are:

An increase in exploration and production costs has • offset the revenue gains achieved from higher crude prices, thus keeping profitability flat. According to the IHS Herold, Inc. and Harrison Lovegrove & Co. Limited, despite a 9% y-o-y increase in oil and gas prices in 2007, upstream profits remained flat at USD13 per barrel of oil equivalent (boe). The higher costs of production have reduced the return on investments required by oil and gas companies, thus making them wary of investing in new projects. Some major IOCs preferred to return cash to their shareholders (through higher dividends and share buybacks) rather than invest in new projects.

Figure 7: Trends in capital spending, F&D costs and RRC

detimiL .oC & evorgevoL nosirraH dna cnI ,dloreH SHI :ecruoS

2003

F&D costs RRC Capital spending

0 02 504 1006 1508 200

10 25012 30014 35016 40018 450

2004 2005 2006 2007

USD

per

boe

USD

billion

Figure 8: Demand and supply of offshore drilling rigs

Source: ODS-Petrodata via “Industry Surveys, Oil & Gas: Equipment & Services,” Standard & Poor’s, 21 August 2008

2004

Demand Supply

0

200100

500400300

600700

2005 2006 2007 2008 (E)


Figure 10: Global offshore rigs in service and expected supply by 2012

Type In service Building Total

Drillships 42 44 86

Semisubmersibles 176 52 228

Jack-ups 435 73 508

Submersibles 7 0 7

Drilling barges 48 0 48

Grand total 708 169 877

Source: “Drilling Rigs currently under order,” Colton company, www.shipbuildinghistory.com/world/highvalueships/rigsonorder.htm, accessed 20 October 2008

The tight demand-supply scenario of the drilling rig • market has increased the construction of new rigs. It is estimated that around 169 offshore rigs are under construction and will be delivered by 2012 (Figure10). Shipyards and EPC players are venturing into the lucrative business of manufacturing offshore rigs. Countries such as Singapore and South Korea, which have huge shipyards, have received bulk orders for the production of offshore vessels and rigs. The boom is also attracting new players to countries such as India and China, which offer the advantage of low labor and production costs. Shanghai Shipyard has already started building China’s first deepwater drilling rig and India’s Reliance Industries and Larsen & Toubro (L&T) have also announced plans to construct deepwater rigs.

The boom in the OFS space is attracting M&A activity. • One of the biggest deals in 2007 was the USD2.9 billion merger between Smith International and W-H Energy Services, both diversified international OFS companies. The entry of private equity players in this sector is also fuelling M&A. In 2008, Umbrellastream, a consortium of private equity players, took over UK driller Expro International for USD3.6 billion, beating Halliburton’s bid by USD420 million. Figure 11 reveals that the deal values in the OFS space increased at a CAGR of 110% during 2003–07.

Competition for the acquisition of reserves has intensified considerably The competitive landscape in the global upstream segment has undergone significant change in the last three years with the emergence of NOCs from the Middle East, China and India on the global stage and the entry of private equity firms and hedge funds. With these players aggressively seeking reserves, the competition for the acquisition of oil and gas assets has intensified.

According to IHS Herold, Inc. and Harrison Lovegrove & Co. Limited, the global upstream M&A deal count rose to record highs in 2007, increasing 14% y-o-y. After two years of extremely high M&A activity, the deal value fell by 4%, from a range exceeding USD160 billion in 2005 and 2006 to approximately USD154 billion in 2007. State-owned entities such as NOCs and sovereign wealth funds (SWF) accounted for 29% of the total global upstream deal value in 2007, worth USD43 billion. Their share in global upstream acquisitions has decreased from its record high of 40% in 2006 mainly due to lower levels of activity from European and Chinese state-owned entities. However, the acquisition activity of state-owned entities abroad, which is worth USD13 billion, has remained unchanged since 2006.

The industry is also witnessing aggressive M&A pursuits by petro dollar-backed NOCs in the Middle East as they look to diversify their portfolio. In 2007, these companies emerged as the primary M&A investors outside their home country, overshadowing China’s NOCs, who were previously the main buyers. NOCs from China, which were highly active in the acquisition of oil and gas assets during 2005–06, remained on the sidelines in 2007, as they continued to integrate the assets acquired in previous years.

Figure 11: Rising M&A activties in OFS space

Source: IHS Herold, Inc and Harrison Lovegrove & Co. Limited

2003

Value (USD billion) Deal count

0

40

20

80 140120100806040200

60

2004 2005 2006 2007


Intensified M&A activity in the upstream sector has increased competition in the market. This upsurge in competition is largely attributed to:

Higher cash flows from soaring oil and gas prices • provided upstream companies with the funds necessary for acquisitions. Higher commodity prices also yielded more profits for such companies, making them attractive targets for private equity firms, hedge funds and investment banks.

Resource nationalism and shortage of essential • services inhibited upstream companies from expanding production through drill-bit activities and made M&A the most feasible option for increasing oil and gas reserves.

The implications of rising competition are:

Since 2005, acquisition costs have increased • considerably, as the bargaining power has shifted to resource holders. This has led to higher bids and larger signature bonuses at auctions of exploration licenses. In 2007, the weighted average cost of acquisition of proved reserves was thrice the level in 2003 (although there was a 22% y-o-y dip, mainly due to lower transaction values realized in the Russian government auction of former Yukos assets to its NOCs) (Figure 12).

IOCs are finding it difficult to compete with reserve-• seeking NOCs in the acquisition of exploration rights, because the latter are offering to invest in social infrastructure projects in the countries where they are seeking access to oil and gas reserves. Some examples are:

A Chinese NOC paid USD2 billion for a 40% stake in • two offshore blocks in Angola. At the same time, the Chinese government extended credit worth USD7 billion to the Angolan government for reconstruction and national development.

In Nigeria, the China National Petroleum Corporation • (CNPC) was granted rights over four blocks in exchange for a USD2 billion investment to recondition a Nigerian refinery.

CNPC’s acquisition of PetroKazakhstan was • underscored by a commitment of the Chinese government to develop infrastructure in Kazakhstan, including railways and electricity generation.

Figure 12: Weighted average of proved reserves acquisition costs

Source: IHS Herold, Inc and Harrison Lovegrove & Co. Limited

20030

5

10

15

2004 2005 2006 2007

(USD

/boe

)


India’s oil and gas sector is traditionally dominated by NOCs. The ONGC is the largest domestic oil and gas producer, accounting for 76% of the country’s oil and gas production in FY08. Introduction of the New Exploration Licensing Policy (NELP) has increased the participation of private players in this sector.

India’s dependence on imported crude oil is steadily increasing

India’s economy is entering an energy-intensive phase of development, which has increased its dependence on primary energy sources such as coal, oil and gas. In 2007, oil and gas had the second-largest share (40.7%), after coal, in the country’s primary energy mix. During FY04–08, domestic crude oil consumption grew at a CAGR of 6.4%, one of the highest growth rates among the world’s top oil-consuming nations. In contrast, crude oil production was practically stagnant owing to maturing oil basins, despite the deployment of enhanced recovery technologies (Figure 13).

Consequently, India’s dependence on imported crude oil has been on the rise, and its share of imports in its total consumption increased from 76% in FY07 to approximately 78% in FY08. In terms of volume, imported crude oil increased by 9.1% y-o-y to 122 million tonnes (mt), while the crude oil import bill surged by 40% y-o-y to USD68 billion, due to an extraordinary rise in international crude oil prices.

The Middle East has the lion’s share of crude importsIndia’s crude oil basket is highly dependent on the Middle East. This region’s share in India’s crude imports has increased from 67% in FY05 to 74% in FY08 (Figure 14). Reasons for this trend are geographical proximity of the Middle East as compared to East Asia or other crude oil

sources and Indian refiners’ capability to process heavy sour crude (which trades at a discount to lighter sweet crude). Saudi Arabia and Iran are the two biggest exporters of crude to India, accounting for 22% and 16% of Indian crude oil imports respectively. Nigeria and Angola are the other major crude exporters to India, cumulatively accounting for 12% of the country’s crude imports.

Indian natural gas market is expected to face supply deficit in the medium term

India’s natural gas market is characterized by supply deficit. According to the Planning Commission of India, domestic demand for natural gas is estimated at 179.2 million metric standard cubic meter per day (mmscmd) in FY08, while the supply is an estimated 111 mmscmd in FY08 (Figure 15). Currently, domestic production accounts for 72.6% of the total supply, while the remaining supply is covered by

Section 2: Indian upstream sector overview

Figure 13: Domestic crude oil production, consumption and imports

Source: Ministry of Petroleum and Natural Gas, Center for Monitoring Indian Economy

FY04

FY04 80%

78%

76%

74%

72%

FY04

FY04

FY04

FY04

FY04

FY04FY05 FY06 FY07 FY08

Production Consumption Imports

Billi

on c

ubic

feet

per

day

Figure 14: Oil imports by region

Source: Planning Commission Integrated Energy Policy, press releases

Saudi Arabia

2004-050

20

40

60

80

100

120

140

2007-08

UAEAngola

IranOther Middle EastOthers

KuwaitNigeria


LNG imports. India’s gas production is expected to increase significantly in the next few years, because independent private players and public-private partnerships have made major hydrocarbon discoveries in the blocks awarded under the NELP and Pre-NELP rounds. Despite rising LNG imports and increasing domestic production, the demand-supply gap is expected to widen in FY08 due to a higher rate of demand from the power and fertilizer industries.

This increased demand for gas primarily stems from the power industry, which accounts for approximately 48.5% of the total demand for natural gas, followed by the fertilizer industry’s share of 27.7%. Apart from these two sectors, natural gas is consumed in the petrochemical, steel and sponge iron industries.

Government initiatives to address growing import dependenceIndia’s growing dependence on imported crude oil remains a serious concern, the Indian government has launched various initiatives to address this concern:

Encouraging the exploration and development of • domestic oil and gas sources by providing various incentives under the NELP. The government is also encouraging the development of unconventional and alternative energy sources such as coal bed methane (CBM), gas hydrates, coal-to-gas, coal-to-liquid and bio-fuels.

Supporting the acquisition of oil equity abroad by • providing economic and diplomatic support to domestic NOCs in their endeavor to acquire equity stakes in overseas upstream projects. ONGC Videsh, the overseas investment arm of the ONGC, has been the most active company in the acquisition of hydrocarbon resources abroad. Currently, ONGC Videsh holds interests in 38 oil and natural gas projects in 18 countries, across Africa, Asia, Latin America and the Middle East. ONGC Videsh and Oil India and India Oil Corporation have, till date, spent approximately INR210 billion and INR20 billion respectively on the acquisition of oil and gas assets abroad. These investments have cumulatively, till date, yielded 28.14 mt of oil and oil equivalent gas. The government is also encouraging Indian private companies to participate in conducting upstream business in foreign acreages. Government–owned downstream and upstream companies are also collaborating with each other to acquire crude oil reserves outside India.

Addressing the concern of possible supply disruption, • India is also developing 5-mt strategic petroleum storages at Mangalore, Visakhapatnam and Padur (near Udupi). These would supplement the crude oil and petroleum storages already existing with domestic oil companies and serve as buffers in the wake of any interruptions in external supply.

The country has also started to focus on its energy • efficiency, by expanding its public-transport network and rationalizing fuel subsidies to reduce its dependence on imports.

NELP is driving the development of domestic upstream segment The NELP has been instrumental in attracting private-sector and foreign investment to the domestic upstream segment. In the seven rounds of bidding conducted so far, a total of 207 blocks have been awarded to various players who have made a cumulative investment commitment of nearly USD10 billion (Figure 16). Unexplored acreage in the country’s total sedimentary area has dropped from 41% in FY99 to 15% in FY07. The pace of accretion to reserves has nearly tripled; the average annual reserve accretion rate during the period 2005–07 was 317.4 mt of oil equivalent (Figure 17). This increase can be credited to larger amounts of capital being invested for exploration and development activities, which, in turn, led to major oil and gas discoveries such as the Krishna Godavari basin

Figure 15: Natural gas demand-supply situation

Source: Planning Commission Integrated Energy Policy

2005-06

Demand Supply

2006-07 2007-08 2007-0880859095

100105110115120125130

mm

scm

d


by Reliance Industries and GSPC and Cairn’s oil discovery in Rajasthan.

Figure 18: The ONGC’s cost of production

Cost of production

FY03 FY04 FY05 FY06 FY07 1H FY08

Oil (USD per bbl)

19.9 19.9 23 26.1 26.3 27.5

Natural gas (USD per MMbtu)

1.37 1.51 1.74 2.22 2.14 NA

Source: "ONGC," Motilal Oswal Securities, 16 January 2008, via Thomson Research

an all-time high, thereby creating a situation wherein the demand for drilling services has exceeded its supply. The domestic supply of drilling rigs is highly dependent upon the global demand-supply balance, which is already in a state of deficit. Due to a shortage of rigs, companies such as Reliance Industries and ONGC, who have together secured over 90% of India’s deepwater blocks, are finding it difficult to complete their minimum work program in their respective blocks allotted under the NELP rounds. The shortage has also delayed the auction of oil and gas blocks under the latest NELP round (NELP VII).

Key initiatives being taken by India’s companies to address this shortage are:

The companies are seeking to collaborate with • shipbuilding companies to manufacture rigs. ONGC is planning a joint venture with the Shipping Corporation of India and to float a global tender for technical support. Reliance Industries has similar plans.

Rising day rates and longer timeframes for the • construction of new offshore drilling rigs are encouraging domestic OFS companies to follow the inorganic route to build assets. Some cases in point are:

Aban Offshore acquired Sinvest, a Norwegian rig • company and a significant player in offshore drilling, for USD1.4 billion. Aban Offshore also purchased a semi-submersible rig, Bulford Dolphin, for USD211 million from Norway-based First Olsen.

Jindal Drilling and Industries, a domestic offshore • drilling company, has acquired a 49% stake in Singapore-based Virtue Drilling PTE Ltd. for INR400 million. Jindal Drilling acquired the stake from its associate company as part of its strategy to expand and consolidate its offshore drilling business.

The sector has witnessed rising costsIndia’s upstream companies continue to cite high raw material and service costs, a tight rig market and high energy costs as the key contributors to inflationary pressures and project delays. For ONGC, the leading domestic player, the cost of production per barrel of crude oil has increased at a CAGR of 7.2% during FY03–07. The company faced further cost pressures in the production of natural gas, an area where costs have increased at a CAGR of 11.8% during FY03–07 (Figure 18).

Domestic exploration and drilling activities have reached

Figure 16: Cumulative investment commitment in NELP rounds

NELP I

NELP II

NELP III

NELP IV

NELP V

NELP VI

NELP VII

02468

1012

USD

bill

ion

Figure 17: Average accretion annual reserves

Source: Directorate General of Hydrocarbon

1992 -96

1996-00

2000 -04

2005-07

050

100150200250300350

MM

T (o

il an

d oi

l equ

ivale

nt g

as)

Source: Infraline via “Corporate Presentation of Shiv-Vani Oil & Gas Exploration Services Limited” March 2008, Director General of Hydrocarbons website, www.dghindia.org/site/pdfattachments/upcomingevents/Shiv_Vani_Mar_2008.pdf


Shiv-Vani Oil Exploration Company, another leading • player, is reportedly scouting for acquisitions in Europe or Indonesia.

Taking a cue from their global counterparts, domestic • shipyards and EPC players are also venturing into offshore rig manufacturing. The Indian government is also encouraging the development of India’s shipbuilding industry by relaxing foreign direct investment (FDI) norms and capital-spending plans.

Bharati Shipyard is constructing its first indigenous • offshore drilling rig for Great Offshore.

BHEL has announced its return to offshore rig • construction after 25 years. The company is seeking a partner for technical support.

L&T plans to build a manufacturing facility for • offshore drilling rigs.

Acquisition of reserves has become very competitive

India faces stiff competition from China. In the past three • years, China has outshone India at energy-asset auctions overseas. ONGC Videsh lost out to Chinese oil and gas companies in the following cases:

ONGC Videsh lost out on Encana’s assets in Ecuador • when a Chinese consortium bid USD1.4 billion.

The company failed to acquire PetroKazakhstan • when CNPC bid USD3.6 billion for it, along with a commitment to develop Kazakhstan’s infrastructure.

The company also lost out on the acquisition of a 50% • stake in Angola’s BP-operated block 18 .

The Indian government is now adopting a different • strategy of offering to build ports, railways, pipelines and refineries in the underdeveloped and hydrocarbon-rich nations of Africa (Figure 19).

Figure 19: Examples of India offering development options

Country India’s contribution

Nigeria OVL and Mittal Investments pledged USD5 • billion for infrastructure development.

Sudan India built a USD200-million petroleum pipeline • in this country.

Cote d’Ivoire India’s investment in this country is expected to • touch USD1 billion by 2011.

Myanmar India offered to train oil and gas personnel in • Myanmar.

India provided credit worth USD20 million to • revamp a refinery here.

India is also involved in port and waterway • upgradation projects and will also build new roads in the country.

Chad India has offered to train Chad nationals across • a variety of professional sectors.

Angola India has offered to build a 200,000 bpd oil • refinery at Lobito.

India has offered to set up a center of excellence • for petroleum technology exploration, refining and marketing. India will also help the country build a railway network.

Others India will extend USD500 million in credit to • eight west-African countries (Burkina Faso, Equatorial Guinea, Ghana, Guinea-Bissau, Mali and Senegal).

Source: Press releases


Figure 20: Global oil and gas reserves (2.365 trillion barrels of oil equivalent

Source: BP Statistical Review of World Energy 2008, EY analysis

Largely/fully open

9.7%

Increasingly closed20.6%

Partially open

26.4%

Largely/fully closed

43.3%

Resource nationalism has constrained the access to resources for foreign players

In the 1970s, IOCs held approximately 85% of the world’s proved oil and gas reserves. However, the advent of resource nationalism has transformed the face of the industry. Just three decades later, IOCs’ share of reserves has plummeted to less than 10%, with the remaining 90% being held by NOCs.

Ernst & Young has analyzed that only 9.7% of global oil and gas reserves can presently be categorized as largely open for exploration and production by private/foreign companies (Figure 20). Resource-rich nations such as Venezuela, Bolivia, Nigeria, Algeria, Qatar, Kuwait and Russia have either closed their reserves to foreign companies or restructured their contracts with foreign players and tightened fiscal terms. A recent example of resource nationalism is the Venezuela government’s decision to take over the majority stake in all the oil and gas fields held by foreign companies operating in the Orinoco belt to its state-owned company Petroleos de Venezuela, S.A. (PDVSA). This has inspired Ecuador and Bolivia to take similar action in their respective countries. Even in mature and open economies, access to resources may be limited by environmental restrictions (for example, parts of the US Rocky Mountains, the Arctic National Wildlife Refuge and the Outer Continental Shelf) or by politics (related to such topics as Alaskan/Arctic gas).

The key factor behind the rise in resource nationalism is the significant decline in the dependence of resource-rich countries on IOCs for resource development. This is because other market players in the global energy industry have stepped up to take on roles previously dominated by IOCs, such as:

Major OFS companies now have the global reach and • capability to provide in-depth technical and project-execution skills.

Private equity and sovereign funds offer the significant • capital necessary for a large-scale exploration and production effort.

Third-party marketers provide distribution access. •

Implications

The key implications of this challenge are:

IOCs are finding it difficult to increase their reserve • replacement rates organically. Maturing oil basins have aggravated their problem of increased production through drill-bit activities. IOCs are now focusing more on the development of unconventional hydrocarbon resources (such as ultra deepwater, tight gas, tar sands and CBM), but these energy sources have long gestation periods, high exploration and development costs and are subject to stringent environmental norms.

Oil and gas operations are becoming increasingly • risky and concentrated to particular regions. NOCs of resource-poor countries as well as IOCs are expanding their operations in politically risky and technically demanding regions. Due to the need to secure supplies, reserve-seeking NOCs have a greater propensity to invest in locations that are riskier than their peers. For instance, the Chinese National Petroleum Corporation has been active in conflict-torn Sudan since 1995 and now holds a 41% stake in the Sudanese NOC, Petrodar.

The possession of specialized skills and technologies is • becoming all-important for striking deals with resource-rich nations. Certain major resource-rich nations have welcomed foreign participation in areas where they lack technology, skills or capacity. IOCs are skilled in heavy oil extraction, gas monetization and deepwater technologies that are of interest to these nations, and more often than not, IOCs are selected on the basis of the specialized skills and technologies they possess. IOCs can also provide investments for the downstream sector, which may have been neglected in the past in certain resource-rich nations. For example, Qatar recently

Section 3: Challenges and opportunities for players


invited foreign companies to collaborate on a Gas to Liquids (GTL) project to help monetize its vast gas reserves. The project is currently being developed under a production-sharing agreement between state-owned Qatar Petroleum and Royal Dutch Shell, one of the first companies to develop proprietary GTL technology.

Resource nationalism can result in reduced investment in • the upstream sector and consequently lower oil and gas production. Some countries such as Russia are starting to pay the price for their strategies. Projects held back by the political regime in Russia have triggered a dramatic drop in the country’s oil and gas production.

The India-specific scenario

Resource nationalism is one of the major drivers for Indian oil and gas companies’ ventures into politically unstable regions (Figure 21). India’s upstream companies face less competitive pressure from IOCs in the context of exploration and development ventures in resource-nationalist countries such as Russia and Venezuela. Like China, such nations favor India’s significant energy appetite and flexibility to collaborate on areas they lack in, such as information technology and health care.

Figure 21: Indian oil and gas companies‘ operations in riskier regions

Country Companies Risk assessment

Sudan OVL High

Myanmar OVL, GAIL, EO High

Iraq OVL High

Nigeria IOCL, OIL, OVL, EO Medium

Venezuela OVL Medium

Congo-Brazzaville OVL Medium

Iran OVL, IOCL, OIL Medium

Turkmenistan OVL Medium

East Timor IOCL, OIL, RIL, BPCL Medium

Cuba OVL Medium

Yemen RIL, IOCL, OIL, GSPC Medium

Syria OVL Medium

Gabon IOCL, OIL Medium

Colombia OVL, RIL Medium

Madagascar EO Medium

Kazakhstan OVL Medium

Source: Global Insight, press releases, companies’ website, annual reports, EY analysisNote: OVL: ONGC Videsh, GAIL: Gas Authority of India, EO: Essar Oil, RIL: Reliance Industries, IOCL: Indian Oil Corporation Limited

In line with the trend in other major oil-importing countries, the Indian government is increasingly promoting the development of unconventional hydrocarbon sources such as CBM, underground coal gasification and gas hydrates. The government has already awarded 23 CBM blocks to participating players. Methane hydrates are expected to be an important source of energy in the future, especially following the discovery of methane hydrate reserves in the Krishna, Godavari and Andaman basins. India has recently set up the National Gas Hydrate Program (NGHP) to harness the potential of this source.

Opportunities

The government’s economic and political support • provides India’s NOCs with an advantage when they enter or consolidate existing operations in resource-rich nations. Even resource-rich nations consider alliances with India’s oil and gas companies valuable, as such tie-ups enable them to market their crude more easily in emerging energy-intensive Asian economies. This provides ample opportunities for domestic companies specializing in any activity in the oil and gas value chain to form partnerships with NOCs belonging to resource-rich nations.

Opportunities to explore and develop unconventional • energy sources in India are available to both foreign and domestic players. As oil exploration increasingly moves from shallow waters to deeper seas, the expertise to acquire and develop oil and gas reserves in this harsher frontier becomes all the more important. Indian companies that lack expertise in deep-water and ultra-deep water projects can scout for alliances with skilled international counterparts.

At a global level, only those oil and gas companies • who excel in establishing and operating mutually beneficial partnerships with NOCs are likely to succeed commercially. Moreover, companies that actively engage in social-welfare initiatives can provide tremendous value to host countries eager to create economic development in local communities.


Global economic crisis The growing financial turmoil, triggered by the sub-prime crisis, is resulting in a global economic downturn. Heavy losses incurred by the collapse of major financial institutions and tightening credit policies have dried up funds. The impact of this crisis on the oil and gas industry is limited to liquidity. The demand fundamentals for the industry are still intact, as the rising energy demand of developing countries will compensate – although at a slower pace – the reduced energy demand from OECD countries.

Implication and opportunities

M&A activities are not expected to remain robust in the • short term, as companies are finding it difficult to raise funds from the debt and equity market. Only cash-rich companies are expected to follow the inorganic growth route. Private equity and hedge funds are bearing the brunt of the current global financial crisis. If this condition persists or further deteriorates, it may lead to a distress sale of their oil and gas assets. This may provide oil and gas companies with sufficient cash to purchase assets at cheaper rates or on advantageous terms. The valuation of oil and gas companies has decreased and this offers India’s companies the opportunity to buy global assets at a more reasonable price than was previously possible.

The global credit crunch will reduce the industry’s capital • outlay. Oil and gas companies are expected to focus more on higher-return projects, which will be financed through internal accruals. Expensive ventures, such as oil sands and deepwater projects, will be hard-hit, as falling crude oil prices have made their economic feasibility uncertain. The tight demand-supply situation in the OFS industry is expected to assuage on the back of new supplies and lower capital spending.

In India’s market, foreign funds are drying up and • the equity markets are in no shape to support any fundraising. Financing capex and working capital is therefore proving to be a severe problem for the country’s corporate sector. The problem is more severe for smaller players, who were previously relying upon private equity firms and hedge funds for finances. Due to its relatively small balance sheets and high-risk nature, debt financing has become an expensive and difficult option for such players. These companies need to bring innovative financing options such as equity convertible debt instruments to attract funding for their projects.

The price of crude oil price has fallen drastically in the • last three months, from USD147 per barrel to below USD70 per barrel. This price volatility has become a major challenge for upstream companies, as it impacts their strategic decision-making and evaluation processes for the execution of new projects.

Global crisis has impacted the fund availability of • Indian companies, and global companies as well. The situation opens attractive inorganic growth opportunities for Indian companies with access to funds through innovative funding strategies.

Human capital deficit—another critical challengeTalent shortage has become a critical challenge for the global oil and gas industry. A recent survey conducted by Ernst & Young in collaboration with Rice University in the US confirmed the extent of struggle that companies have undergone in recent years to recruit, retain and develop a sufficient number of employees. The industry has not been able to replace its aging professionals with new engineers. Manpower shortages are intrinsic to the industry’s boom and bust cycles, and its staffing responses to these cycles have resulted in fewer younger employees and an increasing workforce age profile.

The issue is more critical in Western countries, which are facing a maturing population, where a major part of the workforce is expected to retire soon. Cambridge Energy Research Associates estimates that 50% of the current technical staff working in the oil and gas industry will retire by 2015. This figure is expected to increase to 80% by 2020. The average age range of employees in the industry is 46–49, as compared to the thirties for many other industries.

Implications

The key implications of this challenge are:

A deficit in human capital is leading to project delays and • cost overruns. A shortage of talent, coupled with soaring costs, were the key reasons behind the four-month delay in the start of the 500,000 bpd Khursaniyah field in Saudi Arabia.

The trend of poaching resources has led to higher pay • packages for oil and gas professionals. This is inducing more students from across the world to pursue an education in this field. According to Lloyd Heinze, a


professor of petroleum engineering at Texas Tech University, students pursuing petroleum engineering degrees at the undergraduate level in the US has risen to 3,710, double the number in 2004.

To retain skilled employees, oil and gas companies • are using innovative policies such as increased offsite construction and onsite apprenticeships, onsite camp facilities and flexible shift schedules.

Major oil and gas companies are implementing successful • branding programs to enhance their image. These include university scholarships and mentoring programs and partnerships with community and technical colleges to expand academic courses to cover the study of areas such as instrumentation and operations. For example, Chevron’s “Will you join us?” campaign has helped enhance its image among the youth and the company expects to hire 6,000 employees this year.

The India-specific scenario

The domestic upstream industry is struggling in the wake of the impending HR crisis. Quality geologists, geophysicists, loggers, tool-pushers, drillers, petro-physicists and production engineers are difficult to find and attracting a younger workforce is a major challenge. It is estimated that only 56% of the students who complete petro-technical courses in India join domestic upstream companies. This low rate of entry is attributable to the fact that there is little awareness of the career opportunities available in this industry. In addition, other sectors are proving to be relatively more attractive and opportunities abroad are far more lucrative. Domestic NOCs are also suffering from high attrition rates, losing their skilled employees to the private sector on account of the variation in compensation levels. Personnel employed by NOCs in upstream operations have reduced significantly from 50,942 in 2000 to 38,948 in 2007 (including attrition from voluntary retirement). To address this issue, NOCs are hiking employee compensation and offering stock options. For instance, the ONGC’s employee cost has increased by 24.6% y-o-y in FY08.

Other examples of talent shortage are:

At present, more than 10,000 employees are working • on 45 rigs across India. The next two years will see the addition of 5–6 new rigs, which will require an additional 1,000 professionals. However, the average age of a person working in this sector is expected to reach the retirement age of 55 years within the next 2–6 years.

The Geological Survey of India (GSI) is presently facing • a shortage of scientists for conducting basic research, mineral exploration, data gathering and documentation. It cites inadequate compensation, demanding job profiles and insufficient enrolments at allied post-graduate institutions as the main reasons for this scarcity.

To address the impending shortage of skilled manpower, Bharat Petroleum Corporation Limited (BPCL), along with other NOCs, is setting up the Rajiv Gandhi Institute Petroleum Technology at a cost of INR5 Billion. Further, OCS Services (India) has tied up with institutes such as the Norwegian Drilling Academy, Scotland-based Caledonia Training & Consultancy Ltd. and Pune-based Tolani Maritime Institute for certification courses in drilling and well-service technology for students eyeing a career in the oil and gas sector.

Opportunities

The manpower crunch in India’s upstream sector is • largely attributable to low levels of awareness about the industry. To overcome this challenge, industry-awareness programs can be conducted at schools and colleges.

Upstream companies could explore the option of opening • institutes to train people and bring them into the industry. Another option is to re-train skilled personnel through collaborations with petroleum universities. Individuals with a civil or mechanical engineering background could be re-trained to work effectively in upstream operations.

Companies could also look at the option of increasing • the automation of work, which could curb spiraling labor costs. Many companies across the world have been able to reduce costs and timelines by using automation through technology.

India does not have too many petroleum institutes • to provide effective training to students looking to enter the oil and gas industry. However, the demand for such professionals in the industry is increasing. Global petroleum institutes, which have developed a vast pool of technical know-how over the years, now have the opportunity to open branches in India to meet this demand. They could also tie up with engineering institutes such as the Indian Institute of Technology (IIT) to further penetrate the market.

Conclusion

The effects of the global economic slowdown are not expected to sell severely on India’s oil and gas industry, as domestic consumption continues to grow and production is expected to remain largely in deficit. The global financial crisis provides a number of opportunities for domestic oil and gas players, in the form of cheaper oil and gas assets abroad and the relaxation of the tight demand-supply situation in the OFS space, which, in turn, will help lower F&D costs. M&A activity is a viable option for reducing costs and increasing operational efficiency – a well-structured deal can significantly reduce combined overhead functions, create opportunities to reduce supply chain costs, remove redundant functions and strengthen the resource base.

The global credit crunch is expected to bring divestitures from highly leveraged companies and distress sales from private equity firms and hedge funds on redemption calls, which will result in lower transaction values and multiples. The liquidity crises have decreased the valuation of oil and gas companies, and this will enable India’s companies to buy global assets at a more reasonable price than before.

Depleting conventional oil reserves, higher crude-oil prices and restricted access to resource-rich nations are driving exploration activities to harsher frontiers and increasing the development of unconventional and alternative sources of energy. These sources have long gestation periods, high exploration and development costs and are subject to stringent environmental norms. Consequently, hydrocarbon projects are becoming more complex and technically demanding. The application of new and efficient technologies on an unprecedented scale has become crucial for upstream companies to sustain themselves in the upstream space.

Currently, most offshore drilling activities are taking place in shallow waters (300 feet or less), but much of the undiscovered oil and gas resources are believed to be in waters more than 3,000-feet deep. This implies that the future of the oil and gas industry lies in deepwater and ultra-deepwater exploration. In India, the focus of exploration activities is shifting from shallow-water to deep-sea drilling. The Indian offshore area represents 56% of the total sedimentary area – 3.14 million sq km. Deep-sea drilling activities are on the incline, as most areas nominated under the NELP are in deep sea. The industry still lacks the technologies and essential services and materials required to conduct operational activities in these frontiers. India’s upstream companies need to develop such expertise and assets in order to carry out operations in deep and ultra-deep water. These companies can also collaborate with their international counterparts to develop their technical and project-management skills. Due to the global credit crunch and falling oil and gas prices, investors are skeptical about the economic feasibility of unconventional energy sources. This will reduce development activity in the unconventional energy space, either in the short term or for as long as oil and gas prices remain low. Oil and gas companies are expected to focus more on projects that are likely to yield higher returns. Such projects will be financed mainly through internal accruals.

The looming human capital deficit is a major challenge for the industry. In order to remain competitive, it is imperative that companies strengthen their scientific, engineering and project- management skills by hiring and retaining skilled employees.


The emergence of NOCs has rapidly transformed the global oil and gas industry. Private players and NOCs in resource-poor nations can enhance their resource base either by forming alliances with NOCs or developing their expertise in unconventional oil and gas sources. Domestic companies should strike partnerships with NOCs belonging to resource-rich nations – such countries prefer close ties with India. Having already demonstrated their capability to build and operate complex refineries at high utilization levels, Indian refiners can offer to develop and operate the neglected downstream sector of resource-rich nations in exchange for stakes in upstream projects.

An increase in the presence of IOCs is vital to the development of the domestic industry, as IOCs posses advanced technologies and project-management skills that domestic players often lack. In order to attract IOCs, transparent, consistent and encouraging regulatory policies need to be implemented and rigorously followed. Clarity and consistency regarding fiscal terms, applicable taxes, end-product pricing policies and consistency will go long way in attracting IOCs to Indian upstream segment.

Indian upstream sector 21

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Indian upstream sector22

Upcoming events

2008

Exploring Opportunities for Investment in Power Sector: Overseas Acquisitions, Joint Ventures & Strategic Alliances, Hotel J W Marriot, Mumbai, India. 12 December

2009

1st Annual Conference on Renewable Energy Business 19-20 January

Coal Linkages & Mining, New Delhi 19-20 March

Delhi Mumbai Industrial Corridor, New Delhi 23-24 April

Annual Conference on Natural Gas Business & Pricing, New Delhi 21-22 April

NELP VIII – New Initiatives to Promote Investments May

Downstream – Oil & Gas India 2009 July

Annual Conference on Refining Business & Technologies August

2nd Annual International Conference on E&P Sector November

Annual Conference on LNG Business and Contracts December

Annual Petrochemical Asia 2009 October

23Indian upstream sector


Global upstream sector overview“International Petroleum Monthly,” • Energy Information Administration website, www.eia.doe.gov/ipm, accessed 24 September 2008

“Commodities weekly,” Deutsche Bank, 28 May 2008, via • Thomson Research

“The role of OPEC spare capacity,” OPEC website, www.opec.org/• opecna/speeches/2007/opecsparecapacity.htm, accessed 17 October 2008

“BP Statistical Review of World Energy 2008,” • BP website, www.bp.com/productlanding.do?categoryId=6929&contentId=7044622, June 2008

“European oil and gas,” UBS, 16 May 2008, via • Thomson Research

Moira Herbst, “The Markets: speculation but not manipulation,” • BusinessWeek, 9 June 2008

“World Crude Oil Prices,” • Energy Information Administration website, http://tonto.eia.doe.gov/dnav/pet/pet_pri_wco_k_w.htm, accessed 25 October 2008

“Natural Gas Prices,”• Energy Information Administration website, http://tonto.eia.doe.gov/dnav/ng/ng_pri_sum_dcu_nus_m.htm, accessed 1 October 2008

“Short-Term Energy and Winter Fuels Outlook,” Energy • Information Administration website, 7 October 2008, http://www.eia.doe.gov/emeu/steo/pub/contents.html

Larry Copeland, Paul Overberg, “Drivers cut back by 30B miles ; • 6-month drop biggest since ‘79-80 shortages,” USA Today, 19 June 2008, via Dow Jones Factiva

“2008 Global Upstream Performance Review,” • IHS Herold Inc and Harrison Lovegrove & Co. Limited, John S. Herold, Inc. website, www.herold.com/research/herold.home, accessed 29 September 2008

Indian upstream sector overview “Basic statistics,” • Ministry of Petroleum & Natural Gas website, http://petroleum.nic.in/petstat.pdf, accessed 10 October 2008

“Crude import bill soars 40% to $68 billion in FY08,” • The Economic Times, 28 May 2008, Indian Business Insight, via Dow Jones Factiva, © 2008 Informatics (India) Ltd.

“India’s oil imports from Middle East rise 11 pct in FY08,” • Asia Pulse, 8 August 2008, via Dow Jones Factiva, © 2008 Asia Pulse Pty Limited

“ONGC Videsh logs highest-ever oil & gas production overseas • (up 11%) by an Indian E&P Company, Net Profit up 44%,” ONGC Videsh press release, www.ongcvidesh.com/display1.asp?fol_name=News&file_name=news154&get_pic=ovl_news&p_title=&curr_f=154&tot_file=156, 12 June 2008

“Rs. 40,000 cr in returns from Indian investment in fgn oilfield,” • The Press Trust of India, 29 April 2008, via Dow Jones Factiva, © 2008 Asia Pulse Pty Limited

“Gas, geopolitics and energy security,” • Petroleum Review, 6 June 2008, via Dow Jones Factiva, © 2008 Energy Institute

“Home,” • Indian Strategic Petroleum Reserves Limited website, www.isprlindia.com, accessed 17 October 2008

“Natural Gas,” March 2008, CRIS INFAC•

“India-Petroleum Exploration and Production Activities-2006—• 07,” Director General of Hydrocarbons website, www.dghindia.org/site/dgh_e_p_reports.aspx, accessed 1 October 2008

“USD 1.49 billion committed in NELP-VII,” The Press Trust of • India Limited, 21 August 2008, via Dow Jones Factiva, © 2008 Asia Pulse Pty Limited

“Shiv-Vani Oil & Gas Exploration Services Limited–Corporate • Presentation,” March 2008, Director General of Hydrocarbons website, http://www.dghindia.org/site/pdfattachments/upcomingevents/Shiv_Vani_Mar_2008.pdf, accessed 15 October 2008

“Crude oil: state of industry,” May 2008, CRIS INFAC•

“Monthly statistics,”• Ministry of Petroleum & Natural Gas website, www.petroleum.nic.in, accessed 16 October 2008

Vandana Hari, “India considers tiered pricing as natural gas • costs rise,” Platts Oilgram News, 28 April 2008, via Dow Jones Factiva, © 2008 McGraw-Hill Inc.

“Integrated Energy Policy,” • Planning Commission website, www.planningcommission.nic.in/reports/genrep/rep_intengy.pdf, accessed 8 October 2008

“Report of the Working Group on Petroleum & Natural Gas • Sector for the XI Plan (2007-2012),” Planning Commission website, http://planningcommission.nic.in/aboutus/committee/wrkgrp11/wg11_petro.doc, accessed 7 November 2008

Challenges and opportunities for playersBharat Petroresources Limited 2008 annual report•

GAIL 2008 annual report•

ONGC Videsh 2007 annual report•

“Operations,” • Imperial Energy website, www.imperialenergy.com/op_area.php, accessed 29 September 2008

“ONGC-Mittal gets 30% interest in Caspian block,” • Financial Express, 22 October 2007, via Dow Jones Factiva, © The Financial Times Limited

“ONGC-Mittal wins gas block in Trinidad and Tobago,” • Organisation of Asia-Pacific News Agencies, 13 August 2007, via Dow Jones Factiva, © 2007 OANA

“Exploration and Production,” • Essar website, http://www.essar.com/oil&gas/divisions.htm, accessed 29 September 2008

“Exploration and Production,” • RIL website, www.ril.com/html/business/exploration_production.html, accessed 29 September 2008

“E&P Assets outside India,” • GSPC website, www.gujaratpetro.com/e_p3.php, accessed 29 September 2008

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Rajeev Jayaswal, “Attrition flare-up engulfs oil PSUs,” • The Economic Times, 4 October 2007, via Dow Jones Factiva, © 2007 The Times of India Group

Archana Shukla, ”Manpower crunch mars offshore rigs,” • DNA – Daily News & Analysis, via Dow Jones Factiva, © 2008 Diligent Media Corporation Limited

“IT boom spells doom for Sciences,”• New Indian Express, 16 November 2007, via Dow Jones Factiva, © 2007 The New Indian Express Group

Jeetha D’Silva and Gayatri Ramanathan, “Oil industry to • launch institutes to help check manpower shortage,” Mint, 24 September 2007, via Dow Jones Factiva, © 2007 HT Media Ltd.

“Report of the Working Group on Petroleum & Natural Gas • Sector for the XI Plan (2007–12),” Ministry of Petroleum and Natural Gas, November 2006, Planning Commission website, planningcommission.nic.in

Strategic Business Risk 2008, Ernst & Young•

Overcoming recruitment and retention challenges in the oil and • gas industry, Ernst & Young, 2008

The future of oilfield services companies, Ernst & Young, 2008•

Are the national oil companies the new international oil • companies?, Ernst & Young, 2008

What next for International Oil companies?, Ernst & Young, 2008•

Partnership in oil and gas sector, Ernst & Young, 2008•

National Oil Company Monitor 2008, Volume II, Ernst & Young•

Conclusion“Oil & gas E&P to get tax holiday again (as the Government has • already signed PSCs which commit these tax holidays as part of the NELP policy),” Financial Express, 17 April 2008, via Dow Jones Factiva, © 2008 Informatics (India) Ltd.

Soma Banerjee, “NELP bids may slip on tax turbulence,” • The Economic Times, 25 June 2008, via Dow Jones Factiva, © 2008 The Times of India Group

Vandana Hari, “India unveils its gas marketing plans,” • International Gas Report, 30 June 2008, via Dow Jones Factiva, © 2008 McGraw-Hill, Inc.


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0082 Upstream oil and gas.indd (India) 08/06. Artwork by Ritu Sharma.

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