Report of the Working Group on Petroleum & Natural Gas Sector for the XI plan

Equity Oil and Gas Abroad

1. 
   Oil security for a nation, that is, aspiring to be an economic power, is very vital. Equity oil abroad may lessen our dependence on a few suppliers and increase our inter-dependence on a global basis. Considering the oil demand scenario vis-à-vis domestic production level on the one hand and low crude oil reserve replenishment trend and high risk of domestic exploration on the other, a major focus of NOCs/Indian private companies would be to venture abroad to access exploration blocks and producing properties for equity oil. Access to equity oil through equity participation in producing property development projects in the short term in non-OPEC developing areas (Asia, Latin America, Africa) as well as in politically friendly countries with large oil potential (Middle East, Russia and FSU countries) needs to constitute a part of risk capital investment.
   

1. 
   Focus on producing property ventures in the short term;
   
2. 
   Purchase of equity share of companies as a part of reserves portfolio management;
   
3. 
   Focus on exploration acreages in short to medium term;
   
4. 
   Promoting upstream sector services to establish international credibility;
   

2. 
   The physical targets for oil and gas production during XI Plan period are given below:
   

Table 9.4: Crude Oil and Natural Gas Production from Overseas
		2007-08	2008-09	2009-10	2010-11	2011-12	Total
Crude Oil Production (MMT)	OIL	0.25	0.5	1.0	1.53	1.6	4.88
	OVL	7.02	6.53	5.97	5.76	5.35	30.63
	TOTAL	7.27	7.03	6.97	7.29	6.95	35.51
Natural Gas Production (BCM)	OVL	1.75	1.82	1.93	1.97	2.2	9.67

1. 
   Setting up of National Knowledge Hub (NKH) in India is essential in order to protect past investment (made in the form of data acquisition), promote growth by encouraging greater participation by providing access to quality data in an integrated and synergetic environment, provide level playing field for small players and establish a link among all E&P companies and academia. Creation of National Data Repository (NDR), which is an important component of National Knowledge Hub, is also a part of charter.
   
2. 
   National Knowledge Hub will host the NDR and also be a centre of excellence for knowledge sharing and training centre, hosting domain applications and visualization centre for use by the industry.
   

1. 
   The National Knowledge Hub (NKH) will comprise the following for use by the industry
   
2. 
   The National Data Repository (NDR)
   
3. 
   The National G&G Processing Centre (NPC)
   
4. 
   The National Visualization and Application Centre (NVAC)
   
5. 
   The National Training Centre (NTC)
   
6. 
   The National E&P Knowledge Portal (NKP)
   

1. 
   The benefits through National Knowledge Hub (NKH) will be as under:
   

1. 
   Enable evaluation of the total hydrocarbon potential of the country by integrating geo-scientific data;
   
2. 
   Protect past investment, attract investments and thus promote desired growth in future by leveraging on modern technology;
   
3. 
   Improve the efficiency of hydrocarbon prospecting in the country by providing integrated and synergetic environment;
   
4. 
   Create geo-scientific ambience and link among the geo-scientists, petroleum engineers both from industry and academia to strengthen over-all geo-scientific activities in India.
   

1. 
   Presently 1.09 million Sq. kM. area is under exploration, which is about 35 percent of Indian sedimentary basinal area of 3.14 million Sq. kM. About 70 percent exploration area is either deepwater and in frontier basins. During XI Plan period, most of the discoveries is likely to come from logistically difficult areas and where no production evacuations facilities are in existence. Exploration companies have to invest heavily on development of surface facilities such as pipelines gas/oil collecting stations and platforms. In addition, oil companies will have to invest higher amounts on oil and gas production from ageing fields to maintain current level of production. To keep momentum of increased development activities in E&P sector, requirement of fiscal incentives is inevitable.
   
2. 
   In view of above and as an imperative to realize substantial investment in E&P sector the following incentives need consideration:
   

1. 
   Granting of infrastructure status to the E&P sector under the Income Tax Act, 1961;
   
2. 
   Incentives for replacing surface facilities;
   
3. 
   Incentives to establish technology hub for service providers in E&P sector.
   

8. 
   The major indicative physical parameters for the XI Plan vis-à-vis likely achievements in X Plan are as follows:
   

Table 9.5: Physical parameters for XI Plan vs. X Plan
Parameter	X Plan Target	Likely Achievement In X Plan	Indicative Physical Parameters for XI Plan
Seismic Surveys
2 Dimensional (GLK / LK)	98,327	64,867	128,424
3 Dimensional (Sq kM)	48,305	63,947	150,573
Exploratory Drilling
No. of Wells	871	944	1,100
Development Drilling
No. of Wells	883	1,191	1,660
Hydrocarbon
In-place Reserves Accretion (MMT) domestic	785-914	1,813.42	2,129.44
Production Oil (MMT)
Domestic:	165.24-169.38	167.70	206.76
Overseas:	5.2	16.83	35.51
Total	170.44-174.58	184.57	242.27
Production Gas (BCM)
Domestic:	167.43-176.50	158.79	224.56
Overseas:	4.94	5.41	9.67
Total	172.37-181.44	164.2	234.23
Production Oil & Gas (MMTOE)
Domestic:	332.67-345.88	326.53	431.32
Overseas:	10.14	22.24	45.18
Total	342.81-356.02	348.77	476.5
CBM Gas Production (BCM)	-	-	3.78
UCG Gas Production (BCM)	-	-	2.99

4. Refining Capacity Additions

1. 
   At the beginning of XI Plan (2007-08), the domestic refining capacity is expected to be 148.97 MMTPA. Considering the projects under implementation and the project under various stages of approval, the refining capacity in India is expected to go up to 235 MMTPA during the XI Plan based on the information furnished by the various companies. The capacity addition in XI Plan period is expected to be about 92 MMT. The details of refining capacity additions are given at Annexure – X. however, the year-wise additions to refining capacity are given below.
   

Table 9.6: Year-wise Refining Capacity additions during XI Plan (MMT)
Year	2007-08	2008-09	2009-10	2010-11	2011-12
Capacity Addition	9.73	36.00	15.51	15.67	15.08

2. 
   Based on the year wise refining capacity addition as given above, the year wise refining capacity available during XI Plans as on 1st April will be as follows:
   

   Table 9.7: Year-wise Cumulative Refining Capacity during XI Plan (MMT)
   2006	2007	2008	2009	2010	2011	2012	CARG(%)
   132.47	148.97	158.70	194.70	210.21	225.88	240.96	12.35%

3. 
   The details of refinery capacity additions, year wise are as under:
   

Table 9.8: Year-wise & Company-wise Refining Capacity during XI Plan
Capacity Additions During XI Plan
YEAR	REFINERY	MMTPA
2007-08	Indian Oil Corporation Limited, Panipat	3.00
	Hindustan Petroleum Corporation Limited, Mumbai	2.40
	Hindustan Petroleum Corporation Limited, Visakh	0.83
	Essar Oil Limited, Jamnagar	3.50
	Sub Total	9.73
2008-09	Chennai Petroleum Corporation Limited, Chennai	1.00
	Reliance Petroleum Limited, Jamnagar (New)	29.00
	Nagarjuna Oil Corporation Limited	6.00
	Sub Total	36.00
2009-10	Indian Oil Corporation Limited, Haldia	1.50
	Bharat Petroleum Corporation Limited, Bina	6.00
	Chennai Petroleum Corporation Limited, Chennai	0.70
	Kochi Refineries Limited, Kochi	2.00
	Mangalore Refinery & Petrochemicals Limited, Mangalore	5.31
	Sub Total	15.51
2010-11	Hindustan Petroleum Corporation Limited, Visakh	6.67
	Hindustan Petroleum Corporation Limited, Bhatinda	9.00
	Sub Total	15.67
2011-12	Indian Oil Corporation Limited, Paradip	15.00
	Oil & Natural Gas Corporation Ltd. Tatipaka	0.08
	Sub Total	15.08
2007-12	TOTAL XI PLAN	91.99

4. 
   However, the actual capacity additions would depend upon several factors including domestic demand, duty structure which would impact import and export possibilities, refining margin, and export potential for the products. However, in view of the likely surplus scenario, the companies depending upon the commercial viability of the project may review their projects and capacity additions. We could expect the refining capacity to turn out to be in the range of 190 MMT to 200 MMT leaving a scope of exports in the range of 45 MMT to 55 MMT.
   
5. 
   The benefits of surplus refining capacity are at Annexure – XI. However, the factors like setting up in SEZ areas, differential in sweet and sour crude and import of crude oil and petroleum products being handled through large vessels to bring down the cost of transportation may also add to the viability of the export oriented refineries. Keeping this in view the refineries will have to make processing facilities for processing of 100 percent heavy/sour crude.
   

6. 
   Further into the future projections are complex as assessing the refining capacity additions particularly in the era of surpluses, during the XII Plan period is tricky. However a very rough assessment indicates that a capacity of 67.24 MMTPA (comprising of 43.30 MMTPA in public sector and 23.94 MMTPA in private sector) is expected to be added. With this capacity addition the total refining capacity in the country is likely to reach 302 MMTPA by the end of XII Plan as indicated below:
   

1. 
   But actual materialization would depend upon the commercial viability of the refineries, actual materialization and growth in international oil demand during XI Plan.
   
1. 
   
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