India is the world’s 5th largest importer of oil in 2010, importing ~75% of its oil needs. At US$ 103/bbl, India’s oil import bill would increase by US$ 20 bn in 2012. For India to Secure Oil for Sustaining Growth the options are 1. Domestic Exploration Efforts need to be Stepped Up. 2. Overseas Oil Equity: Natural Hedge against Increasing Prices. 3. Demand Management required to reduce Oil Intensity.
2. 2
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3. 3
India’s Dependence on Imports to meet Oil Demand to Grow
Imports
India world’s 5th largest importer of oil in 2010, importing ~75% of its oil needs
Source:
• Domestic Production - BP Statistics (actual), Infraline (forecast)
• Projected demand @ 2.8%CAGR - EIA Annual Energy Outlook 2011
• OVL overseas equity oil production, forecast @ 2.8% CAGR
4. 4
Increasing Impact on Economic Growth from Oil Import Bill
Source: PPAC, Bloomberg, World Bank, FY12 GDP growth @7.5%
IEA forecasts average crude price of US$ 103/bbl from 2011-2015, compared to US$
79/bbl over 2006-2010
At US$ 103/bbl, India’s oil import bill would increase by US$ 20 bn in 2012
5. 5
Options for India to Secure Oil for Sustaining Growth
1. Domestic Exploration Efforts
2. Acquisition of Overseas Oil Equity
3. Demand Management
6. 6
Domestic Exploration Efforts need to be Stepped Up
Only 22% of India’s sedimentary basin area is well explored
Nine NELP rounds held so far, with one large discovery
Intensity of exploration activities must increase
Capital and technology required – role of private sector will therefore be critical
Supportive policy and fiscal environment key to attracting investment
7. 7
Cairn India Rajasthan – Enhancing India’s Energy Security
Indian Crude Consumption: 2009-2010
Largest oil discovery in India since 1985
Imported
79%
First Oil in August 2009, now producing at
Domestic
125,000 bopd 21%
Innovative technology applications
At current envisaged basin potential of 240,000
bopd, production from Rajasthan will: Other Domestic
~65%
Contribute ~35% of India’s domestic production
Rajasthan
20%
Rajasthan
Offset India’s crude oil import dependency by ~35%
~7%
Imported & Domestic Quantity: MOPNG Data
Future: Assuming Indian production remains at current levels of 2009-10.
8. 8
80% of Value accrues to the Government
Value Split: RJ-ON-90/1 PSC
Rajasthan
In-place resource base of 4 bn bbls with
additional risked exploration potential of
2.5 bn bbls
~ 80% of value – potentially US$ 100 bn Government – 80%
(GoI, GoR, NOC)
accrues to the Government
Ravva
Recoverable resources tripled, expect to
Cairn – 20%
achieve > 60% recovery
>US$ 5 bn paid as profit petroleum to
Government
9. 9
Overseas Oil Equity: Natural Hedge against Increasing Prices
Options
Inorganic Growth Organic Growth
(Discovered Resources) (Greenfield Exploration)
Advantages: Advantages:
- Quicker to Production - Finding costs lower
- Low Risk - Competition is less intense
Disadvantages: Disadvantages:
- Costlier than organic growth - Longer lead time
- Competition for assets is high - Higher Risk
Potential for public and private sector companies to collaborate and share risks
10. 10
Demand Management required to reduce Oil Intensity
India’s crude oil intensity is high relative to Oil Intensity (Oil Consumption per unit of 2009 GDP)
developed and emerging economies
Policy efforts required to bring structural
shift away from oil in key sectors –
transport and industry
Japan’s 2006 National Energy Strategy
includes ambitious targets:
Reduction in ratio of oil to entire primary
energy supply to <40% by 2030
Reducing oil dependence in transport
sector to 80% by 2030
Improve coordination with other oil Source: Morgan Stanley
consuming nations on use of Strategic
Petroleum Reserves
11. 11
Conclusions
Where are we today? What do we need to do?
Cost of oil will continue to rise Policy interventions required
India’s oil demand will continue to grow with National Energy Policy required to set:
its economy Long term vision and short term goals
Roles and targets for Private and Public sector
Gap between domestic production and
demand expected to increase Establish National Energy Council to:
Raise energy security on our national agenda
To bridge the gap, we need to act now Catalyze & coordinate Public/ Private initiatives
Coordinated action between public and private sector key to meeting challenges