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Oil and Natural Gas Corporation limited is the Biggest Exploration and Production
Company in India. ONGC, a Fortune-Global 500 Company, is recognized as one of the top E&P
Company in the world and ranks 25th among leading global Energy majors as per ‘Platts Top
250’ Global Energy Company Ranking 2008.
ONGC ranked 413th position as per Fortune Global 500 - 2010 list based on revenues,
profits, assets and shareholder’s equity. PFC Energy 50 ranked ONGC at 23rd amongst Global
Oil & Gas Companies by Market Capitalization and ranked 4th as Global E&P Company. ONGC is
placed 2nd amongst all Indian Corporates listed in Forbes Global 2000 (rank 155th).
ONGC’s wholly-owned subsidiary ONGC Videsh Ltd. (OVL) is the biggest Indian
multinational, with 44 Oil & Gas projects (7 of them producing) in 18 countries. ONGC has also
ventured into to Refining, LNG, Petrochemicals, Power, SEZ, etc. to further strengthen its core
business activities.
ONGC has been aggressively pursuing its three long-term (2001-2020) strategic goals
which were formulated in 2001; first, to double in-place hydrocarbon accretion to 12 billion
tonne; second, to enhance global Recovery Factor from its domestic producing fields from 28%
to 40%; and the third, to access 20 million tonne per annum equity oil from abroad.
ONGC has a unique distinction of being a company with in-house service capabilities in
all the activity areas of exploration and production of oil & gas and related oil field services.
ONGC has been playing a very important role in strengthening the fabrics of the society.
ONGC has a well articulated policy on CSR under which it focuses on promoting education,
healthcare & entrepreneurship in the community. ONGC accords high importance to
environment management in its various operational activities.
Board of Directors
Natural Gas is a vital component of the world's supply of energy. It is one of the
cleanest, safest, and most useful of all energy sources. Despite its importance, however, there
are many misconceptions about natural gas. For instance, the word 'gas' itself has a variety of
different uses, and meanings. When we fuel our car, we put 'gas' in it.
However, the gasoline that goes into your vehicle, while a fossil fuel itself, is very
different from natural gas. The 'gas' in the common barbecue is actually propane, which, while
closely associated and commonly found in natural gas, is not really natural gas itself. While
commonly grouped in with other fossil fuels and sources of energy, there are many
characteristics of natural gas that make it unique. Below is a bit of background information
about natural gas, what exactly it is, how it is formed, and how it is found in nature.
In its purest form, such as the natural gas that is delivered to your home, it is almost
pure methane. Methane is a molecule made up of one carbon atom and four hydrogen atoms,
and is referred to as CH4. Ethane, propane, and the other hydrocarbons commonly associated
with natural gas have slightly different chemical formulas, in this report.
Natural gas is considered 'dry' when it is almost pure methane, having had most of the
other commonly associated hydrocarbons removed. When other hydrocarbons are present, the
natural gas is 'wet'.
Natural gas has many uses, residentially, commercially, and industrially. Found in
reservoirs underneath the earth, natural gas is commonly associated with oil deposits.
Production companies search for evidence of these reservoirs by using sophisticated
technology that helps to find the location of the natural gas, and drill wells in the earth where it
is likely to be found. Once brought from underground, the natural gas is refined to remove
impurities like water, other gases, sand, and other compounds. Some hydrocarbons are
removed and sold separately, including propane and butane. Other impurities are also
removed, like hydrogen sulfide (the refining of which can produce sulfur, which is then also sold
separately). After refining, the clean natural gas is transmitted through a network of pipelines,
thousands of miles of which exist in the India alone. From these pipelines, natural gas is
delivered to its point of use.
Natural gas can be measured in a number of different ways. As a gas, it can be measured
by the volume it takes up at normal temperatures and pressures, commonly expressed in cubic
feet. Production and distribution companies commonly measure natural gas in thousands of
cubic feet (Mcf), millions of cubic feet (MMcf), or trillions of cubic feet (Tcf). While measuring
by volume is useful, natural gas can also be measured as a source of energy. Like other forms of
There are many different theories as to the origins of fossil fuels. The most widely
accepted theory says that fossil fuels are formed when organic matter (such as the remains of a
plant or animal) is compressed under the earth, at very high pressure for a very long time.
At low temperatures (shallower deposits), more oil is produced relative to natural gas.
At higher temperatures, however, more natural gas is created, as opposed to oil. That is why
natural gas is usually associated with oil in deposits that are 1 to 2 miles below the earth's crust.
Deeper deposits, very far underground, usually contain primarily natural gas, and in many
cases, pure methane.
Formation of methane in this manner usually takes place close to the surface of the
earth, and the methane produced is usually lost into the atmosphere. In certain circumstances,
however, this methane can be trapped underground, recoverable as natural gas.
A third way in which methane (and natural gas) may be formed is through biogenic
processes. Extremely deep under the earth's crust, there exist hydrogen-rich gases and carbon
molecules.
As these gases gradually rise towards the surface of the earth, they may interact with
minerals that also exist underground, in the absence of oxygen. This interaction may result in a
reaction, forming elements and compounds that are found in the atmosphere (including
nitrogen, oxygen, carbon dioxide, argon, and water).
If these gases are under very high pressure as they move towards the surface of the
earth, they are likely to form methane deposits, similar to thermogenic methane.
Oxygen O2 0-0.2%
Nitrogen N2 0-5%
Nitrogen, helium, carbon dioxide and trace amounts of hydrogen sulfide, water and
odorants can also be present. Mercury is also present in small amounts in natural gas extracted
from some fields. The exact composition of natural gas varies between gas fields.
Natural gas can also be hazardous to life and property through an explosion. Natural gas
is lighter than air, and so tends to dissipate into the atmosphere. But when natural gas is
confined, such as within a house, gas concentrations can reach explosive mixtures and, if
ignited, result in blasts that could destroy buildings. Methane has a lower explosive limit of 5
percent in air, and an upper explosive limit of 15 percent.
Explosive concerns with compressed natural gas used in vehicles are almost non-
existent, due to the escaping nature of the gas, and the need to maintain concentrations
between 5 percent and 15 percent to trigger explosions.
Demand for natural gas has traditionally been highly cyclical. Demand for natural gas
depends highly on the time of year, and changes from season to season. In the past, the cyclical
nature of natural gas demand has been relatively straightforward: demand was highest during
the coldest months of winter and lowest during the warmest months of summer. The primary
driver for this primary cycle of natural gas demand is the need for residential and commercial
heating.
As expected, heating requirements are highest during the coldest months and lowest
during the warmest months. This has resulted in demand for natural gas spiking in January and
February, and dipping during the months of July and August. Base-load storage capacity is
designed to meet this cyclical demand: base-load storage withdrawals typically take place in the
winter months (to meet increased demand), while storage injection typically takes place in the
summer months (to store excess gas in preparation for the next up cycle).
The relatively recent shift towards use of natural gas for the generation of electricity has
resulted in an anomaly in this traditional cyclical behavior. While requirements for natural gas
heating decrease during the summer months, demand for space cooling increases during this
warmer season. Electricity provides the primary source of energy for residential and
commercial cooling requirements, leading to an increase in demand for electricity. Because
natural gas is used to generate a large portion of electricity in the India, increased electrical
demand often means increased natural gas demand.
This results in a smaller spike in natural gas demand during the warmest months of the
year. Thus, natural gas demand experiences its most pronounced increase in the coldest
months, but as the use of natural gas for the generation of electricity increases, the magnitude
of the smaller summer peak in demand for natural gas is expected to become more
pronounced.
In general, in addition to this cyclical demand cycle, there are two primary drivers that
determine the demand for natural gas in the short term. These include:
Weather - As mentioned, natural gas demand typically peaks during the coldest months
and tapers off during the warmest months, with a slight increase during the summer to
meet the demands of electric generators. The weather during any particular season can
affect this cyclical demand for natural gas. The colder the weather during the winter, the
more pronounced will be the winter peak. Conversely, a warm winter may result in a
less noticeable winter peak. An extremely hot winter can result in even greater cooling
demands, which in turn can result in increased summer demand for natural gas.
Indian Economy - The Indian economy in general can have a considerable effect on the
demand for natural gas in the short term, particularly for industrial consumers. When
the economy is expanding, output from industrial sectors is generally increasing at a
similar rate. When the economy is in recession, output from industrial sectors drops.
These fluctuations in industrial output accompanying economic upswings and
downturns affects the amount of natural gas needed by these industrial users. For
instance, during the economic downturn of 2006, industrial natural gas consumption fell
by 6 percent. Thus the short term status of the economy has an effect on the amount of
natural gas consumed in the India.
While short term factors can significantly affect the demand for natural gas, it is the long
term demand factors that reflect the basic trends for natural gas use into the future. In order to
analyze those factors that affect the long term demand for natural gas, it is most beneficial to
examine natural gas demand by sector. However, it is useful to have an understanding of what
natural gas is used for in each of these sectors beforehand and These include:
The residential energy demand to increase 25 percent between 2002 and 2025.
Residential use of natural gas is expected to increase by 1.5 percent per year from 2002 to 2010
and 0.9 percent from 2010 to 2025, increasing 25.5 percent from 2002 to 2025. Residential
natural gas consumption accounts for 22 percent of all consumption in the India.
Probably the most important long term driver of natural gas demand in the residential
sector is future residential heating applications. Between 1991 and 1999, 66 percent of new
homes, and 57 percent of multifamily buildings constructed used natural gas heating. In 2003,
70 percent of new single family homes constructed used natural gas. While these new homes
being built are generally increasing in size, the increasing efficiency of natural gas furnaces used
to heat them compensates for the increased square footage to be heated. In general, however,
The energy demand in the commercial sector to increase at an average annual rate of
1.7 percent through to 2025. Commercial floor space is expected to increase at a rate of 1.5
percent per year over the same period, so the energy demand per area of commercial floor
space is expected to increase 0.2 percent per year. Natural gas currently supplies 18.4 percent
of the energy consumed in the commercial sector, but it will supply 16.1 percent in 2025.
Industrial Demand
The primary force shaping the demand for natural gas, and other sources of energy, in the
industrial sector is the movement away from energy-intensive manufacturing processes,
towards less energy-intensive processes. There are two driving forces behind this shift: the
increased energy efficiency of equipment and processes used in the industrial sector, as well as
a shift to the manufacture of goods that require less energy input. It is because of this trend
that, while industrial shipments increased by 41 percent from 1980 to 2002, total energy
consumption only increased by 1 percent. This trend is expected to hold into the future, and is
the reason for modest increases in energy demand for the industrial sector.
Despite this shift from energy-intensive processes to less energy-intensive processes, the
demand for energy is expected to increase in the industrial sector. According to reports, there
are several factors which could affect the demand for natural gas over other sources of energy
to meet the long term energy requirements of the industrial sector. These include:
Economics of the Industrial Sector - The industrial sector has been experiencing a
period of consolidation that is expected to last into the future. Industrial companies
have been merging at a relatively fast pace; a market scenario in which cutting costs and
increasing efficiency becomes paramount. This could lead to increased demand for
Electricity Restructuring - The price and availability of electricity in the industrial sector
will play a role in determining the demand for natural gas. Many electric generation
utilities have been cutting prices for industrial consumers in the hopes of gaining
increased market share in preparation for the complete deregulation of the electric
industry. However, natural gas powered distributed generation technologies, as well as
combined heat and power applications, offer industrial energy users with attractive
alternatives to purchased electricity. Some industrial energy consumers, fearful of the
effects of deregulation on the reliability and flexibility of electricity supply, may choose
instead to generate their own electricity on-site, powered by natural gas.
The demand for electricity is predicted to increase by an average rate of 1.8 percent per
year through to 2025. In order to meet this growing demand, 335 gigawatts of new electric
generation capacity is expected to be needed by 2025. Because of the relatively low capital
requirements for building natural gas fired combined cycle generation plants, as well as the
reduction of emissions that can be earned from using natural gas as opposed to other
dirtier hydrocarbons like coal, economists of India expects 57 percent of new electric
generation capacity built by 2025 will be natural gas combined-cycle or combustion turbine
generation
There are two primary forces at work that serve to increase the demand for natural gas
in electric generation. The increased demand for electricity in general, combined with the
retirement of old nuclear, petroleum, and coal powered generation plants, leaves a
significant requirement for electric generation that is to be filled by natural gas use. Natural
gas is expected to fulfill the requirements for electric generation for a variety of reasons,
including:
Flexibility and Capital Investment - Natural gas electric generation plants can range
in size from large-scale generation plants down to very small-scale microturbines.
Most nuclear and coal fired power plants, however, are limited to larger-scale
generation, and must produce larger quantities of electricity in order to be
economic. Because the demand for electricity is expected to increase modestly over
the next 20 years, many electricity suppliers are wary of making the large capital
investments necessary to build a coal or nuclear powered generating facility. Natural
gas fired plants, with lower capital investment costs and greater flexibility (including
shorter construction and lead times) are much more readily available and practical
to add incremental generation capacity as it is required.
Efficiency - Natural gas powered combined cycle generation units are extremely
energy efficient. Modern natural gas fired combined cycle generation units can
approach 60 percent efficiency, whereas traditional boiler units are usually only
around 34 percent efficient, regardless of fuel source. This means that using natural
gas powered combined cycle technology allows for more electricity produced per
unit of natural gas used. This can both increase the cost-effectiveness of the
Operational Flexibility - Natural gas fired electric generation systems used to meet
short term peak electricity demands have the advantage of being very operationally
flexible. These natural gas fired generators can be quickly and easily turned on and
off, allowing for the timely generation of electricity to meet short term requirements
on a moments notice. Neither coal nor nuclear generation plants have the ability to
operate in this manner. Offering such flexibility in the generation of peak electricity
makes natural gas an extremely attractive option for meeting these electricity
requirements.
Natural gas use in the transportation sector is still in its infancy; although natural gas
powered vehicles present an enormous opportunity for cleaning up the emissions from this
sector. Demand from the transportation sector accounts for 3 percent of total Indian natural
gas demand, and most of this demand is for natural gas to fuel the pipeline transportation of
hydrocarbons. Natural gas supplies barely a fraction of the total energy used in the
transportation sector, and the demand for natural gas to supply natural gas vehicle operation is
almost negligible compared to the energy requirements of traditionally fueled vehicles.
The demand for alternative fuel vehicles (including natural gas vehicles) is expected to
increase in the foreseeable future primarily due to new legislation and regulation surrounding
emissions from the transportation sector. As more stringent emissions standards are adopted,
both at the federal and state level, the automotive industry will have no choice but to devote
significantly more resources into the development of feasible production line natural gas
vehicles; vehicles that are environmentally sound and meet consumer preferences. However,
the technology required to do so, including the need for a natural gas refueling infrastructure,
are current barriers to the widespread proliferation of natural gas vehicles in India.
Customers Profile
The growing demand-supply gap has led the Indian government to open up E&P to
private participants, through NELP and develop a more holistic strategy for acquisition of equity
oil abroad. On the gas front, when compared to mature natural gas based economies like,
Japan, Korea, and the United States, India is a relatively new entrant. However, the increasing
significance of this fuel in the Indian context can be gauged from the fact that, by 2025, the
country is expected to leave behind both China and Japan in having the largest natural gas
demand in Asia. The demand in each of these countries is expected to be in the range of 350
MMSCMD.
The registered demand with GAIL alone, for natural gas in the country is around 260
MMSCMD. The Government of India has also constituted an Expert Group to assess the realistic
demand for natural gas.
The significant potential for natural gas demand is being driven by the following key factors:
• The share of natural gas in India’s energy basket is only around 9 per cent, as compared to the
world average of around 24 per cent. More than 50 per cent of natural gas (NG) volume goes to
sectors in which it is a substitute to petroleum products and the rest goes to the power sector
where it substitutes coal. The share of NG in the fuel mix, is expected to go up, from the
present 8.8 per cent levels to 22 per cent in 2031-32
Supply
On the demand front, despite the significantly high potential across several sectors, we noted
that the realizable demand for natural gas will be a function of gas supplies in the market, the
price competitiveness of gas vis-à-vis alternative fuels, timely commissioning of the proposed
transmission pipeline infrastructure, and some regulatory initiatives in power sector. If the last
two factors materialized, we would expect gas demand to rise to around 390 MMSCMD within
a decade (i.e., by 2019-20) from the actual consumption of around 170 MMSCMD in 2009-10.
Refer Charts 2 and 3 for the sectoral mix of gas consumption.
Energy source availability and investments are the areas to be focused upon by the
energy sector and the Government of India is aligning policy structure conducive to attract
investments of high magnitude.
200
150
demand (mmscnd)
100
50
0
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
200
150
supply (mmscnd)
100
50
0
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Database:
year demand (mmscnd)
2005-06 97.3
2006-07 100.5
2007-08 118.5
2008-09 135.4
2009-10 157.8
Double
smoothing
with K=3:
n year demand Moving (M't) (at) (bt) Forecasted
(mmscnd) Avg. (Mt) value (ŷ)
1 2005- 97.3
06
2 2006- 100.5
07
3 2007- 118.5 105.43333
08 33
4 2008- 135.4 118.13333
09 33
5 2009- 157.8 137.23333 120.266 154.2 16.966 171.1666667
10 33 6667 66667
6 2010- 171.1666667 154.78888 136.718 172.85 18.070 190.9296296
11 89 5185 92593 37037
7 2011- 190.9296296 173.29876 155.106 191.49 18.191 209.6823045
12 54 9959 0535 76955
200
150
demand (mmscnd)
100
50
0
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Database:
year supply (mmscnd)
2005-06 92.9
2006-07 99.8
2007-08 100.6
2008-09 126.7
2009-10 151.4
Double
smoothing
with K=3:
n year supply Moving (M't) (at) (bt) Forecasted
(mmscnd) Avg. (Mt) value (ŷ)
1 2005-06 92.9
2 2006-07 99.8
3 2007-08 100.6 97.7666666
7
4 2008-09 126.7 109.033333
3
5 2009-10 151.4 126.233333 111.0111 141.455 15.2222 156.677777
3 111 5556 2222 8
6 2010-11 156.6777 144.925925 126.7308 163.120 18.1950 181.316049
778 9 642 9877 6173 4
7 2011-12 181.3160 163.131275 144.7635 181.499 18.3677 199.866803
494 7 117 0398 6406 8
180
160
140
120
supply (mmscnd)
100
80
60
40
20
0
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Database:
year demand (mmscnd)
2005-06 97.3
2006-07 100.5
2007-08 118.5
2008-09 135.4
2009-10 157.8
160
140
120
80
60
40
20
0
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12
Database:
year supply (mmscnd)
2005-06 92.9
2006-07 99.8
2007-08 100.6
2008-09 126.7
2009-10 151.4
160
140
120
80
60
40
20
0
2005-06 2006-07 2007-08 2008-09 2009-10 2010-11 2011-12