Industry – Oil and Natural Gas

INDUSTRY ANALYSIS – OIL & NATURAL GAS

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Index

Sl. No Topic Page No

1 Introduction 1
2 Macroeconomic Scenario 9
3 Government Policies 17
4 Major Players in the Industry 19
5 Porter’s Five Force Analysis 19
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INDUSTRY INTRODUCTION
1.1 Crude Oil

Coal, oil and natural gas are the three major energy fuels in the world. Crude oil, which is a
compound of complex hydrocarbons, is one of the freely available form of storable &
transportable energy. It is refined and processed into other petroleum products like petrol,
diesel, naphtha, etc. The key characteristics of crude oil are density, sulphur content, viscosity
and pour point.
Introduction to energy sources:
• Coal, oil, natural gas, solar, falling water, wind and tides are the primary sources of energy. Of
these, coal, oil and natural gas are classified as commercial sources of energy, Natural gas, oil
and coal are non-renewable forms of energy
• Coal, oil and natural gas are the three major fossil fuels
• Crude oil and natural gas are found under the earth's surface between folds of rocks and in
areas that are porous
• Crude oil has to be processed in a refinery before it can be used. Products that are derived
from crude oil include gasoline or motor spirit, diesel fuel, aviation or jet fuel, home-heating oil,
oil for ships and oil to burn in power plants to generate electricity. Crude oil is the most traded
energy source in the world. Its consumption is not constrained by local availability as is the case
with natural gas.

1.2 Natural gas

Natural gas is the third largest energy source after crude oil & coal, and accounts for nearly 24
per cent of global primary consumption. It is combustible in nature as it is a mixture of
hydrocarbons, which results in emission of a large amount of energy when burned.

Hydrocarbon reserves evolve naturally and are derived from decomposition of organic matter,
algae and bacteria trapped and preserved in sedimentary deposits. The burial of these deposits
and the corresponding increase in heat and pressure decomposes the organic matter. This
breaks down the complex hydrogen and carbon molecules and converts them into solid, liquid
or gaseous hydrocarbons known as fossil fuels. Natural gas is a mixture of these gaseous
hydrocarbons. It is obtained either as an associated gas along with crude oil or as free gas from
independent gas fields. Crude oil and coal are the other forms of hydrocarbons.
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1.3 Consumpti on Patt erns and Reserves

1.2.1 Crude Oil

According to BP Statistical Review 2016, at the current rate of production it is estimated that
world crude oil reserves will last for about 50.7 years, while that for natural gas is about
52.7 years and coal is almost 113 years. India's coal reserves are expected to last
for nearly 89 years at the current rate of production, crude oil and natural gas reserves are
likely to last for about 18   years and 51 years, respectively.
Composition of energy consumption in India in 2015

Note: Others include: Hydro - 4 per cent; Nuclear - 1 per cent; Renewable - 2 per cent

Source: BP Statistics

Primary_energy_consumption_by_fuel_in_India (2010-2015)
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The per capita consumption of energy reflects an individual's access to energy and its uses.
Countries with higher per capita GDP also have higher per capita energy consumption.
Given the increasing domestic population, even a small rise in the per capita consumption
will significantly accelerate total energy consumption in the country.
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Primary energy: Per capita consumption by fuels in various countries (2015)

1.2.2 Natural gas

India's total proven reserves of natural gas as 2015 were estimated at 1,488 bcm, with two-
thirds located in offshore gas fields. Gas reserves have been increasing at a CAGR of 5.3 per
cent over the last 5 years. 

The majority of domestic natural gas reserves are concentrated in the offshore gas fields at
Mumbai High. However, large finds have been made by RIL, ONGC and Gujarat State Petroleum
Corporation Ltd (GSPC) in the offshore KG basin area of Andhra Pradesh. Onshore reserves are
primarily located in Rajasthan and the north-eastern states of Assam, Nagaland, Arunachal
Pradesh and Tripura.
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Source: MoPNG, CRISIL Research

Post the commencement of RIL's KG Basin in April 2009, the domestic natural gas production
had seen a boost. However, closure of wells due to sand and water ingress led to production
from the basin decline to ~10 mmscmd in 2015-16 as against ~12 mmscmd last
year (and ~55 mmscmd in 2010-11). Consequently, domestic natural gas production has been
on a declining trend over the last five years, falling to 88 mmscmd in 2015-16 from
143 mmscmd in 2010-11).
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Source: Ministry of petroleum and Natural gas

Trend in domestic natural gas consumption

Natural gas consumption in India has increased at a CAGR of 3 per cent over the last ten years,
rising to 146 mmscmd in 2015-16. Consumption is majorly driven by demand from the
fertilisers and power sectors, which together accounted for 69 per cent of domestic gas
consumption in 2015-16. Other major end use sectors include city gas distribution (CGD - 18 per
cent) and refineries (2 per cent). Given fall in domestic gas output in 2015-16 the share of LNG
imports further rose to 40 per cent during the year from 36 per cent in the previous year. With
domestic gas availability expected to remain constrained, India will continue to rely on
imported LNG.
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With domestic gas available at a discount unlike imported gas (costing $4.2 per mmbtu  versus
$8-10 per mmbtu in 2015-16), it commands a huge share of the demand. However, domestic
production being lower, the government has prioritized end-use sectors for supply. Sectors with
regulated prices (fertilisers, CGD) and limited affordability (power) get higher priority as
opposed to sectors with market-determined products (industries, steel plants, refineries). Thus,
demand for natural gas depends also on the cost competitiveness of LNG vis-à-vis alternate
fuels such as furnace oil and naphtha, as it competes with these fuels in the industrial sector.
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E: Estimated

Source: MoPNG, CRISIL Research

Source: Ministry of Petroleum and Natural Gas, CRISIL Research

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1.3 SUPPLY CHAIN OF OIL AND NATURAL GAS INDUSTRY:

 the upstream sector, concerned with the finding, extraction, initial processing and
trading of both oil and gas;
 the downstream oil sector, concerned with transporting, refining and marketing a large
variety of oil-based products;
 the downstream gas sector, concerned with marketing and transporting gas to end
consumers

2. MACROECONOMIC SCENARIO
2.1 Crude Oil
2.1.1 PRICING

Crude oil is the main raw material from which various petroleum products are obtained. Its
prices are determined by overall demand-supply conditions in the global market, particularly in
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the main refining centres such as Singapore, North-west Europe and US Gulf Coast, and in the
major supply centre - the Middle East. Crude oil prices form the base for petroleum product
prices.

Figure 1 Crude oil price movement over the years

Rationalizing the Fluctuations:

 Post World War II
 Oil war crisis
 Invasion of Kuwait and Gulf War
 The boom-bust cycle of 2001-2007
 The highs and the lows of 2008-2009
 Renewed hope of demand recovery in 2010
 Unrest in MENA region & debt concerns in Europe increased volatility in 2011
 Sanctions on Iran kept crude oil prices high in 2012
 Supply concerns in MENA region kept oil prices high in 2013
 Excess supply resulted in $10 per barrel fall in 2014
 Prices hit six year low at $45 per barrel amid supply glut
 Prices hit 12-year lows at $27 per barrel post lifting of Iran sanctions

2.1.2 DEMAND AND SUPPLY

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Demand review
Crude oil demand is derived from the demand for petroleum products, which is
determined by growth in the economy. India's demand for crude oil which is driven by
throughput of refineries grew at a CAGR of 3.4 per cent to 232 mtpa in 2015-16 from 196 mtpa
in 2010-11.
Supply review
The exploration for hydrocarbons in India began in Assam in 1866, with the country's
first discovery made at the Digboi oilfield in 1890. The first commercial offshore hydrocarbon
discovery was made at Bombay High in 1974. Following the discovery of several oilfields
between 1960 and 1990, domestic crude oil production rose from 6.8 million tonnes in 1970-71
to 33.0 million tonnes in 1990-91. However, except Cairn India's Rajasthan oil fields, no other
large oilfield has been identified since the discovery of the Neelam oilfield off the Mumbai coast
in 1987. As a result, domestic production has remained stagnant at 33-34 million tonnes
between 1996-97 and 2009-10. Post that, domestic crude oil production has increased at a slow
pace and has reached 36.9 million tonnes in 2015-16 on account of increase in production from
Cairn India's Rajasthan fields.
Demand-supply gap
While domestic crude oil production increased only marginally over the last few years, higher
refining capacity additions saw crude oil throughput increase at a CAGR of 3.4 per cent during
the last five years. Due to deregulation in the refining sector, significant investments have been
made (by both public and private players) since 1998, which resulted in huge capacity additions.
India first became a net exporter of petroleum products in 2001. With incremental supply
continuously outpacing demand, share of net exports in total domestic production increased
to 21 per cent in 2015-16, from 3 per cent in 2001-02.
Refining capacity and product consumption in India
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2.1.3 INFRASTRUCTURE

The largest reserves of oil and gas are not in major consuming countries. As a result countries
which are major energy consumers, are significant oil importers. Hence, considerable quantities
of crude oil have to be transported across the world. Crude oil can either be transported by sea
or land; the main issues being those of safety, security, and environmental hazards of
transporting fuel.
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2.2 Natural gas

Types of gas pricing in India

Natural gas pricing in India has undergone a sea change from being fixed by the government in
the early 1970s to greater market determination (based on formulas linked to international
prices) of prices. There are broadly two pricing regimes for gas in the country - domestically
produced gas and imported LNG.

Domestic gas pricing mechanism

Administered Pricing Mechanism (APM) gas is produced from gas fields awarded by the
Government to entities on nomination basis prior to the Production Sharing Contract
(PSC) regime. The prices of gas produced from these fields were administered by the
Government. Landfall price of APM gas was fixed at $1.79 per mmbtu (on Net Calorific Value
(NCV) basis) till May 2010, post which it was increased by the government to $4.2 per mmbtu
(on NCV basis).

On October 18, 2014, the Cabinet Committee on Economic Affairs (CCEA) approved a new
mechanism for determining the price for domestic natural gas. The revised domestic natural
gas price formula is as follows

Domestic gas price = (VHH*PHH + VAC*PAC + VNBP*PNBP + VR*PR) / (VHH + VAC + VNBP + VR) 
Where,

 VHH = Total annual volume of natural gas consumed in the US and Mexico.
 VAC = Total annual volume of natural gas consumed in Canada.
 VNBP = Total annual volume of natural gas consumed in the EU and FSU, excluding
Russia.
 VR = Total annual volume of natural gas consumed in Russia.
 PHH and PNBP are the annual average of daily prices at Henry Hub (HH) and National
Balancing Point (NBP) less the transportation and treatment charges.
 PAC and PR are the annual average of monthly prices at Alberta Hub and Russia,
respectively, less the transportation and treatment charges.

Thus, the domestic price of natural gas is the volume weighted average of gas prices at Henry
Hub, Alberta Gas Reference Point, NBP and Russia. Prices at the three trading hubs/Russian
domestic price will be deducted by $0.5 per mmbtu to account for transportation and
treatment charges.
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Gas prices are determined on a half-yearly (April and October) basis and based on trailing four
quarter prices at these hubs, with a one quarter lag. For instance, prices for April to September
will be based on the average prices over January to December in the previous year.

Based on the new pricing mechanism, domestic gas prices were revised downward for
the October 2015-March 2016 period, to $3.82 per mmbtu (on Gross Calorific Value
(GCV) basis) from $4.66 per mmbtu (on GCV basis) earlier. Post that, prices were further
downward revised to $3.06 per mmbtu (on GCV basis) for the April 2016-September 2016
period, reflecting weakness in global gas prices.

Also, new discoveries (made post October 2014) in deep and ultra-deep water areas and areas
with high temperature-high pressure would be allowed a premium over this base price. Gas
produced from such fields would be allowed marketing and pricing freedom, however its price
will be capped based on the price of substitute fuels such as fuel oil, imported coal, naphtha
and imported liquefied natural gas (LNG). For the period April 2016-September 2016, the price
ceiling for gas produced from these fields is fixed at $6.61 per mmbtu (on GCV basis).

Domestic gas prices post the approval of the new formula

Source: CRISIL Research

R-LNG pricing

In India, at present, Petronet LNG is the only player in the regasified liquefied natural gas field
with long-term contract, for sourcing 7.5 mtpa LNG from Rasgas Qatar. Until December 2009,
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the FOB price of LNG from RasGas was capped at $2.53 per mmbtu after which, the price has
been linked to the price of Japanese Crude Cocktail (JCC) and was to be determined as per an
agreed formula. As  a result, FOB prices of long-term LNG increased gradually to $13.7 per
mmbtu in 2014-15.

However, on December 31, 2015, Petronet LNG (PLL) renegotiated the terms of its long-term
LNG supply contract with Rasgas, Qatar. Rasgas agreed to modify the formula for calculating
the LNG price, which led to the reduction of the LNG price by half; it also waived off the penalty
for low volume offtake in 2015. On the other hand, Petronet LNG committed to increase the
volume of LNG to be purchased from Rasgas.

As per the renegotiated contract, the basis for calculating the LNG price has been modified to
make it more responsive to recent crude oil price (Dated Brent) movements. Under the earlier
contract, the cap and floor price for crude oil was set based on the average price for the
preceding 60 months. While this mechanism limited volatility in the contracted LNG price, it
also prevented a sharp correction in the contracted LNG price in 2015, despite crude oil price
declining by almost half.

From January 2016 onwards, the average crude oil price of only the previous three months is
considered to calculate LNG price. While this has made LNG price much more volatile compared
to the earlier formula, it has also lead to almost a 50% decline in LNG price.

In 2015-16, India imported about 16 million tonnes of LNG. LNG imports, over and above the
contracted quantity, are made on a spot basis, with prices being determined by the prevailing
demand supply scenario. Given weak demand and ample supplies, spot prices during the
year stood at $7.4 per mmbtu, about 30 per cent lower than contracted LNG prices (10.9 per
mmbtu), and 35 per cent lower than spot LNG prices in 2014-15 ($11.3 per mmbtu).

Build up of delivered gas in India in 2015-16

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Note: n.a.: Not applicable

1. Gas prices are on a delivered Gujarat basis

2. Landfall Price inclusive of royalty.

3. CIF price of contracted LNG has been linked to JCC (Japanese Crude Cocktail) price as per agreed formula

3. Transportation charges is calculated as weighted average of Rs. 19.83 per mmbtu for the first contract of 5 mtpa and Rs.
42.46 per mmbtu for subsequent contract of 2.5 mtpa

4. Exchange rate for 2015- 2016: USD / INR @ 65.47

*State sales tax varies from state to state

Source: CRISIL Research

Global trade
Exports

In 2015, total natural gas exports stood at 1,042 bcm - about a third of the global natural gas
production. Pipeline exports continue to remain the predominant form of trade, accounting for
67 per cent (704 bcm) of the total trade, while Liquefied Natural Gas (LNG) exports accounted
for the rest 33 per cent (338 bcm).

Between 2010 and 2015, LNG trade rose at a CAGR of 3 per cent, led by strong demand from
markets such as Japan, South Korea and India, where imports happen exclusively through the
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LNG route due to topographical constraints. On a y-o-y basis, LNG exports grew 5 per cent

to 1,042 bcm in 2015.

Qatar was the largest exporter of LNG in 2015, accounting for a third of the total LNG exports.
However, it has reached its planned target of 77 mtpa of liquefaction capacity in 2011 and has
imposed a moratorium on new capacities. Consequently, new LNG supplies over the next five
years are expected be driven by countries such as Australia and the United States .
Imports

Countries in the Asia Pacific region including Japan, South Korea, China and India accounted for
71 per cent of LNG trade, as natural gas cannot be supplied through pipelines due to
topographical constraints. On a y-o-y basis, LNG imports grew by 2 per cent to 338 bcm, driven
by growth in import demand, particularly from Japan and South Korea. However, due to an
economic slowdown in these key importing nations, rise in demand remained restricted.  

In 2015, almost half of the share of natural gas trade through pipeline was accounted for by
countries like US and major European countries due to better pipeline infrastructure
availability.

GOVERNMENT POLICIES

Growth of the economy has led to an increase in fuel and energy consumption. However, as no
significant new crude oil discoveries have been made, India's dependence on imports is set to
increase considerably. The New Exploration Licensing Policy was launched by the government
to accelerate the pace of hydrocarbon exploration in the country and provide a level playing
field for awarding exploration acreage. NELP was formulated to encourage private participation
and reduce import dependence

Petroleum Exploration Licenses (PEL) for domestic exploration & production of crude oil and
natural gas were granted under four different regimes over a period time:

1. Nomination_Basis:
Prior to NELP, Petroleum Exploration License (PEL) were granted to national oil companies
namely Oil and natural gas corporation (ONGC) and Oil India Ltd (OIL) on nomination basis.

2. Pre-NELP_Discovered_Field:
Petroleum Mining Lease (PML) was granted under small/ medium size discovered field
production sharing contract (PSCs) during 1991 and 1993 where operators of block were
private companies with ONGC/ OIL having participating interest.
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3. Pre-NELP_Exploration_Blocks:
Between 1990 and prior to implementation of NELP 28 exploration blocks were awarded to
private companies where ONGC and OIL have the rights for participation in the block after
hydrocarbons discoveries.

4. NELP:
Under the  New Exploration Lisencing Policy (NELP), exploration blocks were awarded to
Indian private and foreign companies through bidding process where national oil companies
like ONGC and OIL are competing on equal footing with the private and foreign players.

3. Policy for acreages offered in the pre-NELP era

3.2 Speculative survey
3.2.1 Companies could enter into a speculative survey contract by signing a profit-sharing
contract with the Government of India (GoI) through their nominee, the Directorate
General of Hydrocarbons (DGH)
3.2.2 Provision for risk sharing by DGH/GoI up to 50 per cent.
3.2.3  Income Tax Act, 1961, will apply.

3.3 Exploration of blocks

3.3.1 ONGC or OIL will have a participating interest of 25-40 per cent in the joint venture,
thus sharing exploration costs.
3.3.2 The contract will be on a production-sharing basis for 25 years, from the date of
commencement of the contract (with a possible extension of 5 years) in the case of
associated gas. For non-associated gas, the contract shall be for 35 years from the
date of signing the contract.

4. NELP ERA:
4.2 Types of acreages
4.2.1 Onshore - Land acreages
4.2.2 Offshore - Shallow water (up to 500 meters)
4.2.3 Off shore - Deep water (technology available for upto 2,500 meters) (Exploration and
development costs differ, and hence the fiscal regime gives different concessions to
ensure that deep water exploration is attractive.)
4.3 Policy for acreages offered under NELP
4.3.1 Basic terms under NELP
4.3.2 100 per cent foreign participation allowed
4.3.3 Mandatory work commitment to be made with respect to 2D seismic
4.3.4 No excise or cess levied on PSCs
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4.3.5 Option to amortise exploration and drilling expenses for 10 years from first
commercial discovery
4.3.6 Operating experience mandatory to bid for deep water blocks
4.3.7 Royalty at the rate of 12.5 per cent for onland areas and 10 per cent for offshore
areas.
4.3.8 Cess to be exempted for production from blocks offered under NELP.
4.3.9 A model production-sharing contract (MPSC) which is reviewed for every NELP
round

Figure 2 BUDGET IMPACT

4 . MAJOR PLAYERS IN THE INDUSTRY

o PUBLIC SECTOR
o OIL AND NATURAL GAS CORPORATION (ONGC)
o ONGC Videsh Limited (OVL) – subsidiary of ONGC
o Oil India Limited (OIL)
o PRIVATE SECTOR COMPANIES
o Cairn India LTD.
o Reliance Industries LTD
o ESSAR OIL LTD.
o INTERNATIONAL COMPANIES
o Exxon Mobil Corporation
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o Chevron
o Royal Dutch Shell Plc
o Total S.A
o BP Plc

PORTERS FIVE FORCE ANALYSIS

Porter's Five Forces framework is one useful strategic tool to evaluate potential
opportunities and threats/risks for the oil and gas industry. The five key factors of this model
are:

 Competitive rivalry
 Threat of New Entrants
 Threat of Substitutes
 Bargaining Power of Buyers
 Bargaining Power of Suppliers

Competitive rivalry

The competitiveness of oil and gas industry and especially in the upstream sector of the
industry is significantly intensive. There are three different type of players in the upstream
sector of the upstream sector, these are:

 The big IOCs or as we call it Integrated Oil and Gas Companies (private sector)
 Top oil and gas companies by revenue 2015 ranking | Statistic. (n.d.). Retrieved
February 19, 2016
o Royal Dutch Shell 385.6 billion dollars revenue for 2015
o Exxon Mobil from USA 364.5 billion dollars revenue for 2015
o BP from UK 6 billion dollars revenue for 2015
o Total from France 194.2 billion dollars revenue for 2015
o Chevron from USA 8 billion dollars revenue for 2015
o Phillips 66 from USA 161.2 billion dollars revenue for 2015
o Eni from Italy 132.8 billion dollars revenue for 2015

The above list based on the company revenues for 2015 in billion dollars. It is known, that the
best indicator to observe the size of a company is its market capitalization.

 Top oil and gas companies based on market value 2015 | statistic. (n.d.). Retrieved
February 19, 2016
o Exxon Mobil 356.5 billion dollars in market value
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o Chevron 329.7 billion dollars in market value

o Shell 192.1 billion dollars in market value
o Total 118.5 billion dollars in market value
o BP 118.3 billion dollars in market value
o ConocoPhillips 76.7 billion dollars in market value
o Eni 63 billion dollars in market value

One other category of companies are the private oil and gas companies which are operating
only to upstream sector of oil and gas industry (Exploration and Production).

Finally, the last group of companies which control more than 90% of the proven oil and gas
reserves are the National Oil Companies. Some of these major companies are:

 Saudi Aramco, Saudi Arabia

 National Iranian Oil Company (NIOC)
 China National Petroleum Company (CNPC)
 Petroleos de Venezuela (PDVSA)
 Rosneft, Russia
 Gazprom, Russia

Threat of New Entrants in Oil and Gas Industry

The factors that affect the newest companies to enter oil and gas business, especially the
upstream segment are:

 Huge capital required

 National Oil Companies control more than 90% of the proven oil and gas reserves
 Increase of the internal competition within the industry

The big oil and gas companies can increase their R&D spending which will give them a boost
regarding innovation and improve existing technologies. This strategy will give them a
competitive advantage over new oil and gas companies which now enter the industry. Also, to
mention that this whole strategy of the big IOCs can force the new competitors to spend more
money

The big IOCs or as we call it Integrated Oil and Gas Companies which can easy compete with
new competitors due to

 Economics of scale
 Oil and Gas prices volatility
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 Oil and Gas Reserves are usually located in war zones or geographical areas with
geopolitical conflicts or political instability
 National and international law restrictions which can affect the new entrance of a
company in the oil and gas business

Threats of Substitutes in Oil and Gas Industry

The main alternatives sources to oil and gas for producing energy which used for electricity,
transportation, heating, etc. are:

 Nuclear Energy
 Coal
 Hydrogen
 Biofuels and other renewables sources such as solar and wind energy

These alternative sources of energy can replace a high amount of hydrocarbons use in the
global energy mix according to their performance, quality and price of course. This strategy
requires a big amount of investments in R&D and producing procedures, so the possibility for
substitutes to dominate the global energy mix until 2040 is very small.

Bargaining Power of Buyers in Oil and Gas Industry

The main buyers of oil and gas products are:

 Refineries
 National Oil Companies
 International Oil and Gas companies
 Distribution companies
 Traders
 Countries (USA, China, Japan, countries of the EU, etc.)

The bargaining power of buyers in oil and gas industry is relatively small due to the nature of
this industry. Buyers are interested in the price and the quality of a product. It is known, that
global oil benchmarks determine the oil price.

The main oil benchmarks are:

 Brent Blend
 West Texas Intermediate (WTI)
 Dubai/Oman
 Understanding Benchmark Oils: Brent Blend, WTI and Dubai | Investopedia. (n.d.).
Retrieved February 22, 2016
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So it is obvious from the above that the buyers cannot affect the oil prices. Higher
bargaining power have the buyers only which consume enormous amounts of oil and gas
such as EU, China, USA, Japan, and India in comparison with other countries.

Bargaining Power of Suppliers in Oil and Gas Industry

Some big suppliers in the oil and gas industry are fully integrated oil and gas industry
(International and National Oil Companies) which are active in the whole value chain of oil and
gas sector.

THE GLOBAL OIL & GAS INDUSTRY: PROSPECTS & CHALLENGES IN THE NEXT DEC.... (n.d.).
Retrieved February 24, 2016

These companies can be the big International oil companies such as Chevron, Shell and Exxon
Mobil or National oil companies such as Saudi Aramco, Gazprom, and Petrobras. The ability of
those companies to affect oil prices and the industry is high due to their business involvement
on all of the business segments of oil and gas industry, so their bargaining power is significantly
greater than the buyers.

Another great player in the side of the suppliers are the oil rich countries (as they call them oil
producing countries) or else OPEC has a significant bargaining power. OPEC nations own at
least 70% or the world's oil proven reserves. Although these oil reserves have one of the lowest
cost producing price between the oil industry in contrast with oil producing from oil sands and
deep-water oil fields which are expensive regarding costs of production.