Industry Analysis Oil and Gas Industry

Agenda
1 Industry Value Chain & Structure 2 Market Size & Growth 3 Industry Segments 4 Competition 5 Issues & Concerns 6 Outlook

üIndia a net importer of crude oil . üThe industry is highly organized .1.a Industry Overview üOil & Gas Industry accounts for 15 % of The GDP . üIndia is emerging as a refining hub . ü ü ü .

production of oi Govt . storage in terminals .1. and marketing of petroleum products inc MARKET . NELP EXPLORATION PRODUCTION UPSTREAM DOWNSTREAM SHIPPING REFINING & BLENDING STORAGE DISTRIBUTION tion of petrol eum produc ts . development of oil / gas fields .b Industry Value Chain & Structure SESMIC SURVEY e exploration . appraisal of a discovery .

MARKET SIZE AND GROWTH Source : Annual Reports üOil & Gas Industry accounts for 15 % of the Indian GDP . 9 %. ü Net Sales of Major companies have increased -> India emerging as a refining hub . ü . üCAGR of India ’ s crude consumption is 5 .2.

SOARING CRUDE OIL PRICES -GLOBALLY REASON üHuge gap between demand and supply . ü ü . üDepreciating Dollar .

.INDIAN CRUDE OIL BASKET ØIndian crude basket lower than NYMEX Brent crude but still higher than average crude price for the year Ø ØPrice seems to be dipping in near future as Crude has corrected from highs.

3.INDUSTRY SEGMENTS üEXPLORATION & PRODUCTION üREFINING ü üMARKETING ü ü .

provided a level playing field .3.1. ü30 discoveries have been made ü ü . üNELP approved in 1997 .1 EXPLORATION üSedimentary area of 3 . üUnder NELP PSC 110 blocks have been signed . 14 sq km of 26 sedimentary basins .

71MMT . 823 .com of crude oil during 2006 – 07 was 21 .ibef. 50MMT al gas in 2006 – 07 was 44 .1. 506 . 474 .3. 75m cubic metres ( MCM ) tion has increased . PSU 80 % Private Playe roduction during 2006 – 07 was 11 .2 PRODUCTION Source: www.

ibef.com q qHPCL promises strong growth with around 11% growth in 2007-2008 q qBPCL expansion project of 5.1 MMTPA commissioned q qMRPL has received orders from Mauritius government q q .3.2 REFINING Source : www.

businessweek . IBP is now a part of IOCL players are Shell . HPCL and IBP . com is the market leader with roughly 5000 LPG distributors .retail outlets only . 11739 retail is followed by BPCL . Essar and ONGC .MARKETING Source : www .

SECTOR WISE GAS DEMAND BREAKUP ential demand from fragmented industries on gas availability r segment constitute 70 % of the demand chunk may come down because of low incremental urea demand ndustrial sector may grow as various entities may find gas cheaper th .

com . 08MMT onsumption of ATF increased compared to previous year due to increase in the n as it PG consumption also increased comparatively was viewed as a good subst Source: www.domain-b.CONSUMPTION PATTERN otal consumption during 2006 .46 .2007 was 128 MMT iesel has the maximum consumption .

PRICE BREAK-UP of customs duty and taxes .. the government ’ s share etrol at pumps we people pay Rs 28 tax extra . e . i . .

2 HERFINDAHL INDEX .1 PORTER’s ANALYSIS 4. COMPETITION ANALYSIS 4.4.

Threat Of New Entrant . pricing required. Govt. supplier-HIGH Bargaining power of  Highly dependant on international pricing mechanism. policy discourages. Threat of substitutes-LOW  Technically. Economically not viable . Only PSUs are operating.MODERATE Capital Intensive Business. thus no choice for retail buyers.Only few major players are allowed to bid under NELP. regulation is a big hindrance as a large number of licenses are FDI Norms relaxed. among rivals-MODERATE Competition  Oil exploration. Foreign players can enter in JVs but Govt.  Bargaining power of buyers.LOW Prices are fixed by the govt. no private participation. has to import bulk of crude oil.

000190 0.067925862 0.297791 0.09607 0.00012 0.000784 0.017208531 0.02801 0.35365 0. Share 0.082217422 0.020010199 0.389272 ØIt implies moderate concentration of pricing power and competition in the industry.07717 0.138849304 0.00461 0.00414 0.4. .00040 0.000025 2007 0.48948 0.000452 0.00030 0.011065201 0.18620 0.064335586 0.006896 0.239590 0. Share 0.003705044 Sq of Mkt.00676 0.594682852 0.2 HERFINDAHL INDEX HI CALCULATION BPCL CPCL GAIL HPCL IOC ONGC RIL MRPL Bongaigaon refineries 2006 0.01379 0.009229 0.02127 0.01928 0.08304 0.00001 HI 0.005955 0. HI value implies high concentration in the industry.034670 0.00498 Sq of Mkt.

5. . ü üNELP : Commitment to invest of about US$5 billion in exploration phases ü üNatural Gas : In PSC the incremental revenue from production is disproportionately in favour of government ü üEstablishment of bio fuel on PPP basis . ü üGovernment issued oil bonds worth 13943 crores . 100 % FDI in private refining companies .FDI 49 % in refining activities . Oil companies can access maximum 1500cr daily . ISSUES & CONCERNS Regulations üFor PSU .

which will increase if crude edges Northwards Higher crude realizing greater profit margin for refining companies Subsidized selling by ONGC to continue effecting the bottom .6 . Higher subsidy bill for govt . OUTLOOK Lower profit margin for OMC .line Many new E & P players entering in offshore drilling so great room to expand in segment .

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