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Offshore Oil & Gas Sector |
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The global capital investment in the E&P industry is estimated to be more than US$ 450 billion in 2008. Operators are increasingly looking at offshore opportunities in the deep waters of the Gulf of Mexico, West Africa, Latin America and in the Asia Pacific Region. The investments are likely to come down in the year 2009 to US$ 400 billion, due to economic slowdown and lower oil prices. Lower oil prices have resulted in deferment of some of the offshore drilling and logistics projects.
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It is estimated that consumption of petroleum as well as other liquid fuels is likely to be 95 million barrels per day in 2015 and118 million. |
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Barrels per day in 2030 from current levels of 84 million barrels currently. Much of the overall increase in consumption is projected for the non-OECD Asian countries like India and China, where strong economic growth is expected. The production of crude oil is concentrated mainly in the OPEC countries.
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USA and Europe have been traditional consumers with China and India having emerged lately. As land has relatively been explored and the economics of oil & gas exploration in offshore looks attractive at high oil prices, the search for oil has been extended to various offshore avenues of the world. |
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Natural Gas is a cleaner and more efficient alternative to oil and coal. It is often found along with oil reserves and is transported in pipelines or LNG carriers to regions like North America, Europe and North East Asia, where the demand is the highest. The demand for Natural Gas is expected to grow faster than any other kind of primary energy source.
Natural gas currently accounts for around 8% of the total energy mix in India as against the global average of 24%. The un-met demand for natural gas is estimated to increase from about113 MMSCMD (FY 2007-08) to 396 MMSCMD by the year 2022. This is excluding the north eastern region of India, which is not yet connected to the gas supply network.
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Demand Drivers for Indian E&P |
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India’s rapidly growing economy depends on the consumption of energy sources of which oil is a major component which is why all the offshore optios have come under focus. India’s consumption of crude oil in 2007-08 was 156.1 million tones of which close to 127 million tonnes were consumed in domestic market rest were exported in processing. There is a need to undertake offshore drilling due to lack of major domestic reserves. India is a net importer of crude oil and these imports account for 25%of India’s total imports by value for the year 2007-08. Hence, India is looking at stepping up its domestic crude production through various channels (including offshore) which hovers around the 32 million tonne mark annually, about 25% of domestic requirement.
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The graph shows an increasing import of crude oil in terms of quantity. Due to increase in consumption and the increase in price of oil per barrel, the oil import bill has risen sharply by almost 3.5 times over the last decade. The demand for offshore activity in this segment is therefore very high.
It is interesting to note that, the oil import bill has been maintained at about 25% of total imports. This shows that India has been able to manage its imports well to accommodate the increased consumption and price of oil. |
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However, oil represents 1/4th of India’s total imports and is a major reason for India’s Exim trade deficit. Hence India is focused on increasing domestic production of oil, both onshore and offshore. Demand for Natural Gas too has increased, with power generation and fertilizer industry being the main drivers. Although domestic sources meet more than 90% of the Natural Gas demand, the reserves of Natural Gas in India are low, and unless fresh discoveries are made in offshore, the current production rate will not be sustainable. |
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Oil and Gas exploration in India |
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The offshore sector accounts for 67% of India’s total crude oil production. The offshore fields at Bombay High, Rava and Gulf of Cambay and others produce about 23 million tonnes of crude oil per annum. In order to facilitate offshore oil and gas exploration, the government has come up with a phased auction of sea bed plots to private and public sector bidders to encourage offshore drilling.
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Termed the NELP (New Exploration Licensing Policy), this policy has seen successful bidding for 203 exploration blocks under NELP rounds I to VII. So far, 68 offshore Oil and gas discoveries have been made in 19 of these blocks. So far, 50% of India’s sedimentary basin area is under offshore exploration thanks to NELP. |
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This has resulted in increase of hydrocarbon reserves equivalent to 600 million metric tonnes.
This has resulted in 23 blocks being awarded. Out of these, reserves of gas amounting to 6 trillion cubic feet (TCF) have been found in 4 blocks. The latest rounds are the NELP – VIII (70 blocks on offer) and CBM- IV (10 blocks) for which the deadline is in August 2009. This process is advertised by the so called ‘road shows’ which are held in major cities all over the world. |
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The foremost oil exploration and production organization in India is the Oil and Natural Gas Commission (ONGC) which is a public sector company. It has a 79% share in offshore crude oil and the remaining production is carried out by private players.
Offshore oil reserve basins in India are located on the east and west coast. On the west coast, the major fields are in Mumbai High, Gulf of Cambay and Kutch and on the east coast are Cauvery offshore, KG Offshore (deep & shallow), Mahanadi and Andaman.
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Recent Discoveries |
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With the help of the NELP program, a number of oil and gas discoveries have been made over the past decade. The most of these have been the 10 TCF natural gas reserves which were discovered by Reliance Industries Ltd. in 2002 at the Krishna-Godavari basin block.
The o ther offshore discoveries have been made by ONGC in its deep water KG Block and Essar oil made an offshore discovery of 2.7 million barrels of oil in the Mehsana block in Gujarat.
Most recently, GSPC (Gujarat State Petroleum Corporation) found reserves of 3.6 TCF in its Deendayal block in the Krishna-Godavari basin.
ONGC has also discovered pockets of Gas in Krishna Godavari Basin. Map of India on the right shows the details of discoveries in the past.
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Indian Government Policy |
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The Director General of Hydrocarbon (DGH) is the body under the Petroleum Ministry which regulates the technical aspects related to exploration and production in both offshore and onshore areas. Efforts have been made to open up the exploration and production sector and make it more market driven which also gives a boost to offshore drilling. This has been done to attract investment and also to make the field more competitive. Private sector companies have been allowed to determine the price of their products.
Policies like NELP and CBM have been instrumental in showcasing India’s potential in the oil and gas sector to the world. |
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Offshore Support in India |
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AHT (Anchor Handling Tug), AHTS (Anchor Handling Tug Supply), PSV (Platform Supply Vessel) and MSV (Multipurpose Supply Vessel) constitute nearly 90% of the 190+ supply vessels servicing the Indian offshore rigs of these, offshore rigs, nearly 3/4th numbers of vessels are foreign registered. |
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The Indian offshore support fleet is an old one, with many ships plying without the Dynamic Positioning (DP) system and not capable of servicing deep sea platforms. DG Shipping is considering implementation of the rule which bans vessels older than 25 years of age. However, this is unlikely to be carried out without replacing the current fleet.
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Future Outlook |
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India plans to raise crude oil production by more than 30 percent and double its natural gas output by the end of the 11th five year plan. "By the year 2012, natural gas production will be more than double from the present level of about 90 million standard cubic meters per day,"
Close to 44% of India's sedimentary basin is already under offshore exploration for hydrocarbons and is expected to rise to 80 % in the next four years. The NELP program aims to make this 100% by 2015.
India's oil import bill for the year to end-March 2009 was expected to be around US$110-US$120 billion. The government has estimated its fuel subsidy bill of around US$42.5 billion assuming global crude prices at US$123 a barrel. Since then, however, oil prices had fallen sharply to as low as $40 a barrel, but which has now recovered and is currently above US$ 60.
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Although this has provided relief to the government in terms of lower import bills, the reduced prices will have an impact on the oil companies. The outcome of the NELP - VIII round will indicate whether the reduced oil prices and indeed the global downturn have had an effect on the oil exploration companies.
In the long term, offshore oil and natural gas exploration will move deeper into the sea. Increasing global oil demand and limited production will ensure that deep sea exploration and production will become commercially viable and necessary. Natural Gas consumption is likely to increase as it is a more efficient and cleaner alternative to coal and petroleum. For both these fuels, the increase in demand is likely to be due to Non OECD nations like India and China.
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