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Energy Conclave 2006 “Challenges of the Oil Sector” Gautam Sen Executive Director, ONGC New Delhi 26 th July 2006.

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Presentation on theme: "Energy Conclave 2006 “Challenges of the Oil Sector” Gautam Sen Executive Director, ONGC New Delhi 26 th July 2006."— Presentation transcript:

1 Energy Conclave 2006 “Challenges of the Oil Sector” Gautam Sen Executive Director, ONGC New Delhi 26 th July 2006

2 Estimates of oil still in the ground are suspect… The figures quoted are 1.2 trillion barrels Since the dawn of the Oil-age, we have consumed about 950 billion barrels… billion barrels (30%) in last decade only

3 Agenda  Ever growing hunger for Energy  Global Scenario  Indian Scenario  E&P Scenario…thrust areas  Global Scenario  Indian Scenario  Pricing  Global Scenario  Indian Scenario  The issues of concern

4 Population (Billions) Energy Consumption (Qbtu / yr) World Population World Energy Consumption Year Growing hunger…Global 1 QBTU (Quadrillion BTU) = BTU Source: IEA

5 Growing hunger…India 15% of the World’s population 0.5% of the World’s Oil & Gas reserves 2005: World consumed 3.84 Billion Tons of oil and in India consumption was 116 Million Tons Source: BP Statistical Review, 2006

6 Growing hunger…India Demand for Primary Energy to rise up to 1633 MTOE by (GDP rate :8%) Source: Draft Report of the Expert Committee on Integrated Energy Policy

7 E&P Scenario

8 “The last time a major oil province was discovered was in the 1970s.” “The last time the oil industry discovered more oil in a year than was used was a quarter of a century ago.” “Half of the world’s production which comes from the 100 biggest fields, almost all of these are more than 25 years old” Source: The G forces of Energy Insecurity; C D Ruppel, 2006 E&P Scenario…Global Reserve accretion … trickling down

9 Discovery of Giant Fields (> 500 million barrels) 2000: : : : NONE Oil consumption 50% higher than it was in 1985 Average annual growth of world oil demand : Less than 1.0 million bpd 2003: 1.5 million bpd 2004: 2.6 million bpd Source: The G forces of Energy Insecurity; C D Ruppel, 2006 … growing gap Out of 85 million bpd oil production today, only 15 million bpd is coming from New fields E&P Scenario…Global

10 Reserve replacement … Source: E&P Scenario…Global

11 About 80% of oil produced today comes from fields discovered before Most of these fields are declining Every 12 days one billion barrels of oil is produced and consumed. Discovery Trend & Peak Oil Source:

12 E&P Scenario … the Hubbert ’ s way “Prediction is difficult, especially of the future.” Niels Bohr Source:

13 443,000 Oil and Gas Fields 5575 World Sedimentary Basins 3360 non-productive 2215 known productive Oil & Gas Basins 90% of world oil & gas production comes from 10% of these basins E&P Scenario…Global

14 Middle East Europe & Eurasia Africa S-America N- America 59.5 Asia Pacific Oil Reserves…end 2005 *Source: BP statistical review-2006

15 The point of this graph is that they ALL increased and ALL in the same time period. In 1986 and 1987 OPEC countries markedly increased their reserves! E&P Scenario…Global The day… when OPEC linked one’s production quota to its reserve!! Dubious reserve

16 Difficult terrain…difficult sources Tar sands of Alberta Heavy oil of Venezuela E&P Scenario…Global Tar sands found in over 70 countries, but three quarters of the world's reserves are in two regions; Venezuela (~1.8 trillion bbl) and Alberta, Canada (~1.7 trillion bbl)VenezuelaAlberta Canada Venezuela's Orinoco heavy oil belt is the best known example of this kind of unconventional reserve. Estimated reserves: 1.2 trillion barrels New Areas Source:

17 Difficult terrain…difficult sources Tar sands of Alberta Heavy oil of Venezuela Prospects at Polar regions Shale oil of Arunachal E&P Scenario…Global Arctic Oil: “How much” depends on “Who’s talking” Proponent says: 16 billion bbl Opponent says: 3 billion bbl India has enough oil trapped in shale and coal deposits in Assam and Arunachal Pradesh to produce 140 million tonnes (mt) of oil per year for 100 years…view of C. Ratnam, Former C&MD of OIL Source:

18 Indian perspective The Challenges E&P Scenario

19 E&P Scenario…India As on OilGasO+OEG Initially In-place 4,5641,6886,252 Ultimate Reserves 1, ,230 Cumulative Production ,145 Reserves ,085 ONGC Reserves (MTOE) India’s total reserve (~1812 MMT*) 0.56% of World Reserve *Source: BP statistical review MMT of in-place reserve (O+OEG) added by ONGC in last 5 Years

20 E&P Scenario…India Dependence on import increased from 51% in 1994 to 69% in 2005 Oil Production & consumption

21 Oil Import…major FE outgo Rs Billion 27% of India’s total imports (Rs 6,356 Billion) Source: PPAC Ready Reckoner, May 2006 and Provisional E&P Scenario…India

22 Source: Petroleum Exploration & Production Activities, India, , DGH E&P Scenario…India Up to 200m Isobath –1.78 Million Sq. Km Onshore – 1.39 Million Sq. Km Offshore – 0.39 Million Sq. Km Deep-waters –1.35 Million Sq.Km Total Sedimentary area – 3.13 Million Sq. Km

23 Proved Reserves in’MT Source: BP Statistical Review of World Energy 2006 Production in’MT R/P Production hovering around 36.0 MMT R/P stationery around 20 E&P Scenario…India India’s total reserve (~1812 MMT) 0.56% of World Reserve

24 E&P Scenario…India Licensed Domestic Exploration Area (2005) Leased Domestic Production Area (2005)  Exploration is dominated by ONGC with 58% of the total area licensed by the GOI Source: Directorate General of Hydrocarbons, report  ONGC holds the largest portion of leased acreage for oil and natural gas production, accounting for 56% of the area More deregulation & increasing private participation

25 E&P Scenario…ONGC Himalyan Foreland and Ganga Valley Area operated: 59,267 ONGC operated: 34,637(58.4%) Assam-Arakan Area operated: 47,730 ONGC operated: 24,274 (51.0%) Mahanadi-Bengal Area operated: 15,211 ONGC operated: 7311 (48.1%) Satpura-Pranhita-Godavari Area operated: 31,227 ONGC operated: 9,377 (30.0%) Andaman – Nicobar Offshore Area operated: 23,485 ONGC operated: 23,485 (100.0%) Western Offshore Area operated: 467,898 ONGC operated Areas (68.2%) Mumbai Offshore: 108,570 Kutch-Saurashtra: 83,278 Kerala-Konkan: 127,347 Cambay Area operated: 22,056 ONGC operated: 8,922 (45.5%) Kutch – Saurashtra Area operated: 1,550 ONGC operated: NIL Rajasthan Area operated: 29,688 ONGC operated: 1,772 (6.0%) Eastern Offshore Area operated: 257,955 ONGC operated Areas (46.6 %) Krishna-Godavari: 38,413 Cauvery: 22,064 Mahanadi-Bengal: 59,638 Krishna – Godavari Area operated: 5,057 ONGC operated: 5,057 (100.0%) Cauvery Area operated: 5,665 ONGC operated: 4,985 (88.0%) ONGC operates ~568,300 sq. km. of exploration area, which is more than 58% of total area under exploration in India. Source: DGH Annual Report-2004

26 E&P Scenario…ONGC Exploration blocks on nomination basis are to reduce drastically gradually Status of exploration blocks awarded to ONGC on nomination basis

27 E&P Scenario…ONGC Market dynamics encouraging more exploration acreage through NELP

28 New Oil domestic

29 Deepwater & Frontier basin thrust areas Early monetization of new discoveries Technology solutions for improving Recovery Factor Expeditious development of small & marginal fields Refurbishment of surface facilities Technology induction Domain Experts Thrust areas E&P Scenario…ONGC

30 Thrust areas: Marginal fields 153 marginal fields (Onshore: 79, Offshore:74) –38 fields monetized (Onshore:36, Offshore:2) –11 fields on service contract (Onshore:8, Offshore:3) –94 fields under monetization (Onshore:39, Offshore:55) –Balance 21 fields planned for monetization (Onshore:4, Offshore:17) Ultimate Reserves: 184 MMT O+OEG Investment: Rs 12,700 Crore Terminal year of XI Plan would see marginal fields contributing 50,000 bbls/ day &10 MMm 3 /day gas Economics have changed … Marginal fields are no longer marginal E&P Scenario…ONGC

31 Projects Approx. Project cost (Rs. Crore) For Direct Production Marginal fields*12, G-1 & GS-15 Development1, East Coast Hub Development*5, D-1 Development Vasai (East) Development1, Addl. Dev. Bassein field2, Dev. of SB-11, Bassein Addl. Dev A-1 layer in MHN For Producing Facilities Assam Renewal Plan*2, Other Revamping Projects3, Total31, Major E&P Projects of ONGC * Yet to be approved E&P Scenario…ONGC

32 8 IOR/ EOR projects completed (Rs 1,703 Crore) 10 under implementation (Rs 12,138 Crore) ONGC has identified 25 IOR Projects other medium fields Contribution of IOR/ EOR Schemes in 15 major fields Thrust areas: Improving Recovery factor E&P Scenario…ONGC

33 Seismic data Acquisition, Processing & Interpretation Drilling & related services Logging, Well Stimulation, Well Control Info-com applications Facilities & Logistics Thrust areas: New technology E&P Scenario…ONGC

34 Strategic Petroleum Storage Under ground storage of crude oil in Salt Cavern studied to be the most economical & secured. Underground salt deposits North of Bikaner identified to be the most appropriate location DFR to be ready in Pilot Project with 2 MMT Crude oil capacity E&P Scenario…ONGC

35 New Oil equity

36 Energy beyond boundaries Equity oil…OVL MMT

37 Equity Oil…OVL A Investment Destinations B Big Leap Vs Insignificant Scattered Presence C Enabling Environment

38 Equity Oil…OVL The opportunities dry out fast –Buyers exercise spot decisions and shut opportunity windows –Buyers laden with Mandate to compliment the decisions –China and Korea aggressive & empowered –High secrecy in deals OVL needs Empowerment Road blocks

39 Prices…hot…hotter

40 Oil Prices

41 Rig rates v Oil price Rising E&P expenditure Oil Prices

42 Oil prices & Project Management Oil Prices

43 “The Party’s Over”, Richard Heinberg …is diminishing as we resort to going after the hard-to-get oil: Energy Return On Energy Invested Before 1950 it was about 100 to 1 In the 1970s it was down to 30 to 1 Now (2005) it’s about 10 to 1 The Tar Sands have an EROEI of about 4 to 1 Oil Prices

44 Issues of concern

45 NOC’s now hold over 75% of world hydrocarbon reserves Reference India –Socio-economic drivers to play –Value propositions for NOCs required to supplement energy security/ independence –Durable, strategic & interdependent relationship

46 Issues of concern –“One road” beyond boundaries –New avenues: CBM, UCG, SCG etc. –New Energy resources “at cost” - comforts to Companies –“Controlled Prices” vs “Concern for Conservation”

47 Thank You


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