1. Click to edit Master title style Indian Oil and Gas Industry October 2006

2. www.imacs.in © IMaCS 2006 Printed 15-Aug-15 Page 2 Contents Market Overview Government regulations & policy Business opportunities and Advantage India

3. www.imacs.in © IMaCS 2006 Printed 15-Aug-15 Page 3 Indian Oil and Gas Industry - Prime mover of the Indian economy  Oil and Gas Industry Size is estimated at USD 110 bn (about 15% of Indian GDP)  Contributes to about 64% of gross revenues of Government (both Central and State together) through Taxes and Duties  Total Contribution to Government exchequer in 2004-05 = USD 27 bn  Contributes to about 45% of India’s primary energy consumption  Constitutes 30.87% of India’s imports in 2005-06  Accounts for 11.21% of India’s exports in 2005-06  India is the Sixth largest crude consumer in the world  India is the Ninth largest crude importer in the world  India’s has the sixth largest refining capacity - 2.56 million barrels per day representing 2.99% of world capacity  India is the Fifth largest energy consumer in the world  Primary Energy Consumption (2005) – 387.3 MMTOE  Oil and gas accounts for 44% of India’s primary energy consumption  Compounded Annual Growth rate of Energy Consumption (1996-2005) – 3.62%  Energy-GDP Elasticity = 0.58 Source: Integrated Energy Policy; BP Statistical Review 2006, Ministry of Commerce, MoP&NG, Stg Comm Report, FICCI Report, ABN AMRO, IMaCS Analysis India’s GDP would fall by 1.5% for every USD 10 increase in the price of oil per barrel

4. www.imacs.in © IMaCS 2006 Printed 15-Aug-15 Page 4 Supply has failed to keep pace with demand Source: DGH Presentation  Yawning Demand-Supply Gap : Need to  Intensify exploration efforts to convert the remaining prognosticated hydrocarbon reserves to established reserves  Increase recovery factor of producing fields  Tie up crude oil and gas imports – setting up of LNG Regasification terminals/ laying of transnational pipelines  Scout for equity oil and gas from abroad  Explore new technologies like coal gasification, coal to oil conversion, gas hydrates exploration, coal bed methane extraction etc.

5. www.imacs.in © IMaCS 2006 Printed 15-Aug-15 Page 5 Intensive Exploration & Production a must ….  Sedimentary Area – 3.14 million sq km  Only 19% of the area extensively explored  Domestic Hydrocarbon Scenario (as on 1.04.2006): Prognosticated Resources (Oil + Oil Equivalent Gas) 28-32 BMT Established Geological reserves (O + OEG)8.2 BMT O + OEG already produced1.42 BMT Balance Recoverable Reserves (O + OEG)1.85 BMT Current Oil Production32.19 MMT Current Gas Production88.22 MMSCMD Source: DGH / MoP&NG

6. www.imacs.in © IMaCS 2006 Printed 15-Aug-15 Page 6 Exploratory measures initiated by Government…. New Exploration Licensing PolicyCoal Bed Methane Policy  110 Production Sharing contracts in 5 New Exploration Licensing Policy (NELP) rounds  30 discoveries with hydrocarbon in-place reserves of over 600 MMT in last 3-4 years  Investment commitment of about USD 5 bn in exploration phases under NELP  Perception of prospectivity of Indian sedimentary basins reflected in NELP VI response Exploratory Measures  16 Blocks already awarded with production potential of 25 MMSCMD under Coal Bed Methane (CBM) I & II rounds  Significant commercial finds in blocks held by RIL and ONGC  First commercial production of CBM by 2007-08  54 Bids received for 10 CBM blocks offered in the third round  Award of blocks in near future

7. www.imacs.in © IMaCS 2006 Printed 15-Aug-15 Page 7 GSPCRIL OILHOEC ONGC Cairn British Gas Government’s exploratory measures bearing fruits.. Major Upstream PlayersMajor Discoveries YearDiscoveryOperator 2000Gas – Gulf of CambayCairn 2001 Oil & Gas Krishna Godavari Deep waters Cairn 2002 Gas KG Basin Deep waters (World’s biggest discovery for the year) RIL 2003 Oil in Barmer-Sanchor basin (Rajasthan) Cairn 2004 Gas in Mahanadi basin shallow waters RIL 2005Gas in KG Basin shallow watersGSPC 2005Oil in KG Basin shallow watersRIL Source: DGH

8. www.imacs.in © IMaCS 2006 Printed 15-Aug-15 Page 8 Oil Refining Capacity … from shortage to surplus Refinery Capacity in MMT RefineriesNoJune 062006-072011-12 IOC Group1060.2 72.2 BPC Group322.5 30.5 HPC213.016.225.2 ONGC/ MRPL 29.8 RIL133.0 60.0 Essar12.0 18138.5153.7210.0 Refinery Throughput 127 MMT (2005)  Imported Crude – 78%  Domestic Crude – 22% Source: MoP&NG, BP Statistical Review 2006 Refining Capacity more than doubled between 1998 and 2006

9. www.imacs.in © IMaCS 2006 Printed 15-Aug-15 Page 9 Petroleum product exports - a major Foreign Exchange earner Consumption 2005-06 (MMT)Exports ProductMMT% Diesel40.235.9% Petrol8.67.7% LPG10.39.2% Kerosene9.48.4% FO/LSHS12.711.4% Naphtha12.210.9% Bitumen, ATF, Lubes, Solvents 18.516.5% 111.9100%  Sector with vast export potential  Exports increased by about 65% from 2004-05 to 2005-06 Source: MoP&NG, Ministry of Commerce & Industry

10. www.imacs.in © IMaCS 2006 Printed 15-Aug-15 Page 10 Inland Petroleum transportation – gradual shift from railways to pipelines Source: MoP&NG, Infraline, IMaCS analysis Mode of Transportation  Share of pipeline transportation in India much lower as compared to USA, inspite of its advantages  Total POL pipeline length currently under operation in India – 12,204 kms  POL pipelines under implementation – 5,561 kms (Investment of USD 1.5 bn)

11. www.imacs.in © IMaCS 2006 Printed 15-Aug-15 Page 11 Presence of both State and Private players in the Indian oil market… Marketing Infrastructure – Oil Marketing Companies Source: MoP&NG Company Retail Outlets LPG Distributors SKO Dealers IOC11,7394,8563,564 HPCL7,3132,2021,648 BPCL7,3182,1231,014 IBP3,46889381 29,8389,2706,607 Marketing Infrastructure Others Company Retail Outlets ONGC1 NRL58 RIL1,218 Shell12 Essar516 Controlled Pricing Market Determined Pricing Administered Pricing

12. www.imacs.in © IMaCS 2006 Printed 15-Aug-15 Page 12 Massive Investments planned in gas pipelines… Total Investment required in the proposed projects is about USD 15-20 bn Transnational Gas pipelines planned  Iran-Pakistan-India pipeline  Myanmar-India Pipeline  Turkmenistan-Afghanistan- Pakistan-India pipeline Source: MoP&NG, Infraline, IMaCS Research

13. www.imacs.in © IMaCS 2006 Printed 15-Aug-15 Page 13 Contents Market Overview Government regulations & policy Business opportunities and Advantage India

14. www.imacs.in © IMaCS 2006 Printed 15-Aug-15 Page 14 Government regulations have evolved over time in tune with domestic compulsions and international hydrocarbon scenario…. 1947-19621962-19701970-1990 1990-2000Post 2000 Upstream Downstream Setting up of Public Sector Upstream Oil Companies – ONGC (1956) and OIL (1959) Free Investment Multinationals like Shell, Caltex, and Esso conducting operations Dismantling of APM (2002) Passing of Petroleum and Natural Gas Regulatory Board Act, 2006 Nationalization of foreign Companies (1970) Strict Government controls Increasing Government participation Formation of national oil refining companies Coexistence of Public and Private Sectors Liberalised FDI regime Delicensing of Refinery sector (MRPL – 1996) Open marketing of many products Selective private participation Government, the only player Offer of exploration blocks to international oil companies (1979 onwards) Setting up of regulator – DGH (1993) Introduction of NELP Implementation and award of NELP blocks CBM policy

15. www.imacs.in © IMaCS 2006 Printed 15-Aug-15 Page 15 Policy initiatives to attract Foreign Direct Investment…  Upto 100% FDI through automatic route  Through incorporated/ unincorporated Joint Ventures or directly  Upto 100% FDI if set up as a private Indian company  Upto 26% in case of state owned companies  Upto 100% FDI through automatic route  Upto 100% FDI allowed  Approval required from Foreign Investment Promotion Board. Exploration & Production Refining Marketing Product Pipelines Natural Gas/ LNG pipelines

16. www.imacs.in © IMaCS 2006 Printed 15-Aug-15 Page 16 Contents Market Overview Government regulations & policy Business opportunities and Advantage India

17. www.imacs.in © IMaCS 2006 Printed 15-Aug-15 Page 17 India offers significant advantages for the domestic and global oil and gas majors…  Strategic location  Nearness to the premier crude oil and gas supply market (Middle East)  Geographical Proximity to the major petroleum product importers – China and Japan  Well Developed Maritime infrastructure  Government policies conducive to the growth of the sector – tax holidays, Special Economic Zones for Petroleum products  Availability of experienced manpower at lesser costs –Cost advantage  Existence of hi-tech indigenous EPC Companies – lower construction periods  Large domestic market  Anchor customer of the various petroleum products  Possibility of achieving economies of scale Source: IMaCS Research 71 183

18. www.imacs.in © IMaCS 2006 Printed 15-Aug-15 Page 18 Significant Business Opportunities exist for foreign players…  NELP rounds and Open acreage system (Opportunities for providers of services – platforms, rigs, Offshore vessels etc.)  Redevelopment of existing fields to improve recovery factor  Offer of CBM blocks through Competitive bidding route.  Natural gas hydrate programme  Underground coal gasification  Coal to oil conversion  Refining – Expansion of existing capacities, setting up of new refineries, acquiring stakes in these refineries  Ethanol and Biodiesel production – cultivation of Sugarcane and Jatropha  Petroleum marketing – setting up of retail outlets, new product pipelines.  LNG imports  Setting up of LNG Regasification terminals.  Offshore Transshipment (Single Buoy Mooring)  Laying of cross country gas grid and transnational gas pipelines  City Gas Distribution including laying of CGD and CNG networks Upstream Midstream/ Downstream

19. www.imacs.in © IMaCS 2006 Printed 15-Aug-15 Page 19 Key Players in the Indian Oil and Gas Sector Company Fortune 500 Rank Profile 153  India’s largest company by sales (Turnover of USD 37 bn)  India’s flagship Downstream company - Along with subsidiaries accounts for 47% of Petroleum market share among Public Sector Oil Companies, 41% of National refining capacity and 51% downstream pipeline capacity  Operates the largest and widest network of petrol and diesel stations in the country 342  India’s largest private sector company on all major financial parameters  Presence in Upstream, midstream and downstream segment 368  PSU engaged in refining and marketing of petroleum products  Has two subsidiary companies – Kochi Refineries Ltd. And Numaligarh Refineries Limited  Refining Capacity – 22.5 MT (16.25% of India’s refining capacity)

20. www.imacs.in © IMaCS 2006 Printed 15-Aug-15 Page 20 Key Players in the Indian Oil and Gas Sector Company Fortune 500 Rank Profile 378  Another mega Public sector company with focus on refining and marketing  Turnover of about US$ 17 Billion  Accounts for about 10% of India’s total refining capacity 402  India’s Flagship E & P Company  Accounts for 77% of crude oil and 81% of natural gas produced in India  Venturing into downstream refining and marketing All the five Indian companies in the Fortune 500 list are from the oil and gas industry

21. www.imacs.in © IMaCS 2006 Printed 15-Aug-15 Page 21 Global majors present in India  71% stakeholder in Castrol, India’s major lubricant company  Plans to develop a 2.5 MTPA LNG Terminal at Kakinada  Participated in the CBM III and NELP VI bidding rounds – expected to win some blocks  One of the bidders for strategic sale of HPCL  Presence in both upstream and downstream  Stakeholders in Tapti gas fields and Panna/Mukta oil and gas fields, Cambay basin block  Interests in city gas distribution through participation in Gujarat Gas Limited and Mahanagar Gas Limited  Leverages its distribution assets to operate Broadband service, Iqara  Among the top FDI investors in India (Hazira port and LNG terminal project – milestone for FDI in the sector)  Interests in both upstream and downstream (LNG, Lubricants, LPG, Bitumen, retail fuels and even solar energy)

22. www.imacs.in © IMaCS 2006 Printed 15-Aug-15 Page 22 Global majors present in India  Owns 10% stakeholder in Petronet LNG Limited, a JV promoted by Indian public sector companies to set up LNG terminals to import LNG  5% stakeholder in Reliance Petroleum Limited’s proposed new refinery at Jamnagar  Possibility of increasing the stake to 29%  Wholly owned subsidiary TotalFinaElf, a major player in lubricants market  Another 100% subsidiary ElfGas India Ltd owns and operates LPG Import Terminal at Mangalore  50% stakeholder in LPG Import terminal at Visakhapatnam

23. www.imacs.in © IMaCS 2006 Printed 15-Aug-15 Page 23 The India Brand Equity Foundation is a public-private partnership between the Ministry of Commerce & Industry, Government of India and the Confederation of Indian Industry. The Foundation’s primary objective is to build positive economic perceptions of India globally India Brand Equity Foundation c/o Confederation of Indian Industry 249-F Sector 18, Udyog Vihar Phase IV Gurgaon 122015, Haryana, INDIA Tel +91 124 401 4087, 4060 - 67 Fax +91 124 401 3873 Email ajay.khanna@ciionline.org Web www.ibef.org

24. www.imacs.in © IMaCS 2006 Printed 15-Aug-15 Page 24 ICRA Management Consulting Services Limited Disclaimer  This presentation has been prepared jointly by the India Brand Equity Foundation (“IBEF”) and ICRA Management Consulting Services Limited, IMaCS (“Authors”)  All rights reserved. All copyright in this presentation and related works is owned by IBEF and the Authors. The same may not be reproduced, wholly or in part in any material form (including photocopying or storing it in any medium by electronic means and whether or not transiently or incidentally to some other use of this presentation), modified or in any manner communicated to any third party except with the written approval of IBEF.  This presentation is for information purposes only. While due care has been taken during the compilation of this presentation to ensure that the information is accurate to the best of the Author’s and IBEF’s knowledge and belief, the content is not to be construed in any manner whatsoever as a substitute for professional advice.  The Author and IBEF neither recommend or endorse any specific products or services that may have been mentioned in this presentation and nor do they assume any liability or responsibility for the outcome of decisions taken as a result of any reliance placed in this presentation.  Neither the Author nor IBEF shall be liable for any direct or indirect damages that may arise due to any act or omission on the part of the user due to any reliance placed or guidance taken from any portion of this presentation.