The government is trying to expedite domestic exploration as the country?s dependence on imported oil and gas goes up. However, a perception has emerged that regulatory and policy uncertainty is fast returning to haunt the sector and could turn off investors from the industry which has attracted over $14 billion in investments since 1999. While the refining sector is beset by excess capacity, retailing is unable to attract private investment because of the prevailing subsidy regime. Gas producers are disappointed over what they call denial of tax holiday on a par with oil producers. But GE-Oil and Gas, a major equipment supply and installation player in the sector, remains positive about the resilience of the domestic oil and gas industry. Mrinal Vohra, CEO of GE-Oil and Gas for India Region, discusses his company?s business plans with FE?s Noor Mohammad. Excerpts:
What is your growth outlook on the Indian oil and gas industry?
As India continues to take the global stage as one the fastest growing economies, the demand for energy is expected to increase manifold and would make India the third largest energy consumer globally by 2020. Steps in the right direction have been taken, including the NELP rounds and the 100% FDI investment approvals, by the government of India. Despite all these efforts, only half of the country?s potential basins have been explored, and large blocks offshore remain untested, especially in deep water. We believe that this presented a huge growth potential for the oil & gas companies in India to play across the value chain.
With the current oil production level of around 815,000 barrels per day, on estimated reserves of 1.2 bmt (billion metric tonne), the reserves-to-production ratio is 25 years. And the on the gas side, the current production level is around 40 bcm (billion cubic metres) per year on an estimated reserves base of around 1,500 bcm, translating to a reserves-to-production ratio of more than 30 years.
The nine rounds of NELPs have seen 247 blocks being awarded, but only 16 of those have been developed so far and only one out of the 83 deep-water blocks have been developed. On the unconventional side, there are bright established results of shale and CBM (coal bed methane) reserves. So from a growth outlook standpoint, we are very optimistic about future growth perspective for the oil & gas industry in India.
Currently, what is your focus area-upstream or downstream?
GE Oil & Gas is committed to support customers across the entire oil and gas value chain. GE Oil & Gas today fosters cross-pollination of best-in-class technologies from its sister business units like the usage of composites used in GE Aviation to develop the next generation deep water risers and the usage of scanning techniques from GE Healthcare to develop a highly reliable UltraScan Duo.
Our broad experience and deep domain knowledge of various industries are applied in the oil & gas Industry to offer Industry?s most comprehensive products and technologies that continually break new ground in terms of operational efficiency, productivity, reliability, safety and environmental performance. Today we take GE?s Safety, Integrity and Quality culture to segments such as Deep-water & Surface Exploration & Production where our upstream portfolio features structured tree configurations with integrated controls for both shallow & deep water, manifolds, risers & subsea connectors, subsea compression and power distribution. We are key players in the LNG space where we supply mission critical equipment to a large number of LNG facilities worldwide.
Has the high oil price been useful in attracting investment in the Indian hydrocarbon sector? If not, why?
India has witnessed unprecedented levels of economic expansion driven primarily by demographic changes and rapid industrialisation, causing a surge in demand for automobiles and transportation. However, this rapid surge in demand for hydrocarbons has not translated proportionately in domestic exploration and production (E&P) growth in the oil and gas industry. Just to give you an idea India had committed to produce 206.8 million tonnes (mt) of crude oil during 2007-2012 but the actual production was only 176.9 mt during the same period, that translated into an additional $20 billion import bill for the country purely on imported hydrocarbons. If the government objective continues to be energy self-sufficiency, the situation will have to change and we trust the government will continue to pursue a policy that is favourable to the development of the hydrocarbon sector.
Refining capacity is growing fast in India. Do you think this is a sustainable trend?
India?s demand for energy has risen by more than 70% in the last ten years. And this trend is expected to continue in the next decade making India the third largest energy consumer globally by 2020. With the growth in automobiles, power and fertilisers, oil and gas as an energy source now represents more than 45% of the country?s total energy consumption. This paves the way for the sustainable growth of the downstream industry in India especially refining. The total installed crude oil refining capacity in the country at the end of March 2011 was 187 million tonnes per annum. The capacity utilisation of these PSU refineries was 97.7% during 2010-11 as against 114.4% for the private refineries during the same period. These are highly commendable numbers from a global average standpoint.
We also hear about plans of 27 mtpa capacity addition in the PSU refining sector and 43 million mtpa as an overall industry. A case-in-point is that Reliance Industries is said to be planning to ramp up the capacity of its twin-refineries, making it the world’s largest single-location refining complex. These are all positive trends that reassure that the Indian refining industry is heading in the right direction.
Do you think that MNCs have a level-playing field? If not, why?
India over the last few years has made rapid strides in many areas of economic activity, clear front runners are in the field of information technology, business process outsourcing, and manufacturing. Little did we realise (in the early 90s) that liberalisation would bring about such a huge growth for the economy. While at the beginning one of the main issues for MNCs was to have a level-playing field, now MNCs realise that their objective and challenge is to localise their operations in the country to better address the needs of the local market. India is a vast, yet dynamic, market-place and one has to be on the continual learning mode to really understand the Indian market.
India is a unique market in several ways due to its vast demography, cultural divides and emerging middle class. We in GE believe that to harness this market we need to have localised operations in India. We understand and appreciate the unity-in-diversity culture of the Indian people, With 14,000 people employed across India; GE has deep roots in the Indian work ethos and immense respect for its diverse people. With a significant footprint in the country, we believe it is our people and our integrity that truly define us and makes us uniquely positioned to grow in India.
