Oil and Petroleum Industry Analysis
Oil and Petroleum Industry Analysis
Oil and Petroleum Industry Analysis
Industry Awareness
Oil and Petroleum Industry
Section A, Group 8 PGP-1 2012-13
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Agenda
Overview Major Players Indian and International Scenario Petroleum Industry life cycle M&A Technological trends & innovations Key drivers of Growth and Price Key financial performance indicators (KPIs) Impact of Budget 2011-2012 Regulations- Global and Indian perspective Summary
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Global Reserves
India
1349 billion bbl 0.7% of total (5.7 billion bbl) 82.095 million 1% of global bbl (8.209 million bbl) 87.382 million bbl 3.9% of global
Production
Consumption
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Saudi Aramco National Iranian Oil Company Qatar petroleum Royal Dutch Shell Exxon Mobil Corporation
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BPCL (Bharat Petroleum Corporation Limited) HPCL (Hindustan Petroleum Corporation Limited) IOCL (Indian Oil Corporation Ltd) ONGC (Oil and Natural Gas Corporation) RIL (Reliance India Limited) Essar
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Steep rise in prices towards end of 1970s and Global Recession. By 1982, non-OPEC countries produced more oil than OPEC countries OPEC production peaks in 2009 and Non-OPEC production peaks in 2003 OPEC production exceeds non-OPEC production in 2007
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Downstream Entry Barriers - Entry restricted into auto fuel marketing. Distribution & logistics intensive sector Internal Rivalry among firms Low due to high demand. Mostly keen in deregulated products, e.g. lubricants Bargaining Power of buyers - High with bulk /corporate customers, who can purchase products from 10 competitors 10 Bargaining Power of suppliers - Marked by
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% of Indias GDP Indian Oil and Gas Industry have been effective in driving the rapid progression of the Indian economy. Crude Oil Important commodity to import
Given Annual
fuel subsidies 110000 crore Rated as Stable by Fitch Ratings Fossil fuel price escalations has given rise to wholesale price index inflation
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CNOOC has announced the acquisition of Nexen for nearly USD 15.1 billion. Kinder Morgan divested all of the oil and gas exploration and production assets of El Paso Corp for approximately $7.15 billion. Reliance Industries and BP have completed the $7.2billion deal in which the British company will pick up 30% in 21 blocks in August 2011. ONGC and Cairn (Rajasthan Joint Venture) have commenced production from the Bhagyam Field in Rajasthan.
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Extracting heavy oil XTL technology Monotowers Carbon capture and storage Use of technology to work at remote places
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Raw
Material Constraints Large constraint as India depend upon import for 80% of its crude supply demand for Petroleum Petroleum by products is an important input in various industries for the following
Growing
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Factors
-Global
Scenario Regulations
-Government -Taxes
and Subsidies
control discourages innovation. control, subsidies and taxes can introduce distortions
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Company
(INREBITDA Million)
(INRNet
Profit
Million)
P/E
ROE (%)
HPCL
1602087
55162
9120
26.3
55.9
7.1
BPCL
2119638
46369
8513
21.6
32.5
ONGC
1463700
577700
284300
29.2
8.7
19.9
IOCL
3742483
173166
78307
32.1
9.3
12.8
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Company
(INREBITDA Million)
(INRNet
Profit
Million)
P/E
ROE (%)
HPCL
1147962
22005
16364
48.3
5.8
13.6
BPCL
1536450
42762
17570
45.6
15.4
11.2
ONGC
1176200
484600
224600
26.3
9.6
20.9
IOCL
3106254
150243
77976
32.3
9.3
14.2
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Enforce retail & marketing service obligations for retail outlets and entities
Government Regulations
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Development of natural gas pipelines Promote investment from the public and private sectors Ceiling rate for transportation charges
Government Initiatives
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FDI
100% in private and 26% in government refineries Marketing permitted subject to minimum investment in oil and gas sector
level the playing field in the upstream sector between private and public sector companies
APM- prices controlled at production, refining, distribution and marketing Moving away from subsidies
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Organization of Petroleum Exporting Countries- Gulf Countries OPEC -79% of world crude oil reserves and 44% of the worlds crude oil production
Do not deal with energy as a distinct sector Increasing energy needs have led to a growing interest in competition rules and export restriction practices.
Substantially larger amount of energy trade is now in the hands of WTO Members trade.
Indian Scenario
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Subsidies
High subsidies due to high global prices of crude petroleum Rs. 1, 31,212 Crore in 2010-2011 1.5 per cent of GDP in 2011-2012
Subsidizing both the rich and the poor Government paying for under-recoveries- No incentives Absence of price signaling
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100% Foreign participation allowed Option to amortise exploration and drilling expenses Production Sharing Contracts (PSC) signed on blocks of land for exploration; No cess levied
NELP-VI 55 exploration blocks (24 deep water, 6 shallow water and 25 on land) on offer
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Budget Proposals: Direct Taxes Exemption to foreign company selling crude oil in India Relaxation to foreign companies selling crude oil in India Indirect Taxes Cess levied -increased from Rs. 2500/- to Rs. 4500/- per metric tonne Blow to oil producers Government Subsidy Oil subsidy aimed at Rs. 43,580 Cr; 36% below the FY12
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Company
Industry
Impact
Comments Will be hit by the increased cess and decrease in subsidy provision Under-recoveries are expected to increase with the reduced subsidy allocation. However, being eligible for viability gap funding sector is a positive.
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Thank You