Oil & Gas Sector : Opportunities and Challenges

Oil companies are under pressure to prepare for a possible low-carbon future.

There is a fear of being too late to embrace newer energy sources, matched by equally high risks in moving too fast

In such a scenario, oil companies are likely to take a two-pronged approach: diversify into new sources of energy while capitalizing on growth opportunities in conventional forms of energy

A closer look at India’s energy mix reflects a clear trend towards gas and renewable. But there is no imminent danger to demand for oil, forecast to grow at least until 2040

Today, the major fossil fuels account for more than 90% of India’s total primary commercial energy supply (TPCES).

At present, India’s import dependence in the oil and gas sector is significant and the PM has set a target to reduce dependence on crude imports by 10% by 2022

India needs to be aggressive in looking out for the best prices and competing supply sources

With 3.14 million sq. km of potential reserves lying unexplored until 2016, India’s potential in the oil and gas sector is immense and there exists vast headroom for new discoveries

Another area that calls for attention is enhanced oil recovery. With the global average recovery factor for a typical oilfield being around 40%, a substantial amount of identified oil ends up as leftover despite existing production infrastructure

There is a need to enhance recovery from oilfields to reduce import dependence

India has emerged as a refining hub in Asia, serving a massive domestic market for refined petroleum products and even exports

Also, the government’s push towards a gas-based economy has given significant thrust to liquefied natural gas (LNG) imports, given the low domestic natural gas output

Both these elements present an opportunity for India’s downstream and midstream oil and gas sectors

The key to enhancing efficiency lies in the optimum utilization of resources and adoption of the latest technologies

Some of the key areas to focus in the mid- to long-term include enhancing

With major fuels in India deregulated, retailers must focus on their sale and distribution networks. Similar efforts should be made for petrochemicals too

Strengthening the sales and distribution network for petrochemicals will ease margin pressures for distributors, while ensuring reliable supply for small to mid-sized distributors

The current distribution network is concentrated around a few producers, calling for the development of a strong network

To sum up, Indian stakeholders need to adopt an aggressive but cautious approach to fully harness the opportunity created as a result of changing dynamics in the global oil and gas sector