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Energy Conclave 2006

Energy Conclave 2006. “Challenges of the Oil Sector”. Gautam Sen Executive Director, ONGC. New Delhi 26 th July 2006. Since the dawn of the Oil-age, we have consumed about 950 billion barrels… .... 280 billion barrels (30%) in last decade only.

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Energy Conclave 2006

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

  2. Since the dawn of the Oil-age, we have consumed about 950 billion barrels… .... 280 billion barrels (30%) in last decade only Estimates of oil still in the ground are suspect… The figures quoted are 1.2 trillion barrels

  3. 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 Agenda

  4. 12 1400 1200 10 1000 World Population 8 800 Energy Consumption (Qbtu / yr) Population (Billions) 6 World Energy Consumption 600 4 400 2 200 0 0 2000 2050 2100 1900 1950 Year Growing hunger…Global Source: IEA 1 QBTU (Quadrillion BTU) = 1015 BTU

  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 2031-32 (GDP rate :8%) Source: Draft Report of the Expert Committee on Integrated Energy Policy

  7. E&P Scenario

  8. E&P Scenario…Global Reserve accretion … trickling down “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

  9. Oil consumption 50% higher than it was in 1985 E&P Scenario…Global … growing gap • Average annual growth of world oil demand • 1991-2002: Less than 1.0 million bpd • 2003: 1.5 million bpd • 2004: 2.6 million bpd • Discovery of Giant Fields (> 500 million barrels) • 2000: 16 • 2001: 9 • 2002: 2 • 2003: NONE Out of 85 million bpd oil production today, only 15 million bpd is coming from New fields Source: The G forces of Energy Insecurity; C D Ruppel, 2006

  10. E&P Scenario…Global Reserve replacement… Source: http://www.hubbertpeak.com/curves.htm

  11. E&P Scenario…Global Discovery Trend & Peak Oil • About 80% of oil produced today comes from fields discovered before 1973. • Most of these fields are declining Every 12 days one billion barrels of oil is produced and consumed. Source: http://www.hubbertpeak.com/curves.htm

  12. E&P Scenario…the Hubbert’s way “Prediction is difficult, especially of the future.” Niels Bohr Source: http://www.hubbertpeak.com/curves.htm

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

  14. E&P Scenario…Global Oil Reserves…end 2005 1200.7 Middle East 742.7 Europe & Eurasia 140.5 Africa 114.3 S-America 103.5 N- America 59.5 Asia Pacific 40.2 *Source: BP statistical review-2006

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

  16. E&P Scenario…Global Difficult terrain…difficult sources New Areas • Tar sands of Alberta • Heavy oil of Venezuela 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) Venezuela's Orinoco heavy oil belt is the best known example of this kind of unconventional reserve. Estimated reserves: 1.2 trillion barrels Source: http://en.wikipedia.org/wiki/Tar_sands

  17. E&P Scenario…Global Difficult terrain…difficult sources • Tar sands of Alberta • Heavy oil of Venezuela • Prospects at Polar regions • Shale oil of Arunachal 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: http://forum.atimes.com

  18. E&P Scenario Indian perspective The Challenges

  19. E&P Scenario…India India’s total reserve (~1812 MMT*) 0.56% of World Reserve ONGC Reserves (MTOE) 650 MMT of in-place reserve (O+OEG) added by ONGC in last 5 Years *Source: BP statistical review-2006

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

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

  22. E&P Scenario…India Total Sedimentary area – 3.13 Million Sq. Km • 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 Source: Petroleum Exploration & Production Activities, India, 2004-05, DGH

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

  24. E&P Scenario…India More deregulation & increasing private participation Licensed Domestic Exploration Area (2005) Leased Domestic Production Area (2005) • ONGC holds the largest portion of leased acreage for oil and natural gas production, accounting for 56% of the area • Exploration is dominated by ONGC with 58% of the total area licensed by the GOI Source: Directorate General of Hydrocarbons, 2004-05 report

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

  30. E&P Scenario…ONGC Thrust areas: Marginal fields Economics have changed … Marginal fields are no longer marginal • 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 MMm3/day gas

  31. E&P Scenario…ONGC Major E&P Projects of ONGC * Yet to be approved

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

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

  34. E&P Scenario…ONGC 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 2007. • Pilot Project with 2 MMT Crude oil capacity

  35. New Oil equity

  36. Equity oil…OVL Energy beyond boundaries MMT

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

  38. 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 Equity Oil…OVL Road blocks OVL needs Empowerment

  39. Prices…hot…hotter

  40. Oil Prices

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

  42. Oil Prices Oil prices & Project Management

  43. Oil Prices Energy Return On Energy Invested …is diminishing as we resort to going after the hard-to-get oil: • 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 “The Party’s Over”, Richard Heinberg

  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 Issues of concern Energy Resource "Nationalism"

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

  47. Thank You

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