Indian energy firms lay out big plans
By Siddharth Srivastava
NEW DELHI - India's state and private firms have chalked out big-ticket
investment plans - both in the upstream and downstream segments - to meet the
country's growing demand for energy.
Its main competitor, China, has been aggressively scouting for energy sources
worldwide, as well as beating Indian firms in their own back yard - Myanmar and
now, reportedly, Bangladesh.
India's energy companies have their work cut out for them.
New Delhi has announced plans to spend about Rs2.7 trillion
(more than US$66 billion) in the oil-and-gas sector during the 11th Plan period
(2007-12), a 160% jump from the 10th Plan's outlay of Rs1.04 trillion.
New Delhi has also formulated a new open-acreage licensing policy, which allows
foreign firms to bid for oil and gas blocks of their choice. India plans to
auction 80 new oil and gas blocks in August.
Indian energy companies have been looking to tap energy sources from countries
as diverse as Syria, Russia, Yemen, Iran, Iraq, Nigeria, Egypt, Sri Lanka,
Myanmar, Bangladesh, Suriname, Turkey and Central Asia.
India's power and upstream energy sectors, such as coal, oil and gas, need
investments to the tune of $120 billion to $150 billion over the next five
years, according to a recent report from professional services firm KPMG.
State-controlled Oil and Natural Gas Corp (ONGC) has said it is planning to
invest $2.44 billion (more than Rs100 billion) in exploring for oil and gas in
four northeastern states, Tripura, Mizoram, Assam and Nagaland.
ONGC is planning to enhance its outlay for 2007-12 by more than 151%. The
company's proposed outlay in 2007-12 is about Rs830 billion, a significant jump
from Rs330 billion in the 10th Plan.
The company is looking to raise Rs70 billion ($1.65 billion) to fund the
expansion of its refinery in Mangalore, Karnataka. ONGC also has plans to set
up a 15-million-ton refinery at Kakinada, in the southern Indian of Andhra
Pradesh, at a cost of $2.5 billion.
State-run Gas Authority of India Ltd (GAIL) has plans to invest about Rs250
billion in laying new pipelines and expanding its petrochemical business during
the next five years.
"Out of the total capex [capital expenditures], Rs100 billion will be funded
from internal resources and the remaining Rs150 billion will be borrowed from
domestic and overseas markets," GAIL finance director R K Goel said recently.
The company has an investment portfolio of new gas pipelines, petrochemicals,
oil and gas exploration and new projects.
GAIL has chalked out a strategy to nearly triple revenues to $11 billion over
the next four years.
The company is promoting an integrated petrochemical complex proposed to be set
up in Assam at a cost of Rs54 billion. The complex has been configured with a
capacity of 220,000 tonnes per annum of ethylene and 60,000 tons per annum of
propylene.
Flagship refiner Indian Oil Corp has plans to build a new
300,000-barrels-per-day refinery and petrochemical complex at Paradip, in the
eastern state of Orissa, for Rs256 billion and upgrade its existing refineries.
The company, which currently has a refining capacity of 1.2 million barrels per
day, said this week that it also plans to invest Rs32.75 billion in exploration
activities and new ventures such as gas distribution.
Private energy firms are also in an expansion mode. Last year, the two biggest
primary equity offerings were by energy firms - Cairn India (Rs57.89 billion)
and Reliance Petroleum (Rs27 billion).
Reliance Industries Ltd (RIL), India's first company worth more than $50
billion, recently said it would invest $9.2 billion to produce and pipe natural
gas from fields around the country's southeast coast.
"The company will begin producing 40 million cubic meters per day by June 2008
and raise it to a peak output of 80 million cubic meters in the next five
months," said P M S Prasad, chief of the company's oil-and-gas arm.
Prasad said the company will plow $5.2 billion into production in the Godavari
River basin, where it won exploration and extraction rights from the Indian
government.
The company will invest $4 billion to lay a 1,386-kilometer pipeline from the
southeastern state of Andhra Pradesh to Gujarat state to transport natural
petroleum gas.
Reliance will complete the world's largest refinery complex next year and soon
start piping 50 million cubic meters of gas per day.
The company's revenue for 2006-07, earned from refining and chemicals, rose 24%
to Rs1.1 trillion. RIL is sitting on an estimated 11.2 trillion cubic feet of
reserves in the Krishna-Godavari (KG) basin, which was discovered in 2002.
In one of its biggest investments in India, Arcelor Mittal will invest close to
$1 billion in a joint venture with India's state-run Hindustan Petroleum Corp
Ltd and pick up a 49% stake. The joint venture will, through a special-purpose
vehicle, build the Bhatinda Refinery with an investment of about $4.4 billion.
The project involves the construction of a 9-million-tonnes-per-annum refinery,
a captive 175-megawatt power plant, and a 1,011km crude-oil pipeline between
Mundra, Gujarat, and Bhatinda, Punjab state.
Another big-ticket plan is by Essar Global, which is looking to invest $3.4
billion in a proposed 300,000-barrels-per-day oil refinery in northern Egypt.
Tata Steel is planning to invest $900 million in a greenfield venture in Egypt
as well.
A consortium of ONGC, British Gas and RIL will invest Rs21.92 billion in the
Panna-Mukta-Tapti fields off the west coast.
The efforts are paying dividends. Recently, Reliance made its 18th discovery in
the prolific KG-D6 block off the east coast. RIL has also announced a
hydrocarbon discovery in the Gujarat-Saurashtra basin on the west coast.
Cairn India Ltd, the Indian unit of UK-based energy explorer Cairn Energy Plc,
announced two oil and gas discoveries in Rajasthan last month.
Indian officials said that the international arm of ONGC, ONGC Videsh Ltd
(OVL), struck natural gas in Iran's Farsi block, with reserves estimated at 10
trillion cubic feet.
Gujarat State Petroleum Corp Ltd has also reported big gas finds in the KG
basin, and New Delhi has estimated that India will be a gas-surplus nation in
the next two years.
However, there is still a way to go. The capacity addition for the power sector
has been revised downward by 43.44%.
Prime Minister Manmohan Singh this week said inadequate electricity and
pilferage could badly harm India's growth prospects. The shortage of
electricity means greater use of diesel-based backup power plants and
generators.
India may be the 11th-largest consumer of oil and gas in the world, but it
accounted for just 0.37 % of overall deals worth $291 billion in 2006,
according to a study by PricewaterhouseCoopers. However, analysts predict that
the percentage will increase significantly in the near future.
Siddharth Srivastava is a New Delhi-based journalist.
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