Oil & Natural Gas Industry

Oil & Natural Gas Industry

The oil & natural gas sector is recognized as one of the eight core industries in India and for which it plays a very important role
which is also responsible for the institution to make major influencing decisions that further affect the other sections of the
economy. Not in the very far past the GOI has allowed full-fledged FDI in many sectors including this and that is now a reason to
attract far more domestic as well as foreign investments such as RIL & Cairn India. As far as figures are concerned India has a
capacity of 4.5 thousand million barrels of oil reserve at the end of 2018 and produced 39.5 million tonnes in 2018. The country has
a 10,419 km stretched crude oil pipeline with a capacity of 145.6 Million Metric Ton Per Annum (mmtpa).
Market Size:
 India is expected to be one of the strongest and largest contributors to non-OECD petroleum consumption growth globally. The
imports in India rose significantly to USD 87.37 billion in 2017 18 from which was USD 70.72 billion in 2016 17. This is the reason behind maintaining the third spot in the largest consumer of oil in 2017 with a consumption of 4.69 Million Barrels Per Day (mbpd) in 2017 for the country. In Asia, India is considered as the second-largest oil refining capacity holder with a capacity of 238.60 million tonnes, of which 35.36 % is owned by private companies. The crude oil production of India in July 2019 was reported to be 2,769 thousand tonnes with an oil reserve of 600 million metric tonnes as of 2017. In FY19 the crude oil imports were valued at USD 111.96 billion with an increase of 4.41 mbpd in FY 18.
 India also has attracted investors all around the globe with a total FDI of USD 7.07 billion in the last decade. Various MOUs we resigned for example between ExxonMobil & ONGC, NSIC & ARAMCO Asia. Further, the previously known Reliance Gas Transportation Infrastructure is now acquired by Brookfield for Rs 13,000 crores(USD 1.80 billion). The starting of 2020 also saw INDMAX refining technology which is owned by IOCL has provided the license to the NIS(Naftna Industija Srbije) of Recently the industry has experienced a huge setback in April with Oil prices gone negative. The recent events reflected the global price war between the huge players amidst the global pandemic in the market which contributed to the increased dismissal outlook of the global economy and which thus leading to the steep decline in the prices of crude oil. The falling prices had an appositive fallout for the Indian economy since 80% of the oil requirements are met through imports in the country.
 The country has eventually used this development to improve the fiscal position of the country, though it must achieve way more than that. Moreover, there will be a significant impact on the price variation of key raw materials, the supply chain system, cash
flow, etc. On the customer side due to limited travel, there is less demand which reduced the consumption and not being sure as
to when the economy will restart will have a potential impact on the country’s economy. The impact in this industry will follow and
have a significant effect on the Aviation industry as well since the demand for Airplane fuel and Turbine fuel has declined. As of household and commercial fuel, there has been an increase in consumption and since that LPG is also imported (40-50%), that is expected to impact the supply chain.
 Amidst this crisis, the government should provide the labor class and daily wagers price support & DBT for kerosene and LPG.
Further, the GOI can reduce excise & state VAT on crude prices for healthy flow for retail consumption There have also been recommendations on policies by various market research institutions in terms of tax & compliances which include rolling out of
GST for the fuel & gases. Further for easing the stress in the sector, the banks need to provide short term borrowings which will
maintain the cash flow in the sector.

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