Oil and Gas Industry of India – Opportunity for Investors

The oil and gas industry is amongst the six core industries in India. This industry is a major factor for the growth being witnessed in the Indian economy today. The natural gas and petroleum sector, which is inclusive of refining, transportation, and marketing of these products, contributes about 15% to India’s GDP.

Exports from petroleum are the highest in terms of the foreign currency amassed and accounts for 17% of the total exports. The Economic Affairs Committee gave 44 oil and gas blocks for exploration under the New Licensing Policy. These allocations will bring investments worth US$ 1.5 billion in this sector.

As this is an ever growing sector, investment in oil and gas industry promises a great deal.

Investment Opportunities

• Refining: India is rising as a potential refining hub because the capital costs are lowered by 25-50% here in comparison to other Asian countries. India ranks fifth in the category of refining. Its share is 3% of the capacity worldwide and is going to improve further by 45% over the next 5 years. This is in accordance with a report compiled by Deutsche Bank.

• Retail: A surge in the automobile market has led to investments for extending the petroleum sector. According to Keystone, a US consultancy, the automobile industry is poised to grow to 20 million by 2030. This makes India the 3rd-largest market for automobiles worldwide. Thus, the need for more petroleum and petroleum-based products is going to rise further.

• Gas: The power and fertilizer sectors in India drive the demand for gas in the country. They use 66% of the total gas produced. The demand for gas is set to grow; thus, the natural gas share in the overall mix is projected to rise from 8% to 20% by 2025.

The investments by public sector oil companies is going to be US$ 11.33 billion to expand supplies and build new networks for transportation of oil and gas.

The policies of the government are a further boost to foreign investment in this industry.

These are government initiatives

1. 100% FDI is allowed in private refineries via the automatic route and up to 26% in government-owned ones.

2. 100% FDI is also granted in cases of petroleum products, gas pipelines, exploration, and marketing or retail via the automatic route.

3. It has also abolished the administrated pricing policy.

4. With NELP (New Exploration Licensing Policy) it has helped encourage further explorations for oil and gas reserves in India.

Growth Prospects

India’s energy sector will be instrumental in providing avenues worth US$ 120 billion to 150 billion over the coming 5 years. As per the Investment Commission, the opportunities in the oil and gas sector are projected to reach US$ 35-40 billion by 2012.

Another reason that investments in this sector can be useful is that crude oil coming from the Middle East region can easily be transported to India. Also, India offers cost-effective refining technologies.

As the energy sector is never going to slow down or lose its sheen, the growth prospects are enormous in this industry.