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Energy Conclave 2006
“Challenges of the Oil Sector”
Gautam SenExecutive Director, ONGC
New Delhi26th July 2006
Estimates of oil still in the ground are suspect…
The figures quoted are 1.2 trillion barrels
Since the dawn of the Oil-age, we have consumed
about 950 billion barrels…
.... 280 billion barrels (30%) in last decade only
Agenda
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
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op
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En
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Qb
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yr)
WorldPopulation
World EnergyConsumption
19501900
10
Year
Growing hunger…Global
1 QBTU (Quadrillion BTU) = 1015 BTUSource: IEA
Growing hunger…India
15% of the World’s population0.5% of the World’s Oil & Gas reserves
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
China India
2005: World consumed 3.84 Billion Tons of oil and in India consumption was 116 Million Tons
Source: BP Statistical Review, 2006
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
0
500
1000
1500
2006-07 2011-12 2016-17 2021-22 2026-27 2031-32
Hydro Nuclear Coal Oil Natural Gas
E&P Scenario
“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
E&P Scenario…Global
Reserve accretion … trickling down
Discovery of Giant Fields (> 500 million barrels)
• 2000: 16• 2001: 9• 2002: 2• 2003: NONE
Oil consu
mption
50% higher than it
was
in 1985
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
Source: The G forces of Energy Insecurity; C D Ruppel, 2006
… growing gap
Out of 85 million bpd oil production today, only 15 million bpd is coming from New fields
E&P Scenario…Global
Reserve replacement…
Source: http://www.hubbertpeak.com/curves.htm
E&P Scenario…Global
E&P Scenario…Global
• About 80% of oil produced today comes from fields discovered before 1973.• Most of these fields are decliningGLOBAL: Oil discoveries 1900 to present day
0
10000
20000
30000
40000
50000
60000
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
Year
mm
ba
rre
ls o
f o
il p
er
ye
ar
© www.energyfiles.com
Offshore peak
Production forecast
Burgan
Ghawar
Discovery forecast
Daqing
Kirkuk
Onshore peak
Mumbai High
GLOBAL: Oil discoveries 1900 to present day
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20000
30000
40000
50000
60000
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010 2020 2030 2040 2050
Year
mm
ba
rre
ls o
f o
il p
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ar
© www.energyfiles.com
Offshore peak
Production forecast
Burgan
Ghawar
Discovery forecast
Daqing
Kirkuk
Onshore peak
Mumbai High
Every 12 days one billion barrels of oil is produced and consumed.
Discovery Trend & Peak Oil
Source: http://www.hubbertpeak.com/curves.htm
E&P Scenario…the Hubbert’s way
“Prediction is difficult, especially of the future.”
Niels Bohr
Source: http://www.hubbertpeak.com/curves.htm
43,000 Oil and Gas Fields
575 World Sedimentary Basins
360 non-productive
215 known productive
Oil & Gas Basins
90% of world oil & gas production comes from 10% of these basins
E&P Scenario…Global
E&P Scenario…Global
Middle East742.7
Europe & Eurasia140.5
Africa
114.3
S-America
103.5N- America
59.5Asia Pacific
40.2
1200.7
Oil Reserves…end 2005
*Source: BP statistical review-2006
The point of this graphis that they ALL increasedand ALL in the same time period.
In 1986 and 1987 OPEC countries markedly increased their reserves!
E&P Scenario…Global
The day…when OPEC linked one’s production quota to its
reserve!!
Dubious reserve
Difficult terrain…difficult sources
Tar sands of Alberta
Heavy oil of Venezuela
E&P Scenario…Global
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)
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
Venezuela's Orinoco heavy oil belt is the best known example of this kind of
unconventional reserve. Estimated reserves: 1.2 trillion barrels
New Areas
Source: http://en.wikipedia.org/wiki/Tar_sands
Difficult terrain…difficult sources
Tar sands of Alberta
Heavy oil of Venezuela
Prospects at Polar regions
Shale oil of Arunachal
E&P Scenario…Global
Arctic Oil: “How much” depends on “Who’s talking”
Proponent says: 16 billion bbl
Opponent says: 3 billion bbl
Arctic Oil: “How much” depends on “Who’s talking”
Proponent says: 16 billion bbl
Opponent says: 3 billion bblIndia 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
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
Indian perspectiveThe Challenges
E&P Scenario
E&P Scenario…India
As on 1.4.2006 Oil Gas O+OEG
Initially In-place 4,564 1,688 6,252
Ultimate Reserves 1,288 942 2,230
Cumulative Production 726 419 1,145
Reserves 562 523 1,085
ONGC Reserves (MTOE)
India’s total reserve (~1812 MMT*)
0.56% of World Reserve
India’s total reserve (~1812 MMT*)
0.56% of World Reserve
*Source: BP statistical review-2006
650 MMT of in-place reserve (O+OEG) added by ONGC in last 5 Years
E&P Scenario…India
Dependence on import increased from 51% in 1994 to 69% in 2005
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40
60
80
100
120
1 2 3 4 5 6 7 8 9 10 11 12
MM
T -
-->
Production Consumption Import %
Oil Production & consumption
546
715 668
854
1,341
1,717
915
0
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1200
1600
2000
1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06
Oil Import…major FE outgo
Rs Billion
27% of India’s total imports (Rs 6,356 Billion)
Source: PPAC Ready Reckoner, May 2006 and www.rbi.org.in; ---------Provisional
E&P Scenario…India
Source: Petroleum Exploration & Production Activities, India, 2004-05, DGH
E&P Scenario…India
Unexplored22%
Moderate/ well explored
19%
Poorly Explored
22%
Exploration initiated
37%
• 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
Total Sedimentary area – 3.13 Million Sq. Km
250
500
750
1000
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Proved Reserves in’MT
Source: BP Statistical Review of World Energy 2006
0
25
50
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
Production in’MT
0
25
50
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005
R/P
Production hovering around 36.0 MMT
R/P stationery around 20
Production hovering around 36.0 MMT
R/P stationery around 20
E&P Scenario…India
India’s total reserve (~1812 MMT)
0.56% of World Reserve
India’s total reserve (~1812 MMT)
0.56% of World Reserve
E&P Scenario…India
Licensed Domestic Exploration Area (2005)
Leased Domestic Production Area (2005)
Exploration is dominated by ONGC with 58% of the total area licensed by the GOI
Exploration is dominated by ONGC with 58% of the total area licensed by the GOI
Source: Directorate General of Hydrocarbons, 2004-05 report
ONGC holds the largest portion of leased acreage for oil and natural gas production, accounting for 56% of the area
ONGC holds the largest portion of leased acreage for oil and natural gas production, accounting for 56% of the area
More deregulation & increasing private participation
HOC
3%
Others
3%
Cairn
2%
Oil India
4%
Reliance
30%
ONGC
58%
Cairn
3%
Others
3%
BG
14%
Oil India
24%
ONGC
56%
E&P Scenario…ONGC
Himalyan Foreland and Ganga Valley
Area operated: 59,267 ONGC operated: 34,637(58.4%)
Assam-ArakanArea operated: 47,730ONGC operated: 24,274 (51.0%)
Mahanadi-BengalArea operated: 15,211ONGC operated: 7311 (48.1%)
Satpura-Pranhita-Godavari
Area operated: 31,227ONGC operated: 9,377 (30.0%)
Andaman – Nicobar Offshore
Area operated: 23,485 ONGC operated: 23,485 (100.0%)
Western OffshoreArea operated: 467,898ONGC operated Areas (68.2%)Mumbai Offshore: 108,570Kutch-Saurashtra: 83,278Kerala-Konkan: 127,347
CambayArea operated: 22,056ONGC operated: 8,922 (45.5%)
Kutch – SaurashtraArea operated: 1,550 ONGC operated: NIL
RajasthanArea operated: 29,688 ONGC operated: 1,772 (6.0%)
Eastern OffshoreArea operated: 257,955ONGC operated Areas (46.6 %)Krishna-Godavari: 38,413Cauvery: 22,064Mahanadi-Bengal: 59,638
Krishna – GodavariArea operated: 5,057ONGC operated: 5,057 (100.0%)
CauveryArea operated: 5,665ONGC operated: 4,985 (88.0%)
ONGC operates ~568,300 sq. km. of exploration area, which is more than 58% of total area under exploration in India.
Source: DGH Annual Report-2004
E&P Scenario…ONGC
112
9371
197 3 3 0
2006 2007 2008 2009 2010 2011 2012 2013
PEL Block Holdings
Exploration blocks on nomination basis are to
reduce drastically gradually
Exploration blocks on nomination basis are to
reduce drastically gradually
Status of exploration blocks awarded to ONGC on nomination basis
E&P Scenario…ONGC
112
9371
197 3 3 0
2006 2007 2008 2009 2010 2011 2012 2013
PEL Block Holdings
112
93
71
19
3 3 0 0 0 0 0 0 0 0 0
46
2823
93 1 0 0 0 0 0 0 0 0 0 00
15
30
50
70
90
7
0
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2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021
PEL/
Exi
stin
g NEL
P
PEL Existing NELP Blocks Future NELP/Open Acreages
Market dynamics encouraging more
exploration acreage through NELP
Market dynamics encouraging more
exploration acreage through NELP
New Oildomestic
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
Thrust areas
E&P Scenario…ONGC
Thrust areas: Marginal fields
• 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
WTI $/bbl against time
0.0
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20.0
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4/4/02 10/21/02 5/9/03 11/25/03 6/12/04 12/29/04 7/17/05 2/2/06 8/21/06
Date
Oil
Pri
ces
Economics have changed
… Marginal fields are no longer marginal
E&P Scenario…ONGC
Projects Approx. Project cost (Rs. Crore)
For Direct Production
Marginal fields* 12,700.00
G-1 & GS-15 Development 1,263.00
East Coast Hub Development* 5,500.00
D-1 Development 507.00
Vasai (East) Development 1,688.00
Addl. Dev. Bassein field 2,937.00
Dev. of SB-11, Bassein 245.00
Addl. Dev A-1 layer in MHN 911.00
For Producing Facilities
Assam Renewal Plan* 2,570.00
Other Revamping Projects 3,492.00
Total 31,813.00
Major E&P Projects of ONGC
* Yet to be approved
E&P Scenario…ONGC
8 IOR/ EOR projects completed (Rs 1,703 Crore)10 under implementation (Rs 12,138 Crore)
ONGC has identified 25 IOR Projects other medium fields
19.67 19.9320.77
21.60 21.63
22.65
19.56
21.64
23.49
24.08
12
15.5
19
22.5
26
1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006
Contribution of IOR/ EOR Schemes in 15 major fields
Thrust areas: Improving Recovery factor
E&P Scenario…ONGC
Seismic data Acquisition, Processing & Interpretation
Drilling & related services
Logging, Well Stimulation, Well Control
Info-com applications
Facilities & Logistics
Thrust areas: New technology
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
E&P Scenario…ONGC
New Oilequity
Energy beyond boundaries
Equity oil…OVL
Vietnam 3
Myanmar 2
Sudan 3
Nigeria 1 in JDZ
Libya 3
Egypt 1 Syria 1+1
Iraq 1
Russia 1
Iran 1
Producing Assets Development Exploration
Cuba 8
Qatar 1
OperatorIran, FarsiIraq, Bl 8Qatar, Na NjVietnam 127Vietnam 128Cuba 34 Cuba 35Libya 81-1
Joint OperatorSudan GNOPEgypt Bl. 6
Brazil 1
OVL: Sourcing 6.621 MTOE of Equity Oil & GasOVL: Sourcing 6.621 MTOE of Equity Oil & Gas21 Projects (31 Blocks) in 13 Countries21 Projects (31 Blocks) in 13 Countries
Vietnam 3
Myanmar 2
Sudan 3
Nigeria 1 in JDZ
Libya 3
Egypt 1 Syria 1+1
Iraq 1
Russia 1
Iran 1
Producing Assets Development Exploration
Cuba 8
Qatar 1
OperatorIran, FarsiIraq, Bl 8Qatar, Na NjVietnam 127Vietnam 128Cuba 34 Cuba 35Libya 81-1
Joint OperatorSudan GNOPEgypt Bl. 6
Brazil 1
OVL: Sourcing 6.621 MTOE of Equity Oil & GasOVL: Sourcing 6.621 MTOE of Equity Oil & Gas21 Projects (31 Blocks) in 13 Countries21 Projects (31 Blocks) in 13 Countries
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Gas 0.07 0.523 1.349 1.71 1.708 1.9
Oil 0.183 3.345 3.714 4.73 4.513 6.1
2003 2004 2005 20062007
(Budget)2010
(Projected)*
MMT
Equity Oil…OVL
AInvestment
Destinations
AInvestment
Destinations BBig Leap Vs Insignificant
Scattered Presence
BBig Leap Vs Insignificant
Scattered Presence
CEnabling
Environment
CEnabling
Environment
Equity Oil…OVL
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
OVL needs Empowerment
Road blocks
Prices…hot…hotter
Oil Prices
WTI $/bbl against time
0.0
10.0
20.0
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80.0
4/4/02 10/21/02 5/9/03 11/25/03 6/12/04 12/29/04 7/17/05 2/2/06 8/21/06
Date
Oil
Pri
ces
Rig rates v Oil price
Oil Price Vs. Rig rates over time
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300000
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600000
4/4/02 10/21/02 5/9/03 11/25/03 6/12/04 12/29/04 7/17/05 2/2/06 8/21/06
Date
Rig
ra
tes
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Oil
Pri
ce
5th Gen 4th Gen 3rd Gen >750m 3rd Gen <750
2nd gen >750m 2nd Gen<750m Jack up Oil Price
Rising E&P expenditure
Oil Prices
Oil price Vs Project Mgmt cost/hr over time
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4/19/01 11/5/01 5/24/02 12/10/02 6/28/03 1/14/04 8/1/04 2/17/05 9/5/05 3/24/06 10/10/06
Date
Pro
jec
t m
gm
t $
/mh
r
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Labour Oil Price
Oil prices & Project Management
Oil Prices
“The Party’s Over”, Richard Heinberg
…is diminishing as we resort to going after the hard-to-get oil:
Energy Return On Energy Invested
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
546
715 668
854
1,341
1,717
915
0
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800
1200
1600
2000
1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06
Oil Prices
Issues of concern
Issues of concern
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
– “One road” beyond boundaries
– New avenues: CBM, UCG, SCG etc.
– New Energy resources “at cost” - comforts to
Companies
– “Controlled Prices” vs “Concern for Conservation”
Thank You
