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India

Energy report December 2011


advertisement Project Director: Federica Torgneur. Editorial Coordinator: Nicolas Carayon. Project Assistants: Mathilde Paquet & Fleur Richard. Editorial Contributor: Herbert Mosmuller. Report Publisher: Ines Nandin. For exclusive interviews and more info, please log onto energy.focusreports.net or write to contact@focusreports.net

ndia

•••••

I

Pt.2

The Silent Revolution

I

Kedarnath jack-up rig, drilling depth 20,000 feet, courtesy of Great Offshore Limited

n its search to solve the question of India’s energy security, the Indian state government has been pushing to promote exploration activities in the country, and efforts of both public and private sector enterprises have recently been concentrating on the offshore exploration. With shallow water expertise steady in place, India’s shores are witnessing a new round of development as deepwater explorations attract high levels of both domestic and foreign engineering and manufacturing. Nonetheless, the dominance of state-owned players, strong price awareness, and modest foreign investment might throw grit in the machine of India’s offshore oil and gas sector. Focus Reports presents you with an insight look from Mumbai, India’s offshore epicenter.

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New Horizons Offshore

fledged Indian companies taking lump sum turnkey jobs. Before,

The story of India’s offshore started with the discovery of the

only foreign companies were doing it, and Indian companies were

Bombay High oilfield 160 kilometers off the coast of Mumbai. “The

providing a bit of support.” “The country’s offshore sector”, said Singh, “possesses such

Oil and Gas (O&G) discovery in Bombay High took the country by surprise,” explained Satpal Singh, managing director and

levels of homegrown expertise nowadays that it could do without

CEO of Dolphin Offshore, one of the first Indian offshore support

foreign expertise. The growth and development of the Bombay

companies. “There was no expectation that India had offshore oil

High field provided tremendous opportunities for Indian companies

resources. We had historic findings in Assam and Gujarat, which

to start new ventures and over the next 2 decades the country grew

had been found during the days of the British presence in India.

towards self reliance in being able to meet the requirements of the

The entire production was oil - hardly any gas was restricted to that

Oil & Gas industry.”

source. There was no development of O&G technology; there was no trading institution over here, although after a period of time,

Beyond Bombay High

Oil & Natural Gas Corporation (ONGC) started to develop certain

While the output of the Bombay High field run by state-owned

institutions.”

ONGC decreased from a 20 million ton peak in 1989 to 9 million tons now, India’s offshore industry received a next boost in 2002,

ing there was no Indian company that had sufficient expertise,”

when Reliance Industries, India’s largest private player in the petro-

Amit Biswas, CEO of Ambico, explained the initial development

leum sector, discovered the biggest natural gas reserves in India.

of India’s offshore industry. Biswas’ company is a service bound

This was in the D6 block in Krishna Godavari (KG) basin, 37 miles

offshore agency with Joint Ventures (JV) with Malaysian offshore

off the Indian east coast in the Bay of Bengal. The field has proven

engineer IEV, British Found Ocean and a partnership with the Aus-

plus probable reserves of 11.3 Tcf. Similar to what happened in the

tralian offshore project contractor Tamboritha. “Over the last fifteen

Bombay High field, the development of the operations at the east

years, a lot of Indian companies have come in, for exploration and

coast has seen India’s domestic industry, with the support of foreign

production (E&P) of offshore oil and gas,” Biswas continued.

companies, working hard to close the knowledge gap .

“The crews of the vessels, along with the companies mastering

Reliance Industries’ operations in the KG basin were quickly

the supply vessels, were foreigners,” Biswas continues. “It took us

recognized as India’s most important offshore activity and even one

some time to train local people and qualify them (…) My partner

of the most important in the world; the field was the world’s largest

was, in fact, the first ever Indian master to handle an offshore ves-

gas discovery in 2001. Indeed, as P.M.S. Prasad, Reliance Industries’

sel. Slowly, Indian companies came in. Now we see some JV or full-

executive director, told Focus Reports, “our drilling partner, Transocean, says that our operations at a water depth of 10,194 feet are

Oil demand & supply

InMMT

•••••

“It actually all started with a lot of foreign companies, consider-

400 350 300 250 200 150 100 50 0

the deepest that have ever been done [worldwide]”; this project has also seen the participation of the Houston-based oilfield service company, Oceaneering, with an all Indian team. “We had to start from scratch, so having created an organization, trained a lot of people and acquired some competencies and infrastructure, we are now looking at opportunities outside India,”

2001-02

2002-03

2005-06

2011-12

2024-25

Demand

99.7

114.3

140

199.6

376.5

Supply

32.03

33.05

33.98

33.47

61.4

Source: University of Petroleum & Energy Studies (UPES), IORS 2011

4

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continues Prasad. “We have a very good safety, exploration, development and project management record, and now we are looking to capitalize on these competencies outside the country.”

December 2011 Oil & Gas Financial Journal t www.ogfj.com


Full of achievements, including 125 deepwater wells drilled and a strong track record, Reliance Industries signed another milestone in its international strategy by signing a joint venture with BP last February through which the American supermajor committed to invest 7.2 billion USD (30 per cent stake) in 21

Satpal Singh, managing director & CEO, Dolphin Offshore Enterprises

Amit Biswas, CEO, Ambico

Ashley Jerome D'sa, CEO, Oil Field Instrumentation (OFI)

of Reliance’s oil and gas blocks. In a press conference following the signing of the deal, Reliance Industries chairman Mukesh Ambani said that “These guys are the best (in exploration). If you want to climb the Mount Everest, make

•••••

tenders, as: “the general impact of such policies is the increasing

upstream market. Obviously, this has also given more opportuni-

Reliance’s successful deal was followed last August by news

ties for growth in the sector that we are in. We have been working

that ONGC was holding talks with international oil companies already present in India including Shell, Eni and BG to sell stakes in its deepwater wells off the country’s resource-rich eastern shore. At the same time, ONGC has also been carrying out a Rs. 9,000 crore (approximately 2 billion USD) redevelopment investment to

on almost every project; with ONGC for instance, we have been working with them in all the assets and basins – onshore as well as offshore. We have also been working with private and MNC’s like Cairn, Reliance, GSPC, British Gas, Shell, Gazprom, NIKO, Hardy Petroleum and many others. If the exploration industry continues to

increase oil and gas output of its Bombay High field.

grow we hope to see growth in OFI’s business as well.”

Indeed: “In India we are endowed with around 138 billion

The growth should be supported by the upcoming Open Acre-

barrels of oil and oil equivalent, but most of them lie in frontier locations/deep water and ultra deep water. In order to search for these resources our country needs advanced technology,” explains

company delivering mud logging services.

duced in the early 1990’s to further liberalize participation at E&P

entry of foreign investment and private companies in the Indian

sure you have the best Sherpa with you.”

Ashley Jerome D'sa, CEO of Oil Field Instrumentations (OFI), a

D’sa praises the New Exploration Licensing Policy (NELP) intro-

age Licensing Policies (OALP), which will replace the old NELP, and could play an important role in bringing in the necessary technologies. “It will definitely attract further investment. Under the NELP,

!"#$%&' $(' )' *+&,-%.' ")/)0-"-/.' %&/(12.)/%3' .4).' *+&5$6-(' (-+5$%-(' $/' -7-%1.$&/' &8' ")+$/-' )/6' &88(4&+-' +-2).-6' %&/.+)%.(9' *)+.$%12)+23' $/' %&"*2-7' )/6' %4)22-/0$/0' *+&,-%.(' :4-+-' -7*-+$-/%-9' *+-%$($&/' )/6' %&; &+6$/).$&/' )"&/0(.' 5)+$&1(' )0-/%$-(' )+-' +-<1$+-6' 8&+' .$"-23' )/6' (1%%-((812' %&"*2-.$&/=' ' '

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December 2011 Oil & Gas Financial Journal t www.ogfj.com 11/22/11 10:58 AM


those who clearly spots India as key for business: “Wherever there is deep water, Oceaneering comes in,” he told Focus Reports. “We have always gone for strategic locations, and in fact India is a standalone location. The country has a lot of open future for oil and gas and that is why India was selected. The country currently makes a significant contribution to the growth and Oceaneering is also very keen on India for the future.” Kedarnath being towed by Great Offshore's anchor handling tug supply vessels Courtesy of Great Offshore

The company can also provide a solution not only in deep waters but even when it comes to shallow water. “Let’s say where divers cannot go, we come in. We are the kind of company that can

companies have to follow a fixed format and process and must

support any type of operation. For any kind of difficulty we come

participate in the tenders. With the new Open Acreage Licensing

up with a solution,” clarifies Nayyar.

Policy, whether it happens in 2012 or 2013, there should be more

“India is a strategic location to establish operations,” agrees

opportunities for new players to come in. This would also give easy

K.G. Remesh director of Swiber Offshore, a Singaporean com-

access of geological data to E&P operators,” hopes D’Sa.

pany that controls a fleet of offshore support service vessels and construction vessels, when asked what made his company come to

India is quickly becoming a strategic location for global players.

India.“We believe India to be one of the most dynamic and fastest

Parmjit Singh Nayyar, Oceaneering country manager India, is one of

growing markets for offshore oil and gas activities, with a big and

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11/8/11 4:55 PM

•••••

As the government is working on more investor-friendly policies,


BPCL: Moving upstream and offshore For the full interview with R.K. Singh, chairman and managing director of Bharat Petroleum Corporation (BPCL), log onto energy.focusreports.net FR: Since you became chairman & managing director in December 2010, what have been your biggest priorities?

FR: All your moves upstream have been in quite high-risk ventures so far – deepwater in Brazil, a wildcat well in Mozambique and shale gas in Australia. These are all areas where even experienced players are quite wary about entering. What was the rationale behind such moves?

•••••

R.K. Singh: Two things played in our mind. As far as BraR.K. Singh: The first priority was deciding where zil is concerned for example, we bought assets owned we want the company to be in five years from by Encana Canada. A lot of data was available for us, now. Having decided on our aspirations and and we knew that the prospectivity was very good (…). vision for Bharat Petroleum, we needed to work The second aspect of this is that Brazil is now having a out how to attain them. (…) lot of discoveries in deep water. It is a big success story. Predominantly, BPCL is a downstream The operator of the blocks is Anardarko, a very estabcompany dealing with refining and marketing of lished player, and Petrobras also has a stake. They are petroleum products, but we have also looked at known to be experts in deep water drilling, and have all other available opportunities and have entered the necessary rigs and the equipment that are required the upstream sector and have been fortunate to for deepwater drilling. So the operator’s image, their make some discoveries along with other consorcapabilities and data meant that we took the decision tium members. This has certainly encouraged us that this would be the place to grow our upstream busiR.K.Singh, chairman & managing and we now want to consolidate this upstream ness. I hope that by 2015, oil will start flowing in Brazil for director, BPCL business and work towards monetization of the BPCL. Despite the high risk, I believe that the upstream discoveries. business is more profitable.

growing demand for offshore marine support services in India. India has a significant pool of engineers and is a strategic location for market expansion.” Another deepwater specialist, Weatherford, has been active in India since 1996, when it opened an office in Mumbai. Olivier !"#$%##&'%() '*) (+,-$+) !'+.'#+/) 0&,1'/#&) ,.) #%('%##&#/) *#&1'"#*) $%/) 0&,/2"3*4) 0&'5$&'+6) 3,) 37#) ,..*7,&#) ,'+) $%/) ($*) '%/2*3&64) 8'37) $) .,"2*) ,%) /##08$3#&) $00+'"$3',%*9) :7&,2(7) 37#) 2*#) ,.) '3*) $00+'#/) 3#"7%,+,(6) #;0#&3'*#4) !"#$%##&'%() $+*,) *#&1#*) 37#) /#.#%*#) $%/) $#&,*0$"#) '%/2*3&'#*9

Konig, country manager India of Weatherford Oil & Tools, sees an important role for the deepwater sector in modernizing India’s O&G industry. “Deep offshore operations require top class technologies,” Konig said. “This sector has been driving the trend for India

2*"13&$4- %#1- 5)*6+&)4' U#5,3#+6) !0#&$3#/) V#7'"+#*) ) IU!V*K) ) ) ) ) ) W2-*#$) R&,/2"3* W2-*#$) R&,X#"3*) ) ) ) ) <%*0#"3',%) ) ) ) ) N/1$%"#/) :#"7%,+,('#*

to accept, bring in and adopt new technologies, being pushed by service companies as well, considering we have the knowledge, the understanding and the experience in this sector.

“Weatherford has pioneered the !"#$%&$' (&)%#))*+#,- .%+#- (//+&)'!"#$%##&'%() <%3#&%$3',%$+4) <%"94 drilling of deep hot wells on the ==>==) ?@) AB>) C,2*3,%4) :#;$*) DDEF= :#+G) H=) ID=JK) JB>LFAEE) ) M) ) ?$;G) H=) ID=JK) JB>LF>A=) ) ) ) ) east coast of India, Konig contin))))))))))))))))))))))))))))))))))))))))))))))))))))) ued. “These are some of the tough(&)%#))*+#,- 0#1+%- (//+&)'!"#$%##&'%() <%3#&%$3',%$+) N9O94 PLJEB4) Q#+07'4) C'&$%$%/$%'4) R,8$'4) @25-$'4) @$7$&$*73&$) est deepwater environments in FEEEDS) ) :#+G) H>=) IBBK) FESSL>TEE) ) M) ) ?$;G) H>=) IBBK) BADELDDE> which we have deployed our tools

8 CarOce_OGFJ_1112 1

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Parmjit Singh Nayyar, country manager - India, Oceaneering International

December 2011 Oil & Gas Financial Journal t www.ogfj.com 11/9/11 4:16 PM


in and have been immensely suc-

deeper, you require more engage-

cessful in helping clients meet their

ment of the maritime assets,”

exploration objectives. It has been

explains S. Hajara, chairman and

more than 5 years since we started

managing director of the Shipping

out on the east coast and are cur-

Corporation of India (SCI), the

rently involved in the development

largest and most diversified public

drilling in that area.”

sector undertaking (PSU) under the ministry of shipping. “Therefore I

Going deeper:

Olivier Konig, country manager India, Weatherford Oil & Tools

S. Hajara, chairman and managing director, Shipping Corporation of India

the next step

believe offshore has a huge potential and we are trying to increase

for the shipping industry?

our presence there, but we have not been able to break into the

The deepwater developments are also attracting the Indian ship-

higher segment of rig platforms as of yet. That is very much in our

ping industry. As the sector is going through a global downturn,

minds and we have had discussions with a couple of players but

shipping companies have found a new potential area in servicing

nothing concrete has happened yet,” he continued.

the booming offshore industry.

•••••

“Offshore today means going deeper and deeper into the sea,

The support industry as well is looking at the offshore industry with more interest. Bharati Shipyard for instance, one of India’s

and because of the technological improvement, the maritime com-

leading private shipyards, is targeting the deepwater offshore

ponent of the offshore segment is increasing. Obviously if you go

sector. “There is a new trend in the industry where companies

!"#$ %"&#'$ "()*+,-&(*.*"!($ /"('".0$ 12*3$ #*'3 !"#"$%&'%"($%#)"* "$+(,&-&./* #,0* !&-1"2&,!* '&)* &2-* 3* .#!* $45-&)#"2&,*

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CarOFI_OGFJ_1112tOil 1 www.ogfj.com & Gas Financial Journal December 2011

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require vessels with high specifica-

Offshore’s fleet that is currently

tions, especially for deeper water

operating has been constructed by

interventions,” P.C. Kapoor, the

us. There were a lot of interactions

company’s managing director, said.

between the two companies before

“For instance, operations on the

the acquisition, even before we had

east coast of India and in Brazil

a single share.”

require larger vessels. Bharati

Since the acquisition, Bharati has

Shipyard has decided to go on and build these vessels. We see a lot of growth opportunities in this area,

been actively growing and renewP.C. Kapoor, managing director, Bharati Shipyard Limited, and executive director, Great Offshore Limited

ing Great Offshore’s fleet, phasing out the older ships to adapt it to

both in the east coast of India and

deep water operations. Kapoor explains that, “since we took over,

in Brazil.”

we have already purchased six vessels for five or six years, available

Bharati Shipyard acquired an integrated offshore oilfield services

•••••

Christopher Phillips, director, Seatech

in very attractive places. This purchase brings the total size of our

provider, Great Offshore, in June 2010 from the family-owned

fleet to 47 vessels, out of which 10 or 12 are to be phased out. We

Great Eastern Shipping Company, capitalizing on the synergies

will double the fleet in the next five years, not in terms of number

existing between the two companies. Kapoor continued. “Bharati

of vessels, but in terms of operating capacity.”

has been constructing ships for Great Eastern as well as for Great Offshore for the last twenty years. A major portion of Great

Christopher Phillips, director of Seatech, a ship broker and charterer founded in 2008, has been making good use of the opportunities generated by the development of the offshore industry, especially by the discovery in the KG-D6 basin. “There is a lot of potential in the shipping industry in India, especially on the east coast belt which is really rich in minerals,” said Phillips. “In the light of a few power companies increasing their activities in the region, there are a lot of project movements on this belt. Even Mumbai has specialized in project cargoes. Simultaneously, in the West, the states - especially Gujarat - have converted a lot of industrial growth over the last decade.” Given that India imports two thirds of its energy needs and exports about 40% of its refining products, additional opportunities arise for the shipping industry to support the oil and gas sector. This is the approach that has been taken also by Seatech: as “we are a young establishment; we have to be aggressive with our approach and look into every opportunity that comes our way,” explains Phillips.

Foreign investment in restraints While India’s O&G sector has received a good deal of foreign investment in past years, many feel it’s not close to what it should

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December 2011 Oil & Gas Financial Journal t www.ogfj.com 11/8/11 5:16 PM


Gas Thirsty!

Since the establishment of GAIL in 1984 the Indian oil and gas industry has experienced major transformations, especially related to the market liberalization and modernization of the country’s major PSU’s. How has GAIL adapted to this new environment and helped shape it?

I

B.C. Tripathi chairman and managing “GAIL is looking not only to grow in director of GAIL told Focus the domestic market but Reports about current internationally. Hence, we and future plans in LNG. would like to have partnerHe states, “The company ships with companies that has already sourced half a are ready to work with us million tons of LNG, for the in the international arena, first time doing it indepento source more LNG, for dently, and we are now instance. It could be either discussing various other an upstream investment for major supply projects. producing or near-producing GAIL intends to import five blocks, or it could be LNG million tons of LNG in the and petrochemical plants. next two to three years. What GAIL can bring in is its That is why we are gearing B.C. Tripathi, chairman & managing unique 25 years of experidirector, GAIL up GAIL’s infrastructure so ence and expertise in one of the receiving terminals get the world’s most challengready and the pipeline infrastructure is in ing, but most promising, energy markets,” place in due time. Tripathi concluded.

•••••

n looking to secure its evergrowing hunger for energy, Indian demand for LNG is growing. Domestically produced gas saw a lower output, making imported gas more crucial. Growth projections for natural gas demand are 4.7 percent annually, which would mean it would reach about 600 million standard cubic meters per day (mscmd) by 2030. GAIL, India’s principal gas transmission and marketing company, is preparing its Dabhol, Hazira and Kochi LNG terminals for 100-120 mscmd of R-LNG, and is establishing an LNG plant in Maharashtra from where it is planning to progressively bring more LNG to India. Already, under a memorandum signed last June, Gazprom agreed to supply 7.5 million tons of LNG over 25 years to Gujarat State Petroleum Company, Petronet LNG Limited, and GAIL. In this fiscal year, eight LNG deliveries have been sourced, and the company expects another five or six in the remainder of the year. In the next couple of years, its spot gas portfolio will increase four- to five-fold.

be yet. India’s regulatory environment and the high complexity of the market are often mentioned as holding off foreign players. In fact, major international companies are said to be waiting for the country to be ‘mature enough’. Aboveground, India’s reputation is good due to its stable democracy, clear regulations and policies, especially in the upstream sector, and widely praised production sharing contract (PSC) systems in place.

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The NELP has been a very successful policy in opening up

One aspect many believe should

the industry for private players and liberalizing the market. A.K.

change, as expressed by major

Arora, director general of Petrofed, one of India’s top oil and gas

international energy companies

representatives, emphasizes the changes NELP brought. “You have

looking to conduct exploration

to understand that the rate of participation of private players has

activities in India, are restrictions

considerably increased since the market liberalization took place.

imposed by the country's defense

However, in an evolutionary process you have to start somewhere.

and space authorities on explora-

The perceived deviations and imperfections are being taken care

tion activities.

of in a gradual and democratic process, unlike other regimes where

Just over half a year after it

the state requiring something to be done acts differently adopting

signed the biggest foreign direct

varying processes.”

investment in India’s history, BP, in a joint letter with BHP to the

•••••

“What no one disagrees with is that the system in India has

A. K. Arora, director general, PetroFed

Indian petroleum ministry, expressed its concerns over these restric-

evolved towards a market-friendly and level-playing field environ-

tions as they would block medium and long-term commitments.

ment where private players are enjoying great scope for action.

“This is also affecting the confidence of international companies

One may criticize the speed of these changes, but can’t deny their

in undertaking high-cost, high-risk frontier exploration in offshore

existence.”

India,” the letter read.

However, India is still lagging behind in exploring its offshore, with underground risks keeping international players at bay in the

A world nucleus for the service industry

upstream industry. The country has the reputation to be unex-

"While in the upstream segment there is ample room for improve-

plored, and, although it’s the government’s ardent wish to get

ment on the regulatory front, India has been very successful in

exploration going in as many basins as possible, some say the

attracting international players supporting the oil and gas industry

country has failed to do so sufficiently, with available data lacking,

through new technologies, solutions and equipment. Sajiv Nath,

making investors hesitant to deploy activity.

managing director of Swiss-based instrumentation and process

The aforementioned BP deal and the ONGC negotiations with

automation company Endress+Hauser, said “We could have gone

Shell, Eni and BG to sell stakes in its deepwater developments

anywhere in Asia, but we went to India because this is where the

on the country’s eastern shore are promising signs for foreign

benefit to risk ratio is the best. India is rationally considered the

companies looking to enter India. Nonetheless, there are still many

main investment destination for the group. India is a sustainable

administrative hurdles and questions on the risk/benefits ratio.

market which also provides IPR (Intellectual Property Rights) to protect. Looking at the growth market in India, the benefits are far higher than the risks,” he continued. One of the main benefits is undoubtedly provided by the qualified Indian workforce. “The Indian manpower is a young pool of engineers with high communication skills (…),” Rabindranath Burman, director of US manufacturer ITT Corporation, summarized. “India is not only a manufacturing hub but also a talent pool, specifically from the engineering side. ITT demands from its engineers that they support global projects at the R&D level, while

Pipelines in Rajasthan, Courtesy of Cairn India

12

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also synergizing new strategies". And they are up for the task: “We

December 2011 Oil & Gas Financial Journal t www.ogfj.com


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Entering the Indian market

A

•••••

s the industry is booming, foreign companies are flowing in to set a direct base in the country. But what is the best entry strategy in a country as wide and dispersed as India, that counts so many hotspots for the oil and gas industry? We asked Hydratight, the boltied joint solutions specialist, that is currently setting up the Indian operations. “The question is how to organise for ourselves the strongest possible base here. We need a better understanding of the needs of our local customers (…). The market here isn’t as formal and organised as in the US or in Europe, but we stick to our plan: develop a profound knowledge of the market and establish strong relationships with customers”, explains Alain Wald, EMEA area leader, when we met him in the occasion of the Offshore India and Unconventional Oil & Gas India conference and exhibition in Mumbai. Murali Narasimhan, country leader India, adds that, despite Bangalore being the hub for the Indian operations, “no single place can realistically handle the entire country’s needs, wherever it is based. Bangalore will be the hub, but we intend to develop satellite bases across the country. Our initial focus will be the western part of India, which is where the key O&G players are located. Progressively, we will work on developing the

northern and eastern sides of the market. There is also a lot of development taking place at Kakinada in the south.”

Murali Narasimhan, country leader India, and Alain Wald, EMEA business leader, Hydratight

have extensive training programs, a strong team of people, migrating from one part of the world to another, and we have the best of both worlds.” There are worries, however, that the demand for skilled labor in India’s oil and gas sector might outstrip supply making it increasingly difficult to attract and retain talent, which is critical in a fast growth economy. “The working environment is very demanding from a human resources perspective,” Shishir Joshipura, managing director of SKF, a global supplier of rolling bearings, seals, mechatronics, services and lubrication systems said. “The rapid growth will increase the demand for qualified resources, thus invitHydratight sets international standards in joint integrity on a global scale. Operating from 35 locations, Hydratight offers fast, accurate solutions to your bolting and machining needs. Using state-of-the-art equipment, our qualified on-site technicians offer monitoring, bolting, machining and training services to maximize safety, reduce plant down-time and extend facility life.

ing an increased focus on retention of talent. Innovation, energy efficiency and reliability of operations while managing costs in an ever improving way are some of the challenges all industries are faced with,” which, according to Joshipura, could lead to nothing less than “a war for talent.”

To find out more visit

www.hydratight.com

Is India ready to pay the price?

or email solutions@hydratight.com

Despite a very fast changing environment and the sector’s liberal-

ENGINEERING

14

MAINTENANCE

TRAINING

energy.focusreports.net

SERVICE

December 2011 Oil & Gas Financial Journal t www.ogfj.com


ization, India’s PSUs are dominat-

addition of new products and

ing the industry both upstream

services, when these are not part of

and downstream. Given their size,

the scope of work that was decided

entering into agreements with them

initially, even if they are brilliant

is a must for any company wanting

products that could meet their

to be present in the Indian oil and

objectives and more.” Indeed, the procurement system

gas industry. Contracts are often

is very strict, as the selection of

long-term and, given the state backing of these companies, safe.

Sajiv Nath, managing director, Endress + Hauser

Shishir Joshipura, managing director and country manager, SKF India

or equipment providers, is based

In their attitude to new technologies, there are major differences between India’s National Oil Companies (NOCs) and International Oil Companies (IOCs), Olivier

suppliers, either service companies

exclusively on price, what is called the L1, or lowest bid. Clearly, this process has changed the landscape of the industry, influencing not only the local industry but also the international

IOCs in India have a very different approach to technologies. The

companies, which have been progressively reducing their prices

IOCs are very forthcoming and open to trying new technologies

in order to secure contracts with the PSUs. As Dolphin Offshore’s

while NOCs often have stringent procurement,” he continues.

managing director and CEO Satpal Singh explains, “the worldwide

“Besides, with NOCs, there is not enough flexibility to allow the

economic situation and more particularly the reduction in offshore

CarEnd_OGFJ_1112tOil 1 www.ogfj.com & Gas Financial Journal December 2011

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15

11/8/11 4:16 PM

•••••

Konig, country manager India of Weatherford found. “NOCs and


dollars a day. It has been very difficult for Indian companies to pick up work.” The same issue is faced by the equipment suppliers. “The concept of L1 is hurting the industry,” said Javed A Hawa, managing director of Hawa Valves, speaking on the valve industry. “There is an evaluation done by engineers; however, those engineers are not valve engineers. They will look at any company and their products against some parameters that have been set by their management but Sulzer facilities, Pune

they do not have the in-depth knowledge

oil and gas development projects forced international companies

•••••

to come to India and bid competitively. They started to dump

next. In fact they are carrying out an evaluation, which is prior to

prices to get work in India, just to keep their assets deployed. As a consequence, in the last two years, the rates of construction barges have gone down from 455,000 dollars a day to 175,000

to understand what differentiates one valve company from the

the bid opening, but that evaluation is skewed from the beginning. The process is flawed.” In order not to compromise with the quality standards, the company decided to focus on the global market, rather than the Indian one. “We realized that the values that we were bringing to the investor in terms of HSE were better recognized by the global end users in the hydrocarbon sector, rather than the PSUs.” However, for international companies that are setting their foothold in India, PSUs remain the first target, and one of the challenges is increasing the acceptance of new technologies. “Given the importance of the public sector within the Indian market, the idea first needs to be sold to them,” said Sulzer’s India President B. Balaji. “At the same time, as markets are developing, customers also are willing to try new technologies. This has opened up doors for us, as we are able to bring a lot of world class technology in India through the Sulzer Chemtech channel.” Luckily, interest in advanced technology is increasing and the international players are capitalizing on these nascent opportunities. Endress+Hauser’s managing director Sajiv Nath has seen landslide changes in the way in which the country deals with new technology. “The market has predominantly consisted of PSUs but has evolved over time. I still remember the phase during the 1980s, when talking about new technologies and software was not well

16

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December 2011 Oil & Gas Financial Journal t www.ogfj.com


accepted, he explained. Today it

country impacted the reputation

is the innovative technical “geeks”

of Indian manufactured products,

who drive the Indian market. In fact,

fairly or not. “Up until 1990, there was not

Indian technologies are more driven by the end users than by EPCs.

much of a market scope for the

Endress+Hauser has been success-

Indian industry, especially as far as

fully able to identify certain “geeks”

valves were concerned, Jagdish

amongst these end users who have

Prajapati, managing director of

been receptive to technological

Javed A. Hawa, managing director, Hawa Valves

B. Balaji, president, Sulzer India

neers recalls. “Indeed, the purchas-

change.” This aspect has been confirmed by Konig from Weatherford,

valve manufacturer Panam Engi-

ing mentality abroad was laden with a few prejudices in terms of

who is currently at his second stint in India. “Over the years the

region, business ethics, etc. But once they came to the realization

country’s O&G business has evolved and the country is today much

that products from countries like India can be of high quality, they

more open to new technologies, which supports Weatherford’s

began wanting to trade with us more. While the situation has changed for the better and Indian prod-

supported by the entry of international companies There have been

ucts are sold on foreign markets, Indian companies still have a gap

several new private Indian companies that have secured blocks in

to close,” Prajapati said. “There is still a little gap [between Indian

the latest NELP rounds”.

and international quality], as far the industry world is concerned.” “The acceptance of Indian products is much more prominent

From price to quality: the Indian re-evolution

now as compared to 10 years ago”, admits Nath of Swiss-based

As historically many of the local manufacturers have been focusing

Endress+Hauser. To him the ability of Indian engineers to learn and

on lower prices in order to guarantee an access to a very price-

integrate new technologies has much to do with this success: “The

conscious market, for many years the image of India as a cost killer

Indian workforce has tremendous technical skills. Thanks to the

CarTem_OGFJ_1112tOil 1 www.ogfj.com & Gas Financial Journal December 2011

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17

11/9/11 1:43 PM

•••••

growth strategy,” he said. “The opening up of the market has been


technical knowledge the employees have, they can now be trained

a small group on the globe able to

easily.”

manufacture high quality, high pressure heat exchangers.

•••••

The fact that Indian companies did overcome many of the prejudices that haunted them earlier has been confirmed also by

“Foreign operations are defi-

V.P. Ramachandran, secretary of the Process Plant and Machinery

nitely a central focus, due to the oil

Association India (PPMAI). “Ten years back, Indian engineering

sands in South America, Canada,

companies used to go and visit ACHEMA [an international exhibi-

and Russia. We are ready to com-

tion congress on Chemical Engineering, Environmental Protection

pete with players overseas,” Sippy

and Biotechnology, held yearly in Frankfurt, Germany] to under-

said. “We are concentrating on

stand the latest foreign technologies, learn from them, and perhaps

our Screw Plug heat exchangers in

buy them,” says Ramachandran. “The situation has now changed;

O&G, for which we have a patented

the technology transfer goes the other way around. Now, Indian

design. The idea is to increase our

companies go there to sell their equipment and technology. They

global market share to at least

are looking for buyers for the technologies they are able to manu-

40%.” Tema is one of the Indian

facture from India.”

companies that has been strongly

Overcoming the misconceptions, many Indian manufacturers

investing in high quality and latest

look abroad to sell their products. So does H.K. Sippy, chairman

technology. As Sippy highlights,

and managing director of Tema India, whose company belongs to

Jagdish Prajapati, managing director, Panam Engineer

“There are several companies that work with heat exchangers,

VP Ramachandran, secretary, PPMAI

although it is true that very few of them have the design capabilities that we possess. We have been able to elevate the standards of our company to its current standing. Apart from that, there are companies who have not been able to bring to the fore the combination of design and an intricate manufacturing process. They may be

H.K. Sippy, chairman and managing director, Tema India

financially stronger and larger as an establishment, but technically, they have not been able to bring this kind of engineering excellence.” With equipment installed on the five continents, GEI Industrial Systems, specializing in heat transfer technology, is another Indian manufacturer that has found a way to bring Indian equipment to international markets. “Almost every week, somebody visits us from abroad to establish a JV or some kind of manufacturing arrangement with GEI. Foreign visitors have a good opinion of Indian

18

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December 2011 Oil & Gas Financial Journal t www.ogfj.com


Panam Engineers manufacturing facility

capabilities,” said

community should look global and

C.E. Fernandes,

accept companies which are com-

chairman and

ing up aggressively to meet the

managing direc-

demand in these areas, especially

tor of GEI. “There

large multinationals such as Chev-

was a time when

ron, Shell, ExxonMobil. They should

Indian qual-

open up in such a way that compa-

ity was neither

nies from the developing countries,

appreciated nor

like GEI, can get a good participa-

accepted in most

tion to join in their progress.”

C.E. Fernandes, chairman & managing director, GEI Industrial Systems

countries; however, in the last decade or so a lot has changed. There has been a shift in perception in recent years and many are

Refining, the future of India?

now confident of the quality and technology of Indian products,

Even though India has been undoubtedly developing its offshore

which are at par with European vendors”, he continues.

sector, as well as a vibrant manufacturing industry, the most promis-

With JVs in Oman, Brazil, Singapore, and plans to enter South

ing sector in the O&G industry still seems to be refining. India already

Africa, Fernandes has a word of advice on how the international

contributes to 4% of the world refining, with an installed capacity

O&G industry should deal with companies like his. “The O&G

of almost 200 million tons per annum in 2011, and showcase the

CarFur_OGFJ_1112 1

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11/8/11 4:19 PM

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19


addition to expanding capacity at its Kochi refinery, has commissioned the Bina refinery, which will have a capacity of 120,000 barrels per day with the potential to raise it to 300,000 barrels. The other Mumbai-based stateowned refinery, HPCL, plans to expand capacity of its Visakh RefinHydrocracker project, Haldia refinery, Courtesy of Punj Lloyd

largest single-complex refinery in the world, the Jamnagar complex by Reliance Industries. Notwithstanding these impressive figures, the country is continuously adding new capacity and is expected to reach

ery by 9 million tons as well as a relocation of the Mumbai refinery, which currently refines 6.5 million tons, to the west coast of India. The company furthermore commissioned its first refinery in the north of the country, in Bathinda in the state of

300 million tons per annum by 2017. Most of the state owned players are adding capacity. The PSU Indian Oil has recently completed the expansion of its Panipat refinery

•••••

Rabindranath Burman, director and country head, ITT Corporation India

to 300,000 barrels a day, from 240,000. State-owned BPCL, based in Mumbai, with a refining capacity of 30 million tons per annum, in

Punjab, through a joint venture with Mittal Energy. The HPCL Mittal Energy Limited (HMEL) grass root refinery will be commissioned by March 2012 and is expected to produce 9 million tons per year. The expansions in the country’s major refineries have also allowed the service industry to increase its capacities. Swiss manufacturer Sulzer for instance has been expanding its capacity in order to support the boom in the refinery industry. “In fact, Sulzer India has carried out a significant portion of the mega projects in refineries in 2006 and petrochemical in 2007 & 2008. Considering we expanded our plant’s capacity in 2005 and 2006, so before the booming really started, the timing was excellent. Successful execution of large projects has given a lot of confidence to our customer for future collaborations also”, Sulzer’s president of Indian operations B. Balaji said. The new projects have also created a shift in the structure of the industry, as “there has been a shift from a PSU dominated market to a number of private partnerships. For instance, the biggest refineries in India are not PSUs but Reliance and HMEL, which is a partnership with the Mittal Group”, ITT’s managing director Burman pointed out. Indeed, these major expansion projects have created a number of opportunities for the service industry and Burman believes that the extra

20

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A. Basheeruddin, managing director and co-founder, Furnace Fabrica

December 2011 Oil & Gas Financial Journal t www.ogfj.com


capacity in these refineries “will definitely be a driving force in both the top and the bottom line of the profit and losses (P&L)” of the company. Furnace Fabrica, an Indian EPC player with a strong focus on the downstream, has been taking advantage of these new projects as well. As managing director A. Basheeruddin explained, “We successfully completed expansion projects for Hindustan Petroleum Corporation Limited (HPCL). Now G. Sathiamoorthy, managing director, Tecnimont ICB

we are executing a sulphur recovery unit for the same client. We expect to get a major chunk of the business from [the

expansion of the Bombay refinery]. We completed the expansion plans of the Haldia refinery as well. In fact, we were the first company to build the second hydrogen reformer at the Indian Oil Corporation refinery, with a capacity of 94.62 mmkCal/hr”. Currently, the company is working on three acid coolers with anodic protection design for Indian Oil Corporation’s Paradip refinery. “Many companies will find it difficult to meet the stringent requirements,” Basheer-

•••••

uddin said on this last project. “There were only two bidders. One was from America and we were the second. We beat them out on the price, which is often one of the main criteria in India, considering it is a highly price-sensitive market. “In addition to this, we are one of the few international companies with experience in dismantling refineries for reconstruction, not for scrapping. We are able to dismantle, rebuild, and also expand refineries. Our capacity is unique in that respect”, continues Basheeruddin. G. Sathiamoorthy, managing director of Tecnimont ICB (TICB), part of the Italian engineering, procurement and construction company, Maire Tecnimont Group, confirms the number of opportunities available, not only downstream: “India is currently buzzing with new opportunities for gas treatment, refinery and fertilizer units. TICB has the references and the capabilities to undertake these projects. There is a lot potential in the O&G industry, some LNG terminals are under discussion. The company is eyeing few prospects in the refining segment. We do foresee the refining sector to gain momentum next year with new expansion projects getting finalized.” And with all the projects coming up, from upstream offshore to the refining sector, this revolution happening in the Indian oil and gas industry is becoming less and less silent.

Correction: Country Report: India, the silent revolution - Part 1, Oil & Gas Financial Journal, July 2011: on page 72 the photograph on top is of Dr. A. K. Balyan, CEO & managing director, Petronet LNG Limited, and not as wrongly state of B. C. Tripathi, chairman and managing director, GAIL.

www.ogfj.com tOil & Gas Financial Journal December 2011

energy.focusreports.net

21


advertisement Project Director: Federica Torgneur. Editorial Coordinator: Nicolas Carayon. Project Assistants: Mathilde Paquet & Fleur Richard. Editorial Contributor: Herbert Mosmuller. Report Publisher: Ines Nandin. For exclusive interviews and more info, please log onto energy.focusreports.net or write to contact@focusreports.net

ndia

•••••

I

Pt.2

The Silent Revolution

I

Kedarnath jack-up rig, drilling depth 20,000 feet, courtesy of Great Offshore Limited

n its search to solve the question of India’s energy security, the Indian state government has been pushing to promote exploration activities in the country, and efforts of both public and private sector enterprises have recently been concentrating on the offshore exploration. With shallow water expertise steady in place, India’s shores are witnessing a new round of development as deepwater explorations attract high levels of both domestic and foreign engineering and manufacturing. Nonetheless, the dominance of state-owned players, strong price awareness, and modest foreign investment might throw grit in the machine of India’s offshore oil and gas sector. Focus Reports presents you with an insight look from Mumbai, India’s offshore epicenter.

www.ogfj.com tOil & Gas Financial Journal December 2011

energy.focusreports.net

3


New Horizons Offshore

fledged Indian companies taking lump sum turnkey jobs. Before,

The story of India’s offshore started with the discovery of the

only foreign companies were doing it, and Indian companies were

Bombay High oilfield 160 kilometers off the coast of Mumbai. “The

providing a bit of support.” “The country’s offshore sector”, said Singh, “possesses such

Oil and Gas (O&G) discovery in Bombay High took the country by surprise,” explained Satpal Singh, managing director and

levels of homegrown expertise nowadays that it could do without

CEO of Dolphin Offshore, one of the first Indian offshore support

foreign expertise. The growth and development of the Bombay

companies. “There was no expectation that India had offshore oil

High field provided tremendous opportunities for Indian companies

resources. We had historic findings in Assam and Gujarat, which

to start new ventures and over the next 2 decades the country grew

had been found during the days of the British presence in India.

towards self reliance in being able to meet the requirements of the

The entire production was oil - hardly any gas was restricted to that

Oil & Gas industry.”

source. There was no development of O&G technology; there was no trading institution over here, although after a period of time,

Beyond Bombay High

Oil & Natural Gas Corporation (ONGC) started to develop certain

While the output of the Bombay High field run by state-owned

institutions.”

ONGC decreased from a 20 million ton peak in 1989 to 9 million tons now, India’s offshore industry received a next boost in 2002,

ing there was no Indian company that had sufficient expertise,”

when Reliance Industries, India’s largest private player in the petro-

Amit Biswas, CEO of Ambico, explained the initial development

leum sector, discovered the biggest natural gas reserves in India.

of India’s offshore industry. Biswas’ company is a service bound

This was in the D6 block in Krishna Godavari (KG) basin, 37 miles

offshore agency with Joint Ventures (JV) with Malaysian offshore

off the Indian east coast in the Bay of Bengal. The field has proven

engineer IEV, British Found Ocean and a partnership with the Aus-

plus probable reserves of 11.3 Tcf. Similar to what happened in the

tralian offshore project contractor Tamboritha. “Over the last fifteen

Bombay High field, the development of the operations at the east

years, a lot of Indian companies have come in, for exploration and

coast has seen India’s domestic industry, with the support of foreign

production (E&P) of offshore oil and gas,” Biswas continued.

companies, working hard to close the knowledge gap .

“The crews of the vessels, along with the companies mastering

Reliance Industries’ operations in the KG basin were quickly

the supply vessels, were foreigners,” Biswas continues. “It took us

recognized as India’s most important offshore activity and even one

some time to train local people and qualify them (…) My partner

of the most important in the world; the field was the world’s largest

was, in fact, the first ever Indian master to handle an offshore ves-

gas discovery in 2001. Indeed, as P.M.S. Prasad, Reliance Industries’

sel. Slowly, Indian companies came in. Now we see some JV or full-

executive director, told Focus Reports, “our drilling partner, Transocean, says that our operations at a water depth of 10,194 feet are

Oil demand & supply

InMMT

•••••

“It actually all started with a lot of foreign companies, consider-

400 350 300 250 200 150 100 50 0

the deepest that have ever been done [worldwide]”; this project has also seen the participation of the Houston-based oilfield service company, Oceaneering, with an all Indian team. “We had to start from scratch, so having created an organization, trained a lot of people and acquired some competencies and infrastructure, we are now looking at opportunities outside India,”

2001-02

2002-03

2005-06

2011-12

2024-25

Demand

99.7

114.3

140

199.6

376.5

Supply

32.03

33.05

33.98

33.47

61.4

Source: University of Petroleum & Energy Studies (UPES), IORS 2011

4

energy.focusreports.net

continues Prasad. “We have a very good safety, exploration, development and project management record, and now we are looking to capitalize on these competencies outside the country.”

December 2011 Oil & Gas Financial Journal t www.ogfj.com


Full of achievements, including 125 deepwater wells drilled and a strong track record, Reliance Industries signed another milestone in its international strategy by signing a joint venture with BP last February through which the American supermajor committed to invest 7.2 billion USD (30 per cent stake) in 21

Satpal Singh, managing director & CEO, Dolphin Offshore Enterprises

Amit Biswas, CEO, Ambico

Ashley Jerome D'sa, CEO, Oil Field Instrumentation (OFI)

of Reliance’s oil and gas blocks. In a press conference following the signing of the deal, Reliance Industries chairman Mukesh Ambani said that “These guys are the best (in exploration). If you want to climb the Mount Everest, make

•••••

tenders, as: “the general impact of such policies is the increasing

upstream market. Obviously, this has also given more opportuni-

Reliance’s successful deal was followed last August by news

ties for growth in the sector that we are in. We have been working

that ONGC was holding talks with international oil companies already present in India including Shell, Eni and BG to sell stakes in its deepwater wells off the country’s resource-rich eastern shore. At the same time, ONGC has also been carrying out a Rs. 9,000 crore (approximately 2 billion USD) redevelopment investment to

on almost every project; with ONGC for instance, we have been working with them in all the assets and basins – onshore as well as offshore. We have also been working with private and MNC’s like Cairn, Reliance, GSPC, British Gas, Shell, Gazprom, NIKO, Hardy Petroleum and many others. If the exploration industry continues to

increase oil and gas output of its Bombay High field.

grow we hope to see growth in OFI’s business as well.”

Indeed: “In India we are endowed with around 138 billion

The growth should be supported by the upcoming Open Acre-

barrels of oil and oil equivalent, but most of them lie in frontier locations/deep water and ultra deep water. In order to search for these resources our country needs advanced technology,” explains

company delivering mud logging services.

duced in the early 1990’s to further liberalize participation at E&P

entry of foreign investment and private companies in the Indian

sure you have the best Sherpa with you.”

Ashley Jerome D'sa, CEO of Oil Field Instrumentations (OFI), a

D’sa praises the New Exploration Licensing Policy (NELP) intro-

age Licensing Policies (OALP), which will replace the old NELP, and could play an important role in bringing in the necessary technologies. “It will definitely attract further investment. Under the NELP,

!"#$%&' $(' )' *+&,-%.' ")/)0-"-/.' %&/(12.)/%3' .4).' *+&5$6-(' (-+5$%-(' $/' -7-%1.$&/' &8' ")+$/-' )/6' &88(4&+-' +-2).-6' %&/.+)%.(9' *)+.$%12)+23' $/' %&"*2-7' )/6' %4)22-/0$/0' *+&,-%.(' :4-+-' -7*-+$-/%-9' *+-%$($&/' )/6' %&; &+6$/).$&/' )"&/0(.' 5)+$&1(' )0-/%$-(' )+-' +-<1$+-6' 8&+' .$"-23' )/6' (1%%-((812' %&"*2-.$&/=' ' '

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6 CarAmb_OGFJ_1112

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December 2011 Oil & Gas Financial Journal t www.ogfj.com 11/22/11 10:58 AM


those who clearly spots India as key for business: “Wherever there is deep water, Oceaneering comes in,” he told Focus Reports. “We have always gone for strategic locations, and in fact India is a standalone location. The country has a lot of open future for oil and gas and that is why India was selected. The country currently makes a significant contribution to the growth and Oceaneering is also very keen on India for the future.” Kedarnath being towed by Great Offshore's anchor handling tug supply vessels Courtesy of Great Offshore

The company can also provide a solution not only in deep waters but even when it comes to shallow water. “Let’s say where divers cannot go, we come in. We are the kind of company that can

companies have to follow a fixed format and process and must

support any type of operation. For any kind of difficulty we come

participate in the tenders. With the new Open Acreage Licensing

up with a solution,” clarifies Nayyar.

Policy, whether it happens in 2012 or 2013, there should be more

“India is a strategic location to establish operations,” agrees

opportunities for new players to come in. This would also give easy

K.G. Remesh director of Swiber Offshore, a Singaporean com-

access of geological data to E&P operators,” hopes D’Sa.

pany that controls a fleet of offshore support service vessels and construction vessels, when asked what made his company come to

India is quickly becoming a strategic location for global players.

India.“We believe India to be one of the most dynamic and fastest

Parmjit Singh Nayyar, Oceaneering country manager India, is one of

growing markets for offshore oil and gas activities, with a big and

CarDol_OGFJ_1112 tOil 1 www.ogfj.com & Gas Financial Journal December 2011

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11/8/11 4:55 PM

•••••

As the government is working on more investor-friendly policies,


BPCL: Moving upstream and offshore For the full interview with R.K. Singh, chairman and managing director of Bharat Petroleum Corporation (BPCL), log onto energy.focusreports.net FR: Since you became chairman & managing director in December 2010, what have been your biggest priorities?

FR: All your moves upstream have been in quite high-risk ventures so far – deepwater in Brazil, a wildcat well in Mozambique and shale gas in Australia. These are all areas where even experienced players are quite wary about entering. What was the rationale behind such moves?

•••••

R.K. Singh: Two things played in our mind. As far as BraR.K. Singh: The first priority was deciding where zil is concerned for example, we bought assets owned we want the company to be in five years from by Encana Canada. A lot of data was available for us, now. Having decided on our aspirations and and we knew that the prospectivity was very good (…). vision for Bharat Petroleum, we needed to work The second aspect of this is that Brazil is now having a out how to attain them. (…) lot of discoveries in deep water. It is a big success story. Predominantly, BPCL is a downstream The operator of the blocks is Anardarko, a very estabcompany dealing with refining and marketing of lished player, and Petrobras also has a stake. They are petroleum products, but we have also looked at known to be experts in deep water drilling, and have all other available opportunities and have entered the necessary rigs and the equipment that are required the upstream sector and have been fortunate to for deepwater drilling. So the operator’s image, their make some discoveries along with other consorcapabilities and data meant that we took the decision tium members. This has certainly encouraged us that this would be the place to grow our upstream busiR.K.Singh, chairman & managing and we now want to consolidate this upstream ness. I hope that by 2015, oil will start flowing in Brazil for director, BPCL business and work towards monetization of the BPCL. Despite the high risk, I believe that the upstream discoveries. business is more profitable.

growing demand for offshore marine support services in India. India has a significant pool of engineers and is a strategic location for market expansion.” Another deepwater specialist, Weatherford, has been active in India since 1996, when it opened an office in Mumbai. Olivier !"#$%##&'%() '*) (+,-$+) !'+.'#+/) 0&,1'/#&) ,.) #%('%##&#/) *#&1'"#*) $%/) 0&,/2"3*4) 0&'5$&'+6) 3,) 37#) ,..*7,&#) ,'+) $%/) ($*) '%/2*3&64) 8'37) $) .,"2*) ,%) /##08$3#&) $00+'"$3',%*9) :7&,2(7) 37#) 2*#) ,.) '3*) $00+'#/) 3#"7%,+,(6) #;0#&3'*#4) !"#$%##&'%() $+*,) *#&1#*) 37#) /#.#%*#) $%/) $#&,*0$"#) '%/2*3&'#*9

Konig, country manager India of Weatherford Oil & Tools, sees an important role for the deepwater sector in modernizing India’s O&G industry. “Deep offshore operations require top class technologies,” Konig said. “This sector has been driving the trend for India

2*"13&$4- %#1- 5)*6+&)4' U#5,3#+6) !0#&$3#/) V#7'"+#*) ) IU!V*K) ) ) ) ) ) W2-*#$) R&,/2"3* W2-*#$) R&,X#"3*) ) ) ) ) <%*0#"3',%) ) ) ) ) N/1$%"#/) :#"7%,+,('#*

to accept, bring in and adopt new technologies, being pushed by service companies as well, considering we have the knowledge, the understanding and the experience in this sector.

“Weatherford has pioneered the !"#$%&$' (&)%#))*+#,- .%+#- (//+&)'!"#$%##&'%() <%3#&%$3',%$+4) <%"94 drilling of deep hot wells on the ==>==) ?@) AB>) C,2*3,%4) :#;$*) DDEF= :#+G) H=) ID=JK) JB>LFAEE) ) M) ) ?$;G) H=) ID=JK) JB>LF>A=) ) ) ) ) east coast of India, Konig contin))))))))))))))))))))))))))))))))))))))))))))))))))))) ued. “These are some of the tough(&)%#))*+#,- 0#1+%- (//+&)'!"#$%##&'%() <%3#&%$3',%$+) N9O94 PLJEB4) Q#+07'4) C'&$%$%/$%'4) R,8$'4) @25-$'4) @$7$&$*73&$) est deepwater environments in FEEEDS) ) :#+G) H>=) IBBK) FESSL>TEE) ) M) ) ?$;G) H>=) IBBK) BADELDDE> which we have deployed our tools

8 CarOce_OGFJ_1112 1

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Parmjit Singh Nayyar, country manager - India, Oceaneering International

December 2011 Oil & Gas Financial Journal t www.ogfj.com 11/9/11 4:16 PM


in and have been immensely suc-

deeper, you require more engage-

cessful in helping clients meet their

ment of the maritime assets,”

exploration objectives. It has been

explains S. Hajara, chairman and

more than 5 years since we started

managing director of the Shipping

out on the east coast and are cur-

Corporation of India (SCI), the

rently involved in the development

largest and most diversified public

drilling in that area.”

sector undertaking (PSU) under the ministry of shipping. “Therefore I

Going deeper:

Olivier Konig, country manager India, Weatherford Oil & Tools

S. Hajara, chairman and managing director, Shipping Corporation of India

the next step

believe offshore has a huge potential and we are trying to increase

for the shipping industry?

our presence there, but we have not been able to break into the

The deepwater developments are also attracting the Indian ship-

higher segment of rig platforms as of yet. That is very much in our

ping industry. As the sector is going through a global downturn,

minds and we have had discussions with a couple of players but

shipping companies have found a new potential area in servicing

nothing concrete has happened yet,” he continued.

the booming offshore industry.

•••••

“Offshore today means going deeper and deeper into the sea,

The support industry as well is looking at the offshore industry with more interest. Bharati Shipyard for instance, one of India’s

and because of the technological improvement, the maritime com-

leading private shipyards, is targeting the deepwater offshore

ponent of the offshore segment is increasing. Obviously if you go

sector. “There is a new trend in the industry where companies

!"#$ %"&#'$ "()*+,-&(*.*"!($ /"('".0$ 12*3$ #*'3 !"#"$%&'%"($%#)"* "$+(,&-&./* #,0* !&-1"2&,!* '&)* &2-* 3* .#!* $45-&)#"2&,*

!"#!$%&' ($)*+&, -.#' (/**!"*' +0.!1-+", $"#' &+)2!3+' 1)/2!#+)' 4!,5' $ *)/4!"*' !",+)"$,!/"$(' 1)+&+"3+ !"#$ %&''()' *('$ ()+,*"!-),.,(&) !/#$ 0$ ## #*(%%$ 1(,+ 2-!-),$ !&)(,&*()' '.+$ #-,-2,(&) ,"*)3-4$ 5*&6-2,$ !.).'-!-), .(*1&*)-$ '-&574+(2.%$ +"*8-4+

!"# $%"&# '"()# *+",-# ,.# /",# 0*%# ()*01# ,.# *-# .*2).3"455%65*70"' !)28# 9:;# <<# =;>?@AAABAC# D*E8# 9:;# <<# =;>?# @AC@# &&&7"455%65*70"' F# G)-)(&*2*# H(",I# J"'I*%/

CarOFI_OGFJ_1112tOil 1 www.ogfj.com & Gas Financial Journal December 2011

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9

11/9/11 1:48 PM


require vessels with high specifica-

Offshore’s fleet that is currently

tions, especially for deeper water

operating has been constructed by

interventions,” P.C. Kapoor, the

us. There were a lot of interactions

company’s managing director, said.

between the two companies before

“For instance, operations on the

the acquisition, even before we had

east coast of India and in Brazil

a single share.”

require larger vessels. Bharati

Since the acquisition, Bharati has

Shipyard has decided to go on and build these vessels. We see a lot of growth opportunities in this area,

been actively growing and renewP.C. Kapoor, managing director, Bharati Shipyard Limited, and executive director, Great Offshore Limited

ing Great Offshore’s fleet, phasing out the older ships to adapt it to

both in the east coast of India and

deep water operations. Kapoor explains that, “since we took over,

in Brazil.”

we have already purchased six vessels for five or six years, available

Bharati Shipyard acquired an integrated offshore oilfield services

•••••

Christopher Phillips, director, Seatech

in very attractive places. This purchase brings the total size of our

provider, Great Offshore, in June 2010 from the family-owned

fleet to 47 vessels, out of which 10 or 12 are to be phased out. We

Great Eastern Shipping Company, capitalizing on the synergies

will double the fleet in the next five years, not in terms of number

existing between the two companies. Kapoor continued. “Bharati

of vessels, but in terms of operating capacity.”

has been constructing ships for Great Eastern as well as for Great Offshore for the last twenty years. A major portion of Great

Christopher Phillips, director of Seatech, a ship broker and charterer founded in 2008, has been making good use of the opportunities generated by the development of the offshore industry, especially by the discovery in the KG-D6 basin. “There is a lot of potential in the shipping industry in India, especially on the east coast belt which is really rich in minerals,” said Phillips. “In the light of a few power companies increasing their activities in the region, there are a lot of project movements on this belt. Even Mumbai has specialized in project cargoes. Simultaneously, in the West, the states - especially Gujarat - have converted a lot of industrial growth over the last decade.” Given that India imports two thirds of its energy needs and exports about 40% of its refining products, additional opportunities arise for the shipping industry to support the oil and gas sector. This is the approach that has been taken also by Seatech: as “we are a young establishment; we have to be aggressive with our approach and look into every opportunity that comes our way,” explains Phillips.

Foreign investment in restraints While India’s O&G sector has received a good deal of foreign investment in past years, many feel it’s not close to what it should

10 CarSea_OGFJ_1112 1

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December 2011 Oil & Gas Financial Journal t www.ogfj.com 11/8/11 5:16 PM


Gas Thirsty!

Since the establishment of GAIL in 1984 the Indian oil and gas industry has experienced major transformations, especially related to the market liberalization and modernization of the country’s major PSU’s. How has GAIL adapted to this new environment and helped shape it?

I

B.C. Tripathi chairman and managing “GAIL is looking not only to grow in director of GAIL told Focus the domestic market but Reports about current internationally. Hence, we and future plans in LNG. would like to have partnerHe states, “The company ships with companies that has already sourced half a are ready to work with us million tons of LNG, for the in the international arena, first time doing it indepento source more LNG, for dently, and we are now instance. It could be either discussing various other an upstream investment for major supply projects. producing or near-producing GAIL intends to import five blocks, or it could be LNG million tons of LNG in the and petrochemical plants. next two to three years. What GAIL can bring in is its That is why we are gearing B.C. Tripathi, chairman & managing unique 25 years of experidirector, GAIL up GAIL’s infrastructure so ence and expertise in one of the receiving terminals get the world’s most challengready and the pipeline infrastructure is in ing, but most promising, energy markets,” place in due time. Tripathi concluded.

•••••

n looking to secure its evergrowing hunger for energy, Indian demand for LNG is growing. Domestically produced gas saw a lower output, making imported gas more crucial. Growth projections for natural gas demand are 4.7 percent annually, which would mean it would reach about 600 million standard cubic meters per day (mscmd) by 2030. GAIL, India’s principal gas transmission and marketing company, is preparing its Dabhol, Hazira and Kochi LNG terminals for 100-120 mscmd of R-LNG, and is establishing an LNG plant in Maharashtra from where it is planning to progressively bring more LNG to India. Already, under a memorandum signed last June, Gazprom agreed to supply 7.5 million tons of LNG over 25 years to Gujarat State Petroleum Company, Petronet LNG Limited, and GAIL. In this fiscal year, eight LNG deliveries have been sourced, and the company expects another five or six in the remainder of the year. In the next couple of years, its spot gas portfolio will increase four- to five-fold.

be yet. India’s regulatory environment and the high complexity of the market are often mentioned as holding off foreign players. In fact, major international companies are said to be waiting for the country to be ‘mature enough’. Aboveground, India’s reputation is good due to its stable democracy, clear regulations and policies, especially in the upstream sector, and widely praised production sharing contract (PSC) systems in place.

www.ogfj.com tOil & Gas Financial Journal December 2011 CarGEI_OGFJ_1112 1

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11 11/9/11 1:51 PM


The NELP has been a very successful policy in opening up

One aspect many believe should

the industry for private players and liberalizing the market. A.K.

change, as expressed by major

Arora, director general of Petrofed, one of India’s top oil and gas

international energy companies

representatives, emphasizes the changes NELP brought. “You have

looking to conduct exploration

to understand that the rate of participation of private players has

activities in India, are restrictions

considerably increased since the market liberalization took place.

imposed by the country's defense

However, in an evolutionary process you have to start somewhere.

and space authorities on explora-

The perceived deviations and imperfections are being taken care

tion activities.

of in a gradual and democratic process, unlike other regimes where

Just over half a year after it

the state requiring something to be done acts differently adopting

signed the biggest foreign direct

varying processes.”

investment in India’s history, BP, in a joint letter with BHP to the

•••••

“What no one disagrees with is that the system in India has

A. K. Arora, director general, PetroFed

Indian petroleum ministry, expressed its concerns over these restric-

evolved towards a market-friendly and level-playing field environ-

tions as they would block medium and long-term commitments.

ment where private players are enjoying great scope for action.

“This is also affecting the confidence of international companies

One may criticize the speed of these changes, but can’t deny their

in undertaking high-cost, high-risk frontier exploration in offshore

existence.”

India,” the letter read.

However, India is still lagging behind in exploring its offshore, with underground risks keeping international players at bay in the

A world nucleus for the service industry

upstream industry. The country has the reputation to be unex-

"While in the upstream segment there is ample room for improve-

plored, and, although it’s the government’s ardent wish to get

ment on the regulatory front, India has been very successful in

exploration going in as many basins as possible, some say the

attracting international players supporting the oil and gas industry

country has failed to do so sufficiently, with available data lacking,

through new technologies, solutions and equipment. Sajiv Nath,

making investors hesitant to deploy activity.

managing director of Swiss-based instrumentation and process

The aforementioned BP deal and the ONGC negotiations with

automation company Endress+Hauser, said “We could have gone

Shell, Eni and BG to sell stakes in its deepwater developments

anywhere in Asia, but we went to India because this is where the

on the country’s eastern shore are promising signs for foreign

benefit to risk ratio is the best. India is rationally considered the

companies looking to enter India. Nonetheless, there are still many

main investment destination for the group. India is a sustainable

administrative hurdles and questions on the risk/benefits ratio.

market which also provides IPR (Intellectual Property Rights) to protect. Looking at the growth market in India, the benefits are far higher than the risks,” he continued. One of the main benefits is undoubtedly provided by the qualified Indian workforce. “The Indian manpower is a young pool of engineers with high communication skills (…),” Rabindranath Burman, director of US manufacturer ITT Corporation, summarized. “India is not only a manufacturing hub but also a talent pool, specifically from the engineering side. ITT demands from its engineers that they support global projects at the R&D level, while

Pipelines in Rajasthan, Courtesy of Cairn India

12

energy.focusreports.net

also synergizing new strategies". And they are up for the task: “We

December 2011 Oil & Gas Financial Journal t www.ogfj.com


The Change Will Do You Good © 2011 Weatherford. All rights reserved. Incorporates proprietary and patented Weatherford technology.

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Entering the Indian market

A

•••••

s the industry is booming, foreign companies are flowing in to set a direct base in the country. But what is the best entry strategy in a country as wide and dispersed as India, that counts so many hotspots for the oil and gas industry? We asked Hydratight, the boltied joint solutions specialist, that is currently setting up the Indian operations. “The question is how to organise for ourselves the strongest possible base here. We need a better understanding of the needs of our local customers (…). The market here isn’t as formal and organised as in the US or in Europe, but we stick to our plan: develop a profound knowledge of the market and establish strong relationships with customers”, explains Alain Wald, EMEA area leader, when we met him in the occasion of the Offshore India and Unconventional Oil & Gas India conference and exhibition in Mumbai. Murali Narasimhan, country leader India, adds that, despite Bangalore being the hub for the Indian operations, “no single place can realistically handle the entire country’s needs, wherever it is based. Bangalore will be the hub, but we intend to develop satellite bases across the country. Our initial focus will be the western part of India, which is where the key O&G players are located. Progressively, we will work on developing the

northern and eastern sides of the market. There is also a lot of development taking place at Kakinada in the south.”

Murali Narasimhan, country leader India, and Alain Wald, EMEA business leader, Hydratight

have extensive training programs, a strong team of people, migrating from one part of the world to another, and we have the best of both worlds.” There are worries, however, that the demand for skilled labor in India’s oil and gas sector might outstrip supply making it increasingly difficult to attract and retain talent, which is critical in a fast growth economy. “The working environment is very demanding from a human resources perspective,” Shishir Joshipura, managing director of SKF, a global supplier of rolling bearings, seals, mechatronics, services and lubrication systems said. “The rapid growth will increase the demand for qualified resources, thus invitHydratight sets international standards in joint integrity on a global scale. Operating from 35 locations, Hydratight offers fast, accurate solutions to your bolting and machining needs. Using state-of-the-art equipment, our qualified on-site technicians offer monitoring, bolting, machining and training services to maximize safety, reduce plant down-time and extend facility life.

ing an increased focus on retention of talent. Innovation, energy efficiency and reliability of operations while managing costs in an ever improving way are some of the challenges all industries are faced with,” which, according to Joshipura, could lead to nothing less than “a war for talent.”

To find out more visit

www.hydratight.com

Is India ready to pay the price?

or email solutions@hydratight.com

Despite a very fast changing environment and the sector’s liberal-

ENGINEERING

14

MAINTENANCE

TRAINING

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SERVICE

December 2011 Oil & Gas Financial Journal t www.ogfj.com


ization, India’s PSUs are dominat-

addition of new products and

ing the industry both upstream

services, when these are not part of

and downstream. Given their size,

the scope of work that was decided

entering into agreements with them

initially, even if they are brilliant

is a must for any company wanting

products that could meet their

to be present in the Indian oil and

objectives and more.” Indeed, the procurement system

gas industry. Contracts are often

is very strict, as the selection of

long-term and, given the state backing of these companies, safe.

Sajiv Nath, managing director, Endress + Hauser

Shishir Joshipura, managing director and country manager, SKF India

or equipment providers, is based

In their attitude to new technologies, there are major differences between India’s National Oil Companies (NOCs) and International Oil Companies (IOCs), Olivier

suppliers, either service companies

exclusively on price, what is called the L1, or lowest bid. Clearly, this process has changed the landscape of the industry, influencing not only the local industry but also the international

IOCs in India have a very different approach to technologies. The

companies, which have been progressively reducing their prices

IOCs are very forthcoming and open to trying new technologies

in order to secure contracts with the PSUs. As Dolphin Offshore’s

while NOCs often have stringent procurement,” he continues.

managing director and CEO Satpal Singh explains, “the worldwide

“Besides, with NOCs, there is not enough flexibility to allow the

economic situation and more particularly the reduction in offshore

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11/8/11 4:16 PM

•••••

Konig, country manager India of Weatherford found. “NOCs and


dollars a day. It has been very difficult for Indian companies to pick up work.” The same issue is faced by the equipment suppliers. “The concept of L1 is hurting the industry,” said Javed A Hawa, managing director of Hawa Valves, speaking on the valve industry. “There is an evaluation done by engineers; however, those engineers are not valve engineers. They will look at any company and their products against some parameters that have been set by their management but Sulzer facilities, Pune

they do not have the in-depth knowledge

oil and gas development projects forced international companies

•••••

to come to India and bid competitively. They started to dump

next. In fact they are carrying out an evaluation, which is prior to

prices to get work in India, just to keep their assets deployed. As a consequence, in the last two years, the rates of construction barges have gone down from 455,000 dollars a day to 175,000

to understand what differentiates one valve company from the

the bid opening, but that evaluation is skewed from the beginning. The process is flawed.” In order not to compromise with the quality standards, the company decided to focus on the global market, rather than the Indian one. “We realized that the values that we were bringing to the investor in terms of HSE were better recognized by the global end users in the hydrocarbon sector, rather than the PSUs.” However, for international companies that are setting their foothold in India, PSUs remain the first target, and one of the challenges is increasing the acceptance of new technologies. “Given the importance of the public sector within the Indian market, the idea first needs to be sold to them,” said Sulzer’s India President B. Balaji. “At the same time, as markets are developing, customers also are willing to try new technologies. This has opened up doors for us, as we are able to bring a lot of world class technology in India through the Sulzer Chemtech channel.” Luckily, interest in advanced technology is increasing and the international players are capitalizing on these nascent opportunities. Endress+Hauser’s managing director Sajiv Nath has seen landslide changes in the way in which the country deals with new technology. “The market has predominantly consisted of PSUs but has evolved over time. I still remember the phase during the 1980s, when talking about new technologies and software was not well

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December 2011 Oil & Gas Financial Journal t www.ogfj.com


accepted, he explained. Today it

country impacted the reputation

is the innovative technical “geeks”

of Indian manufactured products,

who drive the Indian market. In fact,

fairly or not. “Up until 1990, there was not

Indian technologies are more driven by the end users than by EPCs.

much of a market scope for the

Endress+Hauser has been success-

Indian industry, especially as far as

fully able to identify certain “geeks”

valves were concerned, Jagdish

amongst these end users who have

Prajapati, managing director of

been receptive to technological

Javed A. Hawa, managing director, Hawa Valves

B. Balaji, president, Sulzer India

neers recalls. “Indeed, the purchas-

change.” This aspect has been confirmed by Konig from Weatherford,

valve manufacturer Panam Engi-

ing mentality abroad was laden with a few prejudices in terms of

who is currently at his second stint in India. “Over the years the

region, business ethics, etc. But once they came to the realization

country’s O&G business has evolved and the country is today much

that products from countries like India can be of high quality, they

more open to new technologies, which supports Weatherford’s

began wanting to trade with us more. While the situation has changed for the better and Indian prod-

supported by the entry of international companies There have been

ucts are sold on foreign markets, Indian companies still have a gap

several new private Indian companies that have secured blocks in

to close,” Prajapati said. “There is still a little gap [between Indian

the latest NELP rounds”.

and international quality], as far the industry world is concerned.” “The acceptance of Indian products is much more prominent

From price to quality: the Indian re-evolution

now as compared to 10 years ago”, admits Nath of Swiss-based

As historically many of the local manufacturers have been focusing

Endress+Hauser. To him the ability of Indian engineers to learn and

on lower prices in order to guarantee an access to a very price-

integrate new technologies has much to do with this success: “The

conscious market, for many years the image of India as a cost killer

Indian workforce has tremendous technical skills. Thanks to the

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11/9/11 1:43 PM

•••••

growth strategy,” he said. “The opening up of the market has been


technical knowledge the employees have, they can now be trained

a small group on the globe able to

easily.”

manufacture high quality, high pressure heat exchangers.

•••••

The fact that Indian companies did overcome many of the prejudices that haunted them earlier has been confirmed also by

“Foreign operations are defi-

V.P. Ramachandran, secretary of the Process Plant and Machinery

nitely a central focus, due to the oil

Association India (PPMAI). “Ten years back, Indian engineering

sands in South America, Canada,

companies used to go and visit ACHEMA [an international exhibi-

and Russia. We are ready to com-

tion congress on Chemical Engineering, Environmental Protection

pete with players overseas,” Sippy

and Biotechnology, held yearly in Frankfurt, Germany] to under-

said. “We are concentrating on

stand the latest foreign technologies, learn from them, and perhaps

our Screw Plug heat exchangers in

buy them,” says Ramachandran. “The situation has now changed;

O&G, for which we have a patented

the technology transfer goes the other way around. Now, Indian

design. The idea is to increase our

companies go there to sell their equipment and technology. They

global market share to at least

are looking for buyers for the technologies they are able to manu-

40%.” Tema is one of the Indian

facture from India.”

companies that has been strongly

Overcoming the misconceptions, many Indian manufacturers

investing in high quality and latest

look abroad to sell their products. So does H.K. Sippy, chairman

technology. As Sippy highlights,

and managing director of Tema India, whose company belongs to

Jagdish Prajapati, managing director, Panam Engineer

“There are several companies that work with heat exchangers,

VP Ramachandran, secretary, PPMAI

although it is true that very few of them have the design capabilities that we possess. We have been able to elevate the standards of our company to its current standing. Apart from that, there are companies who have not been able to bring to the fore the combination of design and an intricate manufacturing process. They may be

H.K. Sippy, chairman and managing director, Tema India

financially stronger and larger as an establishment, but technically, they have not been able to bring this kind of engineering excellence.” With equipment installed on the five continents, GEI Industrial Systems, specializing in heat transfer technology, is another Indian manufacturer that has found a way to bring Indian equipment to international markets. “Almost every week, somebody visits us from abroad to establish a JV or some kind of manufacturing arrangement with GEI. Foreign visitors have a good opinion of Indian

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December 2011 Oil & Gas Financial Journal t www.ogfj.com


Panam Engineers manufacturing facility

capabilities,” said

community should look global and

C.E. Fernandes,

accept companies which are com-

chairman and

ing up aggressively to meet the

managing direc-

demand in these areas, especially

tor of GEI. “There

large multinationals such as Chev-

was a time when

ron, Shell, ExxonMobil. They should

Indian qual-

open up in such a way that compa-

ity was neither

nies from the developing countries,

appreciated nor

like GEI, can get a good participa-

accepted in most

tion to join in their progress.”

C.E. Fernandes, chairman & managing director, GEI Industrial Systems

countries; however, in the last decade or so a lot has changed. There has been a shift in perception in recent years and many are

Refining, the future of India?

now confident of the quality and technology of Indian products,

Even though India has been undoubtedly developing its offshore

which are at par with European vendors”, he continues.

sector, as well as a vibrant manufacturing industry, the most promis-

With JVs in Oman, Brazil, Singapore, and plans to enter South

ing sector in the O&G industry still seems to be refining. India already

Africa, Fernandes has a word of advice on how the international

contributes to 4% of the world refining, with an installed capacity

O&G industry should deal with companies like his. “The O&G

of almost 200 million tons per annum in 2011, and showcase the

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addition to expanding capacity at its Kochi refinery, has commissioned the Bina refinery, which will have a capacity of 120,000 barrels per day with the potential to raise it to 300,000 barrels. The other Mumbai-based stateowned refinery, HPCL, plans to expand capacity of its Visakh RefinHydrocracker project, Haldia refinery, Courtesy of Punj Lloyd

largest single-complex refinery in the world, the Jamnagar complex by Reliance Industries. Notwithstanding these impressive figures, the country is continuously adding new capacity and is expected to reach

ery by 9 million tons as well as a relocation of the Mumbai refinery, which currently refines 6.5 million tons, to the west coast of India. The company furthermore commissioned its first refinery in the north of the country, in Bathinda in the state of

300 million tons per annum by 2017. Most of the state owned players are adding capacity. The PSU Indian Oil has recently completed the expansion of its Panipat refinery

•••••

Rabindranath Burman, director and country head, ITT Corporation India

to 300,000 barrels a day, from 240,000. State-owned BPCL, based in Mumbai, with a refining capacity of 30 million tons per annum, in

Punjab, through a joint venture with Mittal Energy. The HPCL Mittal Energy Limited (HMEL) grass root refinery will be commissioned by March 2012 and is expected to produce 9 million tons per year. The expansions in the country’s major refineries have also allowed the service industry to increase its capacities. Swiss manufacturer Sulzer for instance has been expanding its capacity in order to support the boom in the refinery industry. “In fact, Sulzer India has carried out a significant portion of the mega projects in refineries in 2006 and petrochemical in 2007 & 2008. Considering we expanded our plant’s capacity in 2005 and 2006, so before the booming really started, the timing was excellent. Successful execution of large projects has given a lot of confidence to our customer for future collaborations also”, Sulzer’s president of Indian operations B. Balaji said. The new projects have also created a shift in the structure of the industry, as “there has been a shift from a PSU dominated market to a number of private partnerships. For instance, the biggest refineries in India are not PSUs but Reliance and HMEL, which is a partnership with the Mittal Group”, ITT’s managing director Burman pointed out. Indeed, these major expansion projects have created a number of opportunities for the service industry and Burman believes that the extra

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A. Basheeruddin, managing director and co-founder, Furnace Fabrica

December 2011 Oil & Gas Financial Journal t www.ogfj.com


capacity in these refineries “will definitely be a driving force in both the top and the bottom line of the profit and losses (P&L)” of the company. Furnace Fabrica, an Indian EPC player with a strong focus on the downstream, has been taking advantage of these new projects as well. As managing director A. Basheeruddin explained, “We successfully completed expansion projects for Hindustan Petroleum Corporation Limited (HPCL). Now G. Sathiamoorthy, managing director, Tecnimont ICB

we are executing a sulphur recovery unit for the same client. We expect to get a major chunk of the business from [the

expansion of the Bombay refinery]. We completed the expansion plans of the Haldia refinery as well. In fact, we were the first company to build the second hydrogen reformer at the Indian Oil Corporation refinery, with a capacity of 94.62 mmkCal/hr”. Currently, the company is working on three acid coolers with anodic protection design for Indian Oil Corporation’s Paradip refinery. “Many companies will find it difficult to meet the stringent requirements,” Basheer-

•••••

uddin said on this last project. “There were only two bidders. One was from America and we were the second. We beat them out on the price, which is often one of the main criteria in India, considering it is a highly price-sensitive market. “In addition to this, we are one of the few international companies with experience in dismantling refineries for reconstruction, not for scrapping. We are able to dismantle, rebuild, and also expand refineries. Our capacity is unique in that respect”, continues Basheeruddin. G. Sathiamoorthy, managing director of Tecnimont ICB (TICB), part of the Italian engineering, procurement and construction company, Maire Tecnimont Group, confirms the number of opportunities available, not only downstream: “India is currently buzzing with new opportunities for gas treatment, refinery and fertilizer units. TICB has the references and the capabilities to undertake these projects. There is a lot potential in the O&G industry, some LNG terminals are under discussion. The company is eyeing few prospects in the refining segment. We do foresee the refining sector to gain momentum next year with new expansion projects getting finalized.” And with all the projects coming up, from upstream offshore to the refining sector, this revolution happening in the Indian oil and gas industry is becoming less and less silent.

Correction: Country Report: India, the silent revolution - Part 1, Oil & Gas Financial Journal, July 2011: on page 72 the photograph on top is of Dr. A. K. Balyan, CEO & managing director, Petronet LNG Limited, and not as wrongly state of B. C. Tripathi, chairman and managing director, GAIL.

www.ogfj.com tOil & Gas Financial Journal December 2011

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Oil and Gas India report (Part 2) 2011  

Written after exclusive interviews with India's decision makers from NOCs and multinational E&P companies, legislators, financial institutio...

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