This report profiles India’s oil and gas industry, discussing market trends through 2013 and outlook for 2014 and beyond. The report also highlights leading players in the sector including Oil and Natural Gas Corporation Ltd, Indian Oil Corporation Ltd and Reliance Industries Ltd.

India’s oil and gas industry saw a period of consistent growth during the last decade after the government partially deregulated the sector. However, the sector is still regulated by the government through the Ministry of Petroleum and Natural Gas which is responsible for the exploration, production, distribution, marketing as well as pricing of oil, natural gas and petroleum products. The sector also acts as a major source of revenue generation for the central and state governments of India. Various types of taxes are levied on oil, gas and petroleum products in India, including sales tax charged by the state governments and excise taxes charged by the central government.

Industrial production in India went through a period of extended slowdown during the last two years. Indian oil and gas sector also saw a challenging period in FY14. The upstream segment witnessed a decline in production of crude oil as well as natural gas. The downstream segment was also affected by shutdowns and maintenance issues subsequently recording a subdued growth in refined crude throughput. The domestic production was also marred by regulatory issues particularly related to pricing. Domestic crude and natural gas production was also insufficient to meet the demand. As a result, a large proportion of the requirement was met through imports thus disturbing the trade balance in the sector as well as the economy.

Government subsidies have been another concern in the sector. Though the government has tried to reduce it by gradually implementing the suggestions of Kelkar committee report, yet it still is a big drain on the country’s fiscal balance as well as the profitability of public sector companies.

Regulatory policies have a huge bearing on India’s oil and gas sector. Hence, the medium term fate of this sector hinges on the results of 2014 general elections due in May 2014. The policies of the incoming government will decide how things will shape up in this sector. Till then the sector will be marred by regulatory uncertainties.

Key Points:

• Oil and gas imports accounted for 33% of the total Indian imports in FY13. The sector also accounted for 51% of the country's trade deficit. Total trade deficit in oil and gas sector grew at a CAGR of 30% during 2005-13.

• India’s share in the world crude oil reserves was around 0.3% and in natural gas reserves was around 0.6% as of 2012. Majority of recoverable reserves in India are situated in off-shore locations. As of FY13, offshore reserves accounted for 56% of total crude oil reserves and 74% of the natural gas reserves in India.

• India’s share in the world crude oil production was around 1%. Crude oil production grew at a CAGR of 1.4% during 2005-13. Crude refining throughput grew at a CAGR of 7% during the same period.

• Crude oil production has a weightage of 5.22% in the Index of Industrial Production (IIP), while natural gas production and refinery products have a weightage of 1.71% and 5.94% respectively. Both crude oil and natural gas production, i.e. upstream business, slipped in 11MFY14. The downstream segment comprising refining industries also registered a subdued growth during this period.