'Make in India' becomes central to the transformation in the energy industry'

Sashi Mukundan,
Regional President and Head of Country - India, BP Group.
Globally as well as in India, new oil and gas production is focused on more remote, challenging and expensive to operate locations; and Deep-water, ultra deep-water, tight oil and shale gas are great examples of this. However, a different approach will have to be taken to bring in investments in exploring for oil and gas in new areas, developing discovered oil and gas resources and enhancing production from existing fields, says Sashi Mukundan, Regional President and Head of Country - India, BP Group. In a candid interaction with Offshore World, he talks about the existing E & P activities and investments in India and the required steps along with government's paradigm shifts in reforms to augment the domestic E & P. He further outlines Gas potential in bridging the energy gap of India and the key initiatives to realise the Honourable Prime Minister's call for building a gas based economy.

Business Opportunities in India's Energy Industry for the 'Make in India' Campaign
'Make in India' becomes central to the transformation in the energy industry . As we address big societal challenges, like sustainable environment, health & cleanliness, food, energy and water, we need to keep in mind the need to efficiently and affordably solve the problems of citizens at the bottom of the pyramid. Scope and scale, as never before, combined with the dynamism of enterprise and cutting edge technology will be needed. Significant opportunities exist across the oil and gas value chain and 'Make in India' is one focused policy that promotes the E & P sector to extract resources in the sedimentary basins of India t o the last molecule .

It is obvious that energy produced domestically is advantaged in many ways namely: economic stimulus, energy security, FDI flow, feedstock to make industry competitive, developing and employing latest technologies and building new skills and capabilities. Domestically produced oil and gas will have to play a critical role to achieve Prime Minister's vision of reducing 10 percent energy dependence on imports by year 2022.

E & P Activities and Investments in India
India E & P sector is yet to be fully explored or produced. There are 26 sedimentary basins; 3.14 million sqkm, 52 per cent yet to be appraised and 65 percent of the prognosticated resources yet to be established besides significant discovered resources yet to be developed. Oil and Gas will need to continue to play a pivotal role in the energy mix for India with its demand expected to more than double in next 15 years. Globally and in India, new oil and gas production is focused in more remote, challenging and expensive to operate locations. Deep-water, ultra deep-water, tight oil and shale gas are great examples of this .

A different approach will have to be taken to bring in investments in exploring for oil and gas in new areas, developing discovered oil and gas resources and enhancing production from existing fields. The Government needs to act as an enabler, provide flexibility and space for participants to work at scale and build competitiveness. This is an industry that is inherently affected by high risks which need to be managed and mitiga ted efficiently.

What is required?
  • Accelerated exploration to discover significant yet to find resources in both conventional and unc onventional.
  • Fast track development of undeveloped discovered resources in both oil & gas. There are significant gas resources in challenging areas with a potential to double India’s gas production.
  • Enhance recovery factor from existing fields bringing new technology expertise through strategic partnerships using an effectual contractual model.
Steps to Increase E & P Activities in India
Government of India through Ministry of Petroleum and Natural Gas has rolled out a series of new initiatives and reforms to boost E & P activities in India. The key ones are:
  • New domestic Natural Gas Pricing Guidelines
  • Policy for monetization of discovered small fields
  • New Hydrocarbon Exploration and Licensing Policy (HELP)
  • Streamlining working under various Production Sharing Contracts
  • Setting up of committees to look into site restoration guidelines and best petroleum industry practices
  • National Data Repository
These forward looking initiatives are a step change and will provide the much needed impetus to the Indian oil and gas industry. It demonstrates the Government's intent to transform the oil and gas sector and enhance import substitution. We believe this should help unlock the development of existing discoveries, and encourage additional exploration. It will also lead to the development of a competitive gas market in the country. BP brings state of the art technology and years of expertise into the E & P sector in deep -water,large fields & gas value chain.

Gas-based Economy in India
Industry studies show that there is huge potential for a gas-based economy in India. There is greater potential in India for discovering gas resources than oil, besides already having significant undeveloped discovered gas resources. Significant volumes of undeveloped discovered gas resources in the deep water, ultra-deep water, HPHT and other challenging frontier areas exist with the pot ential to double India ’s current gas pr oduction by 2022 .

Gas could play a key role in bridging the energy gap as India transitions to affordable clean energy and renewables. With a national gas grid, gas can help India leapfrog across many years with smart cities, industrial and energy corridors, expressways and high speed transportation fuelled by gas - much like the telecom revolution that vaulted Indians from landlines to high speed mobile telephony and data transmission in just a decade. The need of the hour is to have multiple players in the gas value chain, who will be the energy providers and users of the future to meet the Prime Minister’s call for building a gas based economy.

There is a need for a gas master plan:
  • The plan should touch all aspects of the gas value chain from supply sources to infrastructure to demand cr eation and management.
  • Gas as co-generation for solar and wind power
  • Gas as green fuel for smart cities, city gas, transportation, industrial corridors, new high way net works, railways, peaking power, etc.
  • Infrastructure build of new highways and mega industrial corridors to include gas (and fibre optic) grids as part of development - fuel and communication network as part of basics.
  • Fast track development of stranded gas and fully exploit new exploration options
Also, the following 4 key initiatives can change the paradigm.
1. Augmenting Natural Gas Supply:
Deepwater gas discoveries are around 10 trillion cubic feet (tcf ) of which projects in advanced stages of preparation will help monetise around 7 tcf of this over the next 5 years with investments of over INR 1 lakh crores (USD 15 billion), employing close to 1 lakh skilled workers and producing around 75 mmscmd of gas by 2022. This needs to be followed by development of all remaining discovered resources and more through exploration. These will be in addition to existing production from on-land and shallow-water fields; most of which are associated gas. I expect domestic gas availability to reach at least 300-350 MMSCMD by 2030. We should aspire and set a goal to get this number to 500 mmscmd or roughly 50 percent of our consumption in 2030.

This will then be supplemented by imported LNG. We, today, have LNG import terminals with a capacity of 30 mtpa. An additional 10 mtpa is being installed and 15 mtpa being planned in the next 3-5 years. This will provide room for 200 mmscmd of LNG supply. We need to more than double this capacity by 2030 to meet the balance demand.

While I appreciate transnational gas pipeline are politically very challenging, a focus effor t should be made towards this.

HELP and OALP launch next year on the back of deep water projects being sanctioned would attract major players and help accelerate exploration to keep the dev elopment funnel and pipelines full .

We need to collaborate to encourage and support all activities that increase production, ensure robust compliance of contracts and let public/private capital get t o work for India.

2. Expanding Gas Supply and Distribution Infrastructure:
When we say a gas value chain it means a well-connected gas supply and distribution infrastructure to the last mile. This is now a priority and like the national highway and state highway projects it has to be driven by the government - like what the minister has now done in the east coast. We now need to look at a hub based approach like in Gujarat rather than a one size fits all. In the east coast the government has initiated a gas value chain build up using the Dhamra LNG project, a refinery as anchor customer, a potential gas grid, with 7 city gas distribution licenses all supported and gap funded by the ministry. This infrastructure would also support the potential development of the Mahanadi domestic deep water gas discoveries. Similar opportunity exists in the KG basin with infrastructure, trunk pipelines, and discoveries in place - it needs the last mile connectivity and development of Gas Economic Zones. Similar hubs can be developed around other domestic fields and LNG import facilities in the west and south. Accessing land through National Highways/State Highways, Railway lines, Water or Oil Pipelines would ensure speedy implementation of gas grids. Having state governments on boarded into this objective will ensure speedy clearances and prompt dispute resolution, and enforcing pipeline ROU rights, resulting in creating end mile connectivity.

3. Linkages to Tap Global Gas:
India needs to fully tap the global gas glut. There are too many LNG projects coming up globally – one train each 8 weeks for the next 5 years! Gas is abundant; it is readily available. This is the time to attract major gas players to come to India, invest and be part of the growth - similar to what is happening with the refining and fuels marketing business. These major players will then become India's partner in ensuring uninterruptable supplies come in and also help in developing transnational pipelines so that India is linked - in any which way to the global gas market.

4. Policy Reforms in Downstream to Move from Monopoly to Competition:
For gas and gas based industry to prosper, we must move to a market place where the consumer is agnostic to the source of gas supply and they must have multiple competing gas supply options to ensure that supply is available, affordable and sustainable. Unbundling marketing and transportation assets like in many markets around the world; with true common carrier access to infrastructure will be needed to stimulate competition and pr ovide supply options t o the customer.

The world, as we know, is fast moving towards Gas as its primary energy source and this growth is rising due to 4 key value propositions that only natural Gas has. I spoke about its Abundance and Availability. It is also Affordable today (HH at USD 3 and spot LNG at USD 5-6), Acceptable as it has a cleaner footpr int than c oal or liquid fuels .

So I wrap up my introductory remarks with this last important fact - a 10 percent replacement of liquid fuel by gas will reduce our import bill by nearly 3 billion dollars every year… if not for any of the other fine attributes of natural gas, just for this significant savings India has a business case to switch fast to natural gas.

Role of Technology in Offshore E & P Operations in India
Technology has become very relevant in different fields of life over the past few decades. Today, no industry can exist or become fully operative without the optimum use of technology. Oil and Gas have direct influence on every other commodity in the market. Therefore, it is critical to identify risk and solutions through technological innovation to maintain global economic balance and need .

The world of energy faces some tough challenges in the decades ahead, particularly in meeting increasing demand with less environmental impact. Technology can play a major role in meeting these challenges by widening energy resource choices, transforming the power sector, improving transport efficiency and helping to address climate concerns out to 2050.

An abundance of supply and a fall-off in demand growth have driven energy prices down and constrained the funds available for investment. Such price falls compel the industry to develop new technologies to reduce costs. Technologies such as enhanced oil recovery, advanced seismic imaging, and digitisation will have a huge impact on which of the available fossil resources we develop, how, where and when. Innovation will not only help to sustain the supply of hydrocarbons.

Key will be selecting right technology as per the requirements is very critical. We are now seeing upstream companies selecting an increasingly varied set technology to achieve their development needs. Lots of intensive researches are being done on technology in the recent time and these have resulted to unimaginable impact in the oil and gas industry.

Some of the key lessons that have emerged from our exploration campaigns are that while geological risks are very high, prospect sizes are typically small and scattered over large areas (thousands of square kilometres) and at big distances (30 t o 350 k m) from shore.

CSR and Talent Development in India
At BP we strongly believe in building long term and sustainable partnerships with the communities around us. We want to make a positive difference, wherever we do business. Social investment is one of the many ways in which we contribute to the communities around us. Globally, our focus is on access to education, building enterprise and ensuring access to energy. In India, we have fine-tuned the social investment strategy to adapt to the specific needs of the c ommunity around us.

The need for skilled labour with appropriate safety training cannot be overstated. The country as a whole is poised for significant spike in manufacturing and production and skilled safety conscience labour is going to be in demand. BP is focussed on delivering safety at the bottom of the skills pyramid.

A solid foundation in mathematics and science paves the way to logic & reasoning and good engineering skills. We believe this is critical for the country. STEM (Science, Technology, English and Mathematics) foundations need to be strengthened and boosted across education delivery in order to produce a w orkforce with a scien tific bent of mind for the future

Energy is a theme which is intrinsically intertwined with our purpose as an organization. Worrying about meeting the energy needs of the population in a sustainable and affordable manner into the future is our third area of community investment focus.