1. Oil and Gas industry

3. Introduction
 Major activities divided into Upstream, Midstream
and Downstream
 Types of companies: National and International
 Types of crude: Light Sweet and Heavy Sour
 Major benchmark crudes: Brent and WTI
 Market structure: Collusive Oligopoly
 An industry driven by prices

4. Pricing – Demand and Supply
 Production - OPEC
 Financial/Commodity Markets
 Demand (India-China)

5. Pricing – Demand and Supply
 Highly Inelastic demand and supply
 Short Term Dynamics

6. Pricing - Speculation
 Is price of crude oil in accordance relation of supply
to demand ?
 Who has a say in Oil prices?
 Who isUS speculator? of Energy’s Energy Information
The
a Department
Administration (EIA) recently forecast that in the next few
 What is an Oil future?
years global surplus production capacity will continue to grow
Nymex in New 3 and and the ICE Futures in day by 2010, thereby
to between York 5 million barrels per London today control
global benchmark oil prices regulated? set most of the freely
Can Future market be the surplusturn
“substantially thickening which in capacity cushion.”
traded oilis impact of speculation on oil prices
What cargo.
Enron Loophole
allowed the Intercontinental Exchange to install terminals in the
Perhaps 60% of oil prices today pure speculation
United States
That would mean today that at least $50 to $60 or more of today’s $115 a
barrel price is due to pure hedge fund and financial institution speculation.

7. Import and Export – Net Exporters
Top 10 Oil Exporting Nations
COUNTRY QTY(BBL/Day) in Million
1. Saudi Arabia 8.73
2. Russia 5.43
3. UAE 2.7
4. Iran 2.4
5. Kuwait 2.35
6. Nigeria 2.32
7. EU 2.19
8. Venezuela 2.18
9. Norway 2.15
10. Canada 2.00

8. Import and Export – Net Exporters

9. Import and Export - New Plays
 Shale Gas
 Deals with Economic feasibility of oil shale extraction
 USA, Estonia, China, Brazil
 Production cost of a barrel ranges from US$12 to US$
95
 Coal Bed Methane
 Form of natural gas extracted from coal beds
 USA, Canada and Australia
 Oil Sands
 Typeof unconventional Petroleum deposits
 Canada and Venezuela

10. Import and Export – India’s Imports
 India has significant coal Country Imports
resources USA 13.5 mbod
 India’s reserves 5.9 billion China 5.3 mbod
barrels (.5% of world)
Japan 4.4 mbod
 Current dependence at
South Korea 3 mbod
75% to grow to 91.6%
India 2.9 mbod
 Demand expected to rise to
250 MMT by 2015 Germany 2.8 mbod
Netherlands
 Exported 50.974 mmt of 2.7 mbod
petroleum products against France 2.4 mbod
the imports of 23.49 mmt Italy 2.2 mbod
Singapore 2.1 mbod

11. Import and Export – India’s Imports
 Oil import by India
India’s Sources
Saudi Arabia 23%
Iran 17%
Nigeria 11%
Iraq 10%
Kuwait 9%
UAE 9%
Malaysia 4%
Yemen 3%
Others 14%

12. International Business
 Oil’s effect on Economy
 Less Indian growth
 Impact on Inflation
 Consumer Spending
 Auto Sales
 Government subsidies fail
 Interest rates go up
 The travel sector suffers
 Alternative energy grows

13. International Business
 Economy’s effect on Oil
 Positiveoutlook tends to increase oil prices
 Negative outlook reduces prices due to low demand
 US credit downgrade reduced oil prices
 Negative US employment numbers reduced oil prices
 India, China growth will cause increase in oil prices
 Recessions exert downward pressure on oil prices

14. Government Policies – Price Ceilings
 Reliance KG D6 Case
 Gas price fixed at $4.2 per mmBtu till 2014
 Production declined to 45 mmscmd against plan of 80
 Well complications blamed

15. Government Policies – Tax and
Subsidies
 Subsidy component by theas on 01.08.2011 has remained
Diesel price after taxes government
Petrol
Price paid constant since 2004-05 at Rs 22.58 per LPG cylinder
to refinery @ Trade Parity 35.39
37.46
Inland Freight Rs 0.82 per litre of kerosene.
and + 0.65
0.69
MarketingIn Case Margin
 Cost and of Liquefied petroleum gas (LPG) there is a loss 1.39
+ 1.47
Excise Duty (including cess etc.) over INR 350.
on each cylinder of + 2.06
+14.78
Total price after Price before VAT and
Total Desired Excise duty and kerosene accounted for 87% of 52.29
 Electricity, LPG = 41.60
Dealer Commission absorbed by
Less: Under-recovery
total subsidies in India in 2009, or 1.9% of the GDP.
Less: Under recovery
OMCs (-) 00.71
(-) 6.06
 Nationally, the richest 30% of households consume
Price Charged to Customer - Depot Price
Price Charged to Customer - Depot Price = 51.58
72% of all liquefied petroleum gas, or cooking gas, +35.54
Dealer Commission
=
1.50
Dealer Commission poorest 30% consume just 2%.
while the + 0.91
Value added Tax (Including VAT on
VAT (Including VAT on dealer + 10.62
dealer commission.) * + 4.84
commission.) *
Retail Selling Price * *
Retail Selling Price = 63.70
= 41.29

16. Government Policies – Tax and
Subsidies
 The government is likely to pay an additional around
Rs30,000 crores ($6.8 billion) than budgeted in 2011-12 to
state refiners as compensation towards selling fuel at
subsidized rates
 The government, which plans to raise Rs40,000 crores
through its divestment programme in 2011-12, is planning to
sell shares in Oil India Ltd now instead of Indian Oil Corp.
 The Indian government has said that gasoline and diesel
prices will now be market-determined.
 The deregulation will lead to a INR3.5 per liter increase in
the price of gasoline, while the price of diesel will go up by
INR2 per liter as of now.

17. Advertising Policies
 International Oil Companies
 BritishPetroleum
 Shell Oil
 Chevron

18. Q&A