Risk Analysis in Oil and Gas Sector

India is the fifth largest consumer of energy in the world, and is likely to surpass Japan and Russia to become the world’s third biggest energy consumer by 2030. According to the International Energy Agency (IEA), hydrocarbons satisfy major energy demand in India wherein coal and oil, together, represent about two-thirds of total energy use. Natural gas accounts for about 7 per cent share. India has about 5. 7 billion barrels of proven oil reserves. India’s oil and gas sector has attracted investors round the globe as the country enjoys rich reserves of resources.

The petroleum and natural gas industry in India has attracted foreign direct investment (FDI) worth US$ 3, 332. 78 million during April 2000 to December 2011. The Department further recorded US$ 196 million during April– December 2011-12, in the industry. Oil & Gas- Production and Consumption * Crude Oil production was recorded at 31. 87 million metric tonnes (MMT) for April-January 2012, as compared to the 31. 41 MMT in April-January 2011 * Natural Gas production was 40, 156. 7 million cubic metres (MCM) during April-January 2011 * During April-January 2012, 140. 73 MMT of crude oil was refined, compared to 136. 9 MMT of oil refined during corresponding period in 2011 India’s average oil and liquids production for 2011 is estimated at 1. 04 million barrels per day (B/D) which will touch the peak production at 1. 06 million B/D in 2012. Further, giving its demand outlook, BMI projects consumption to rise sharply to 4. 29 million B/D by 2016 from 3. 44 million B/D in 2011. Total gas consumption is estimated by BMI at around 81 billion cubic meters (BCM) in 2016 from around 58 BCM in 2011. Diesel ;amp; Petrol Around 40 per cent of fuel consumption in India is satisfied by diesel. There would be an increase in India’s fuel demand by 3. per cent which would be majorly accounted by diesel and petrol (gasoline). IEA expects diesel’s demand to have increased to 1. 37 million b/d in 2011 (rising by 5. 8 per cent) and further it projects an increment of 5. 5 per cent in 2012 at around 1. 44 million b/d. Demand for petrol is expected to have expanded by 7. 6 per cent (363,000 B/D) in 2011 and is projected to increase by another 6. 7 per cent (388,000 B/D) in 2012. The Ministry of Petroleum anticipates a growth of 4. 6 per cent in the sale of oil products in the FY12. Gas Development of gas-fuelled power stations in India is boosting the demand for gas in the country.

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BMI states that gas consumption in India has increased by more than 160 per cent since 1995 while average annual demand would grow by 6 per cent over next few years. Gas production is estimated at 50 BCM in 2011 while total gas consumption is predicted at 81 BCM in 2016 from an estimated 58 BCM in 2011 by BMI. Developments and Investments in Oil ;amp; Gas * Energy giant Reliance Industries Ltd (RIL) is in full force to strengthen its global leadership position through its ambitious US$ 11 billion-Jamnagar phase three expansion project (popularly known as J-3 mega petrochemicals project).

The company has approached international markets to raise funds for the same. Recently, RIL officials have signed a US$ 400 million-loan agreement with Italian finance group SACE Spa * State-run Indian Oil Corporation (IOC) plans to expand its pipeline network (from 10,900 km to 15,000 km) by investing Rs 7,700 crore (US$ 1. 55 billion) by 2015. The company would lay more than 20 new pipelines to materialise its expansion plan. Further, IOC is contemplating to set up a refinery with a capacity of 15 million tonnes per annum (MTPA) in Gujarat by entailing an outlay of Rs 30, 000 crore (US$ 6. 2 billion) * Oil ;amp; Natural Gas Corporation (ONGC) and IOC are eyeing exploration and refining opportunities in Sri Lanka as the island’s Government would call for bids for seven oil and gas blocks in Mannar Basin by June 2012. Both the companies are reported to have visited Sri Lanka to review the opportunities and discuss the prospect with concerned authorities * After setting up two terminals on the western coast, Petronet LNG Ltd is planning to set up its third terminal in the east coast of India. The terminal, with a 5 million tonne capacity, is projected to cost around Rs 4, 500 crore (US$ 902. million) Companies in the oil and gas industry must deal with their own unique set of risks, whether natural, man-made or operational, as part of their daily operations. The approach that works well at an offshore installation may not be the best option for a refinery. An effective risk management system needs to offer solutions tailored not only to the industry, but also to the specific company and the sectors in which it operates. There are various risks associated with this sector which are as follows * Foreign exchange risk * Country risk * Environmental risk Capital risk * Human capital deficit These risks can be mitigated by proper management which can prove to be beneficial or helpful for the organization RESEARCH METHODOLOGY Research methodology is a way to systematically solve the research problem. The research methodology using for find out the solution of the research problem is analytical research methodology and some extend descriptive research methodology. My research methodology will be “case study methodology” in nature. The qualitative and quantitative data will be collected from the various websites of Oil Companies.

Information would be collected and data would be tabulated, analysis and recommendation will be made. RESEARCH OBJECTIVES: 1. To identity and analyze the various kinds of risk in Oil& Gas Industry. 2. To study the challenges faced by the Indian Oil Industry. 3. To suggest the remedies to mitigate the risk encountered by this Industry. RESEARCH QUESTIONS 1. What are the various risks prevalent in Oil & Gas Industry? 2. Whether risk can be evaluated and measured or not? 3. What actions can be taken in order to mitigate the various kinds of risks? TENTATIVE CHAPTERIZATION * Executive summary Research Methodology * Research objectives * Research questions * Introduction : Oil & Gas Industry * Literature Review * Meaning and Concept of Risk & Risk management * Types of risks in Oil & Gas Industry * Challenges faced by Indian Oil Industry * Critical Insight – Risk Management * Conclusion * Analysis and recommendations * Literature Survey *

Bibliography and References

http://www. absconsulting. com/oil-and-gas-risk-management. cfm


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