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INDIA ENERGY

IndiaEnergy reportSeptember 2012

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IndiaPt.1

I ndia’s economic growth is widely praised, and with a GDP of

$4.046 trillion USD in 2010 and a GDP growth rate of 8.3%

last year, it is clear why the country is making the headlines in

the most positive of lights. In his latest visit to India, U.S. President

Barack Obama stated that "India is not simply emerging: India has

already emerged." However, before it can complete its transfor-

mation into one of the world’s superpowers, India must address

two big issues that are hampering its development. These are its

infrastructure and energy challenges.

The Silent Revolution

Project Directors: Karim Meggaro & Henrique Bezerra Project Coordina-tor: Federica Torgneur Project As-sistant: Andrey Muntyan Prepared

in collaboration with Petrofed

www.ogfj.com • Oil & Gas Financial Journal July 2011 www.focusreports.net 55

Refinery at night, courtesy of BPCL



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RPN Singh, Minister of State of Petroleum & Natural Gas

Sunil Kumar Srivastava, directorgeneral, DGH

AK Arora, secretary general, Petrofed

56 www.focusreports.net July 2011 Oil & Gas Financial Journal • www.ogfj.com

Despite the fact that stories of India’s booming economy and

emergence on the world stage shout from newsstands across the

world on a daily basis, very little time is dedicated to discussing

the industry that is needed to fuel this growth. However, India has

taken important steps to address its energy imbalance. Indeed, it

has been remarked that the transformation that has taken place in

the Indian oil and gas industry over the last two

decades has been a silent revolution, and today

India stands as one of the most influential and

important oil and gas markets in the world – and

more importantly, it has reached this position with-

out the rest of the world noticing. Focus Reports

has spent some time on the Indian subcontinent in

order to uncover the factors that have caused this

revolution, and discover where the Indian oil and

gas industry is now headed.

“The transformations in the Indian oil and gas

industry represent a silent revolution,” says S

Sundareshan, outgoing secretary of the ministry

of petroleum & natural gas, “because, besides

allowing India to grow and improve the lives of

hundreds of millions, it goes largely unnoticed. For

instance, India’s refining capacity jumped from 68

million tons to 185 million tons in only ten years.

It is likely to increase to 240 million tons before

2012.” Today, India has excess refining capacity,

and as a result the country currently exports about

40 million tons per annum. When capacity is fur-

ther bolstered, India will be in a position to export

more than 80 million tons per annum.

However, India is the world’s fourth largest

oil consumer after the United States, China, and

Japan, consuming around 3 million bbl/d in 2010

while producing only about 900 thousand bbl/d,

making energy security one of India’s major bottle-

necks for its future growth.

As a response to this, Indian policymakers have

gradually liberalized India’s oil and gas industry

over the last 15 years in an effort to boost the

country’s 5.6 billion barrels of proven oil reserves

(as of January 2011), the second-largest reserves

in the Asia-Pacific region after China. Its main

policy tool has been the New Exploration licens-

ing Policy (NELP), which aims to provide a level

playing field for all players active in E&P. Under

the NELP regime, organized in rounds and starting

with NELP I in 1999, 87 oil and gas discoveries

have already been made in 26 exploration blocks,

not counting this year’s bidding round.

The latest NELP round, NELP IX, closed in

March 2011, and offered 34 exploration blocks in

10 sedimentary basins covering an area of 88,807km2. The blocks

comprised 19 onshore blocks, 8 deep-water blocks and 7 shallow

water blocks. 19 of these blocks were being offered for the first

time to interested parties. At the close of the bidding cycle, 33

of these blocks had bids placed on them, with 10 new companies

entering the Indian E&P sector for the first time, 2 foreign and 8

Indian.

Sunil K Srivastava, the director general of Directorate General

of Hydrocarbons (DGH), India’s upstream regulatory authority,

believes the country’s sound governance and stable rules have

been the main ingredients in its efforts to attract more private

investment to its oil and gas industry: “Reliance Industries’ KG-D6

discovery took only six years to go from discovery

to production; its success was not only a product

of the competence of the operators but also the

government’s fast-tracked decisions, approvals,

governance and policies. Thanks to India’s sound

policies, investors both domestic and interna-

tional have increased their stakes in India’s E&P

industry.”

As a result, since April 2009 India has added

2.1 billion cubic feet of natural gas production per

day to its existing 2.65 billion with the start of pro-

duction on the Krishna Godavari (KG) basin and

specifically the KG-D6 block, the biggest natural

gas discovery in the world for the year 2002.

Even so, India is aware that it is far from

achieving self-sufficiency in the oil and gas sector.

As a result, it has applied pragmatic policies to

boost national production and import capacity;

internationalize its companies and secure assets

and markets overseas; and become a prominent

international refining hub by importing crude oil

from its Middle-Eastern neighbors and exporting

refined products to new markets.

The silent raise their voicesOn reflection, what many may regard as a fairly

quiet player on the oil and gas map seems to have

an awful lot to shout about. Admittedly, the vast

nature of the market, the history of state influ-

ence in India, and the need for subsidies in order

to make fuel affordable to India’s rural poor make

the downstream a fairly unattractive option for pri-

vate companies as it stands at the moment. But as

BP has shown recently, there are attractive options

in the country for multinationals willing to take

a bet on India’s untapped reserves, and less of a

bet on the country’s massive refining capacity. On

top of this, the private sector players have gone

through a period of change and emerged on the

other side as profitable, energized and creative

businesses, diversifying and evolving to overcome

new challenges and build themselves a market for

the future. The private sector cannot be forgotten

in this equation. Having established a formidable

presence in their home market, companies across

the value chain are now looking abroad to find the next frontier.

As India’s pioneering spirit develops and matures, the world will

see a tiger awake – one that can beat competitors on price, and

still bring an excellent level of quality to bear. Traveling to India, it

is hard to describe the country as silent, but now it is time for the

country to roar.



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India, in need of a little NELP For a long time the Indian oil and gas industry was dominated by

its top state-owned players: the so-called ‘public sector undertak-

ings’ or PSUs. Once funded by the government, these companies

are now self-sufficient, although due to fuel subsidies imposed by

the government, they rely on regular compensation in order to

keep themselves profitable. As a result, many of these companies,

headed by new management, are now looking to diversify their

businesses and make them independently sustainable, whilst con-

tinuing to play the role for which they were established; ensuring

that India has access to the energy it needs.

Outside India, these companies are not particularly well known,

but on the subcontinent, these companies are the public face

of India’s fight for energy security. From ONGC, the major E&P

player in India and the country’s most profitable company, to

GAIL, involved across the entire natural gas value chain including

pipeline infrastructure and LNG terminals; OIL, mostly onshore oil

E&P in the north west of the country but increasingly growing in

other regions, both onshore and offshore; IOCL, focused mostly

in the downstream sector owning around half of India’s refiner-

ies; and HPCL and BPCL, two companies traditionally focused in

downstream and marketing activities, bringing finished products

to consumers; and finally EIL, the engineering consultancy created

specifically to solve the challenges that would be faced by India’s

fledgling oil and gas industry.

In the 1990s, the liberalization of the industry and the introduc-

tion of the NELP started to change this state-dominated envi-

ronment. Companies such as Cairn and Reliance Industries have

become prominent private players in the upstream and down-

stream sectors – Reliance Industries recently completed the world’s

largest refinery complex at Jamnagar, with a combined production

capacity of more than 1,200,000 bpd. The development of private

players, together with the fast modernization and development of

India’s state-owned companies, has contributed significantly to the

creation of a complex and mighty service and equipment industry

that is now crossing India’s borders and conquering international

markets.

However, this excitement about the potential of India does not

Changing faces, evolving undertakings

In recent months, India has not only changed the top three

figures at the ministry of petroleum and natural gas (min-

ister, minister of state and secretary), but also, due to the

stipulation that the chairmen and managing directors (CMDs)

of state-owned companies must retire at sixty, the heads of

ONGC, IOCL, HPCL and BPCL have all been replaced. ONGC

still does not have a permanent CMD due to the complex

process by which these leaders must be nominated, approved,

checked and then appointed. Whether this situation will affect

the industry in the months and years to come will remain to

be seen; it has the potential to either set the country back by

removing those with the most influence and experience in the

industry, or bring bright new figures to these positions with the

ideas and creativity to help the industry realise its full potential.

We asked the new chairmen of several of India’s PSUs what

it is that makes their company unique, given the shifting and

diversification of the state-controlled industry. This is how they

replied…

AK Hazarika, ONGCONGC has an important role to play in India’s energy develop-

ment. Today, ONGC contributes about 70% of domestic oil

production for of the country. In gas, Reliance Industries has

taken a large share of the market after the commencement of

production from KG-D6, but still ONGC and ONGC’s share of

its joint ventures accounts for almost 50% of India’s domestic

gas production. OVL is also contributing around 20% of India’s

total oil production. In India’s oil and gas industry, ONGC’s role

will always remain important.

AK Purwaha, Engineers India Ltd.Engineers India is unique in its partnering relationship with all

of its esteemed clients, whether public or private sector. This

has developed well since the company began. Initially, the

company’s only interactions were with the Indian public sector,

as these were the only companies involved in the oil and gas

industry in the country. Today, we have seen that the market

has been liberalized and the world has entered India, and EIL

has learnt to deal with its new clients just as well as it did with

its old ones, who are still very valued clients. Our recall value

and return business rate are proof that we have managed these

relationships very well, even in this brand new industrial and

economic environment that we are facing today. As the years

progress, we hope that the confidence our clients have in us will

continue to be our greatest strength.

RK Singh, Bharat PetroleumThe question of whether BPCL continues to remain down-

stream or diversifies and looks at other opportunities has

been debated at length. Any company, whether it is a PSU or

a private sector business, wants to grow and have access to

more opportunities. BPCL also wants to grow and diversify its

business activities, but not at the cost of the core activities.

Therefore we have created strategic business units, so that each

remains focused on their core activities.

S Roy Choudhury, Hindustan PetroleumHindustan Petroleum is the amalgamation of Esso and Caltex.

As a result, we have a very rich cultural blend of Esso and

Caltex mixed with our experience in the public sector. Putting

all this together, I think HPCL got a very clear defined strategy

to service the people of the country at the same time maintain

its growth. Whatever we do, we should always remember that

we are a commercial organisation. We must generate profit in

order to grow, and we will ensure that we achieve this growth

hand in hand with India.



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yet seem

to have

spread to

the world’s

major oil

and gas

players.

The fact

that only

BP out of

the global

top ten is

currently

invest-

ing in India’s upstream says a lot about

the attractiveness of the Indian market for

many large foreign companies.

Vikram Singh Mehta, chairman of Shell

India, explains this lack of investment from

the international majors: “If Shell takes the

decision not to invest in Indian explora-

tion, it is not a reflection of a purposeful

strategic decision not to invest in India—it

is simply a decision based on the relative

geological attractiveness of the various

opportunities that are available to Shell,

at any particular point in time, throughout

the world.” Though this seems clear, Shell’s

decision years ago to sell its Northern

Rajasthan assets to Cairn was later regret-

ted when the massive Mangala oil field of 1

billion barrels of recoverable oil was found.

Indeed, as Rahul Dhir, managing direc-

tor and chief executive office of Cairn

India points out, “based on our success,

it becomes hard for us to imagine the

reasons why the world’s majors have not

invested in India.” He believe that “ people

still don’t understand India’s full poten-

tial; about 80% of our sedimentary basins

are not as well explored as elsewhere, so

people have been very cautious about

coming in. But on the upper side, the fiscal

terms are very well understood; the licensing regime

is very transparent; India has one of the fastest grow-

ing markets in the world; there is a very comprehensive

downstream infrastructure with India being a net exporter

of refined products; so there is no shortage of access to

oil and gas, with the demand for gas being constrained

only by supply bottlenecks. The government is very keen

on overcoming these challenges by, for instance, giving

open access to the pipelines. Therefore, it is a bit of a

mystery to us to understand why

some majors are not investing heavily

S. Roy Choudhury, chairman and managing director, HPCL

AK Hazarika, chairman and managing director, ONGC

RK Singh, chairman and managing director, BPCL



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in India’s upstream sector.”

It seems, though, that the situation might be starting to change.

Late February 2011 saw the largest foreign investment in India’s

energy sector to date, when BP

announced that it would buy a

30% stake in Reliance Industries’

assets, and form a strategic

partnership together which would

see a 50:50 joint venture created

between the two for sourcing and

marketing energy in India. Addi-

tionally, BP will take a 30% stake

in Reliance’s 23 oil and gas blocks,

for which the company paid $7.2

billion USD plus a further $1.8

billion USD in the future through

performance related payments.

Deals like this will perhaps lead

the way for greater involvement from the world’s biggest oil and

gas players.

As PMS Prasad, executive director of Reliance Industries (RIL)

points out: “This deal marks a

significant milestone in India’s

E&P history as it ushers in the

participation of a global oil and

gas major for the first time ever

with a material stake in Indian oil

and gas blocks. There are signifi-

cant synergies between both the

partners given BP’s deepwater

capabilities worldwide and RIL’s

demonstrated project execution

capabilities. We believe it is a

potent combination to find more

the hydrocarbons to meet India’s

energy needs.”

Interview with Jubilant EnergyFor the full interview, log onto energy.focusreports.net

Why did the Jubilant Group choose to invest in a sector that is so technologically and capitally intensive, when it had so many other choices?

There is a silent revolution going on in the E&P industry in India.

E&P markets opened up in India only in the 1990s, first through

the pre-NELP programs, and then through the NELP. Even

today, there is significant unexploited potential in this country.

There are areas where we have not even done basic exploration

activities. So, considering these facts, the group feels that there

is great opportunity in this market. We know that the sector

requires high technology, and considerable investment, but the

group is prepared for that.

In many aspects, the E&P industry strongly resembles the

pharmaceutical industry. In pharma, you have a very long pro-

cess of drug discovery, which is akin to the exploration phase in

oil and gas. Then, you have a process of drug testing—similar

to the appraisal phase in O&G. Then, in both industries, you go

into the production stage. In E&P, we work on 7 to 10 different

exploration prospects/blocks and the success rate of 30-40%

are likely to provide very good returns to shareholders. Both of

these businesses require a lot of industrial expertise, a wealth of

research, and a technologically focused mind frame.

The recent listing of Jubilant Energy on the AIM, raising $85 million USD, was the third largest IPO of the year on the AIM. What was your strategy to attract such high interest from the international investor community?

There were several reasons behind investor interest in our IPO.

The first was the profile of India as a country, and the opportu-

nities a company like ours has here. There are very few nations

in the world, especially from an E&P perspective, that have

sufficient in-house demand for everything you explore and pro-

duce in the country. That was a very strong selling point.

The second selling point was the significant under-exploita-

tion of the Indian sedimentary basins. If you speak to the DGH,

they will tell you that 70-75% of the Indian sedimentary basins

are underexploited.

Another very strong theme that investors were interested

in was that India is just emerging as an international E&P pres-

ence.

Jubilant is one of the very few E&P plays in the private sec-

tor in India. Yes, you have many government companies that

are involved in E&P, but if you look into the private sector, you

have Reliance and Cairn at the top, and then there is a huge

vacuum of pure, independent E&P plays. Our objective was to

show Jubilant, on the London market, as a model of such plays

in India. A final aspect was Jubilant’s reputation in India’s capital

market. Jubilant Group has always created significant share-

holder value in this market. Our objective was to replicate the

same model in the London market.

Ajay Khandelwal, CEO, Jubilant Energy

PMS Prasad, executive director, Reli-ance Industries

Vikram Singh Mehta, chairman, Shell India



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It is not just the majors that are

looking at India with hesitation;

India is also struggling to attract

junior players to its NELP blocks,

both domestic and international.

Ajay Khandelwal, CEO of Jubilant

Energy, a prominent junior player

who has actively acquired assets

in the NELP rounds seems opti-

mistic, but asks for improvements.

“With any market that undergoes

a regulatory transformation, it

takes time for everything to fall

into its intended place. It cannot

occur overnight… The whole idea and conception of the highly

transparent mechanism of NELP is great, and very successful, but

there are always limitations to any such mechanism. India has gone

through multiple rounds of regulatory framework, and there has

to be a transition where the market becomes even more investor-

friendly, such as if the Open Acreage Licensing Policy (OALP) gets

enacted. So, better times to come.”

AK Arora, director general of PetroFed, India’s main oil and

gas association, agrees, “What would further boost new explora-

tion intensity would be the implementation of the OALP, which

requires the creation of a data repository now on its way. With the

announcement of NELP IX the honorable minister of petroleum

Rahul Dhir, managing director and chief executive officer, Cairn India

India Sedimentary basins, courtesy of DGH



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and natural gas gave a clear

indication that the OALP would

follow soon. It will probably be

announced around 2012.”

In the same way Ashu Sagar,

secretary general of the Asso-

ciation of Oil & Gas Opera-

tors (AOGO), sees the need to

increase the number of players,

especially juniors in the Indian

market, “India must have many

more small E&P companies; the

current number is not enough. It

should be easy to get in; it should

be easy to get out. There should be a completely open market

where the increased number of players improves the quality of

service and bring competitive prices. This is not a demand. It is a

paradigm for a healthy industry.”

One of the major hurdles standing in the way of the planned

move to an open acreage policy is the lack of seismic survey work

done in the country to date; without this data, it is hard for compa-

nies to assess attractive prospects for investment. Prem Vasistha,

vice president of PGS India, explains the perspective from one of

the world’s largest seismic companies: “for some time, PGS has

been working in India, thinking and discussing with the people

that have been involved in policy regarding this transition. Until

the government comes up with a policy where they put everything

together to make speculative survey a viable option for the major

seismic companies, OALP is not a feasible option.”

Vasistha believes that in order to incentivize speculative survey

in India, the government must work with the seismic companies

and become stakeholders in the data that is needed in order to

move exploration of the country forward. “Even a small concession

of a financial contribution from the government will make a huge

difference. I believe that the government should consider funding

25% to 30% up front for this work, so that good service companies

would be encouraged to do the survey and recover the remaining

cost from sales. This would have some very positive consequences.

It would help the government with faster acquisition of data,

encourage more mutual trust between seismic companies and the

DGH, and also make the government, through the DGH, a joint

partner in eventual data sales.”

The government recognizes the need to consider new options,

but is rightly proud of the success of the initial liberalization of the

market through the NELP, as minister of state for petroleum & nat-

ural gas RPN Singh explains; “We will look at options of what we

can do to address acreages, because we need to make this policy

move at a much faster rate. Without doubt we can say that NELP

has been a very successful initiative of the government, and to

further kick-start exploration and production we will look at other

proposals.” He also addresses the need to collate the data on

which an open acreage policy must be based: “We are working on

Prem Vasistha, vice president - India, PGS

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a National Data Repository to be set up. As soon as that is ready,

we will evaluate moving to an Open Acreage Licensing Policy.”

An industry refinedRefining in India has come a long way since the country’s first

refinery, Digboi, opened in 1901. Technological leaps and aspira-

tions towards global competitiveness mean that today, India is

home to the world’s largest refinery at Jamnagar on the country’s

west coast, operated by Reliance Industries and accounting for an

incredible 2% of the world’s refining capacity.

Quality has never been an issue for India’s refineries. AK Arora

of PetroFed points to the fact that it is not just the private sector

players that have changed the industry; from as far back as the

1980s, India’s state-owned refining companies were benchmarking

themselves against global standards of refining. This is what has

led India’s refining quality to be so high today. “This benchmark

exercise was a special challenge because it was done in a period

when India was absolutely destitute of hard currency. Yet the PSUs

spent valued resources on this, modernizing major refineries as

well as those smaller and remote. We set our targets high – true,

excellence is not always achievable, but you always have to aim in

that direction.” He concludes; “Indian refineries kept on improving

quality and capacity at the lowest cost for decades. Now it is only

natural that we are winning in international markets.”

This drive by the PSUs to strive for international refining quality

resonates with India’s desire to increase self-sufficiency and take

advantage of the relatively low cost of refinery building and opera-

tion in India, and today the government is pushing for an increase

of annual refining capacity in the country to 240 million tons by

2012, both for the home and domestic markets.

Bharat Petroleum Corporation Ltd. (BPCL) is one such company

paving the way to India’s increased refining capacity. Today, the

company’s capacity stands at 30 million tons per annum, but in

order to grow this capacity at the same rate as India’s GDP, the

company has initiated a plan involving brownfield expansions at

its refinery in Kochi, and has recently begun crude processing new

greenfield refinery at Bina, with a current capacity of 120,000 bar-

rels per day, expandable to 240,000 barrels in the future.

Hindustan Petroleum Corporation Ltd. (HPCL) accounts for 10%

of India’s refining capacity, but with a petroleum product market

share in the country of 20% and responsible for selling 40% of the

nation’s lube oil, the company is fighting a constant battle to refine

enough crude to supply its customers. For this reason, a new refin-

ery has been commissioned in Bathinda in partnership with Indian

industrial giant Mittal.

S Roy Choudhury became chairman and managing director of

HPCL in August 2010, after 20 years with the company across the

business, from marketing to sales, refinery, pipelines, operations

and distribution. Today, Choudhury also serves HPCL as director

of marketing. In his interview with Focus Reports, he explains the

need to expand the company’s refining capacity on a continuous

basis: “even after you take into consideration this new refinery,

HPCL will only be able to meet 56-57% of its requirement, because

of the company’s growth rate.” Projecting sales figures of 40

million tons by 2015-16, the company has resolved to expand its

refining operations in both Mumbai and Visakhapatnam. However,

budget constraints mean that these upgrades in capacity have



INDIA ENERGY•

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•a National Data Repository to be set up. As soon as that is ready,

we will evaluate moving to an Open Acreage Licensing Policy.”

An industry refinedRefining in India has come a long way since the country’s first

refinery, Digboi, opened in 1901. Technological leaps and aspira-

tions towards global competitiveness mean that today, India is

home to the world’s largest refinery at Jamnagar on the country’s

west coast, operated by Reliance Industries and accounting for an

incredible 2% of the world’s refining capacity.

Quality has never been an issue for India’s refineries. AK Arora

of PetroFed points to the fact that it is not just the private sector

players that have changed the industry; from as far back as the

1980s, India’s state-owned refining companies were benchmarking

themselves against global standards of refining. This is what has

led India’s refining quality to be so high today. “This benchmark

exercise was a special challenge because it was done in a period

when India was absolutely destitute of hard currency. Yet the PSUs

spent valued resources on this, modernizing major refineries as

well as those smaller and remote. We set our targets high – true,

excellence is not always achievable, but you always have to aim in

that direction.” He concludes; “Indian refineries kept on improving

quality and capacity at the lowest cost for decades. Now it is only

natural that we are winning in international markets.”

This drive by the PSUs to strive for international refining quality

resonates with India’s desire to increase self-sufficiency and take

advantage of the relatively low cost of refinery building and opera-

tion in India, and today the government is pushing for an increase

of annual refining capacity in the country to 240 million tons by

2012, both for the home and domestic markets.

Bharat Petroleum Corporation Ltd. (BPCL) is one such company

paving the way to India’s increased refining capacity. Today, the

company’s capacity stands at 30 million tons per annum, but in

order to grow this capacity at the same rate as India’s GDP, the

company has initiated a plan involving brownfield expansions at

its refinery in Kochi, and has recently begun crude processing new

greenfield refinery at Bina, with a current capacity of 120,000 bar-

rels per day, expandable to 240,000 barrels in the future.

Hindustan Petroleum Corporation Ltd. (HPCL) accounts for 10%

of India’s refining capacity, but with a petroleum product market

share in the country of 20% and responsible for selling 40% of the

nation’s lube oil, the company is fighting a constant battle to refine

enough crude to supply its customers. For this reason, a new refin-

ery has been commissioned in Bathinda in partnership with Indian

industrial giant Mittal.

S Roy Choudhury became chairman and managing director of

HPCL in August 2010, after 20 years with the company across the

business, from marketing to sales, refinery, pipelines, operations

and distribution. Today, Choudhury also serves HPCL as director

of marketing. In his interview with Focus Reports, he explains the

need to expand the company’s refining capacity on a continuous

basis: “even after you take into consideration this new refinery,

HPCL will only be able to meet 56-57% of its requirement, because

of the company’s growth rate.” Projecting sales figures of 40

million tons by 2015-16, the company has resolved to expand its

refining operations in both Mumbai and Visakhapatnam. However,

budget constraints mean that these upgrades in capacity have



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to happen gradually: “We are not going for the

full capacity straight away because of the costs

involved. Today we are walking on a tightrope

economy, especially the public sectors. We have a

lot of borrowings, and already HPCL’s debt equity

ratio is very tight. We concluded it would be bet-

ter to start at 9 million tonnes, start to bring in

revenue, and then go for another 9 million tons.”

One of the companies that supported the

most the development of the Indian downstream

sector has been Engineers India (EIL). Accord-

ing to AK Purwaha, its chairman and managing

director, “today, to EIL’s credit, there are 20 of 24

refineries in country 9 of which were grassroots

refineries built by us and another grass root refinery at Bathinda is

close to completion. In this sense, Engineers India is unique, being

probably the only company in the design engineering and project

management consultancy segment who have more than 50 large

refinery projects to its name.”

Other PSUs, not traditionally involved in the refining sector,

have seen the opportunities available in the sector for growth.

Applying its expertise in the fertilizer sector to the refining indus-

try, Projects & Development India’s (PDIL) main growth driver

today is project management for various refining units, working

both in India and abroad.

There are not just opportunities for public sector players to take

advantage of the silent revolution happening in the Indian refining

sector. Engineering consultancies such as Enereff Engineers were

quick to take advantage of the newly liberalized market, but of

course had to overcome the traditional boundaries facing any new

service provider in the oil and gas industry; build-

ing up a track record and gaining the confidence

of clients, in this case, the PSUs who already had

existing facilities in the country. Enereff’s manag-

ing director, Lalit Shingal, explains that “once one

of the refineries of IOCL had accepted us, there

was less resistance with the second unit of the

same company: acceptance was a little smoother,

faster, better, as they had seen our work.”

Shingal has noticed some major changes in the

refining industry since he began his company at

the time the liberalization of the sector was begin-

ning to occur. As well as noting that today, Indian

refineries are processing more heavy and sulphu-

rous crude than ever before, he believes that the largest change

has been in the scale of refineries being built and upgraded:

“Today we talk of processing over 9 million tons per annum of

crude in a single refinery. This has enabled refiners to install a lot

of equipment that would otherwise have been non-viable eco-

nomically.” The complexity of equipment needed in such refineries

provides plenty of opportunities for niche engineering consultan-

cies such as Enereff, and today the company’s main focus is work-

ing with Indian Oil at their new refinery at Paradip, providing heat

exchangers in order to maximize the plant’s efficiency.

Increasingly however, the PSUs that have been responsible

for building up India’s strength as a refiner are today looking to

diversify their activities in order to continue their path to sustain-

able growth. RK Singh, newly appointed chairman and managing

director of BPCL after a long period as director (refineries), spoke

in detail to Focus Reports about his company’s foray s into the

Uhde - a global first

Uhde, part of the ThyssenKrupp group, has been in

India for over four decades, and the Indian subsid-

iary has worked on over 500 global contracts since

that time. Dr. Benno Lueke, managing director of Uhde India,

explains how the Indian subsidiary was responsible for taking

Uhde’s first steps into the oil and gas industry on a global level,

at the time that the sector was just starting to liberalize in India:

“after the refinery sector opened up, Uhde India was employed

to provide engineering services to India’s first public sector

refinery at Mangalore. Previously in India, this work had only

been given to Engineers India, as all of India’s refineries were

owned and operated by the public sector. The moment the

refining sector opened up to the private sector Uhde India got

involved. We started with the Mangalore refinery, and since that

project we have worked on almost all the refineries in India. This

is a competency that Uhde India developed on its own, and it

has been instrumental in driving the business here.”

It is the fact that Uhde India developed capabilities in the

refining sector separate from the main Uhde group that makes

it such a unique story. Today, the Indian subsidiary accounts for

20% of Uhde’s global workforce, and following Uhde India’s

successes in the oil and gas

sector, a new global business

unit comprising the best of

Uhde’s oil and gas talent is

being developed in order to

take on projects around the

world. “Combining forces,”

says Lueke, “we hope that

we will be qualified for more

projects in India, which will

enhance our oil and gas busi-

ness significantly.” As well

as offering EPCM and PMC

services for various refining

units, along with Uhde’s refining technologies division, the com-

pany can also offer hydrogen plants, sulphur recovery units and

aromatics extraction processes. It seems that for Uhde, India

has been the first step along a long and fruitful journey into the

hydrocarbon sector, and will play a continuing role in the years

to come.

Benno Lueke, managing director, Uhde India

Lalit Shingal, managing director, Enereff Engineers



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E&P sphere, as well as its plans to move into gas marketing, city

gas distribution, petrochemicals and power generation. He also

summed up the need to diversify and remain profitable by saying

“India is short of crude: we currently import 80% of our crude

oil, and accordingly the government has placed a lot of empha-

sis on increasing crude production. That is how the NELP policy

came into being. When India has such a demand for crude, it

makes sense for companies like BPCL to enter

the upstream sector. We took a risk, but we

succeeded. As an organization, we have dreamt

to grow and make more profit and diversify our

portfolio and activities, and I am sure that BPCL

now has a good future ahead.”

Go forth and multiplyAnother pillar of India’s strategy to guarantee

the supply of its fast-growing demand has been

the acquisition of assets oversees. According to

government figures, Indian oil and gas companies

are already present in more than 21 countries and

produce more than 8 million tons of oil and gas

per annum outside of the country. Unquestionably,

the company leading this charge to international markets for India

is ONGC, who as a PSU is charged with the task of guarantee-

ing India’s energy security for the years to come. Current chair-

man & managing director of ONGC AK Hazarika, also director

(onshore), and charged with the task of leading the company while

a permanent chairman is selected, explains the company’s strategy

in international markets: “Our focus is also on sourcing equity oil

from outside India to meet the country’s rising energy demands.

That is why we created our subsidiary company, ONGC Videsh Ltd

(OVL), whose sole purpose is to look for oil internationally. In this

regard, another strategy, set by the company in 2002 is to source

20 million tons of oil equivalent per year into the

country by 2020, through OVL.

“Today, OVL is a good growth vehicle for

the company, and now has 34 properties in 15

countries. OVL has 9 producing assets where it

has equity oil, and year on year the company is

producing an increasing amount of equity oil. This

year it has reached 9.4 million tons of oil equiva-

lent, whereas last year, in 2009, it was 8.87 million

tons.” Through its flagship projects in Sudan,

Venezuela, Brazil and Russia, ONGC hopes to

secure energy for India, and also bring the Indian

flag to large international projects, and promote

the strengths of the Indian oil and gas industry

abroad.

Oil India Ltd. (OIL) is another PSU now looking to international-

ize its exploration and production activities. Chairman and manag-

ing director NM Borah had some interesting comments to make

about the challenge of taking those first steps abroad: “one must

be cautious and strategic when internationalizing. Three years

back OIL had opportunities coming from everywhere, from Latin

America to Africa. But we didn’t have a structured way of think-

ing questions such as ‘given the choice, what part of the world

would OIL like to go and why? Is it onshore or offshore? Gas, oil

or both? If it’s oil, what size?’ The company didn’t have good

answers for these questions, so we realized that this was some-

thing we needed to figure out before further expanding abroad.

This brainstorming might take some time, but it will put OIL on a

better position to capitalize on good international opportunities

that come along the way.”

However, the acquisition of overseas oil and gas assets by

Indian companies, though in fast expansion, is still shy when

compared to its Chinese and Western counterparts. Outgoing

secretary Sundareshan explains that “the Indian model of inter-

nationalization has been very different from others. If you look at

Western countries, private companies carry all their investments.

If you look at other players such as China, all their investments

come from governmental funds, with the state’s backing. In India,

our state-owned companies have been internationalizing on their

own, using self-generated resources. There is no national govern-

ment contribution to this. But even without our explicit guidance,

they have done a very good job guaranteeing India’s future energy

security. We hope that the private sector will add increasingly to

this process, and help India’s fast-growing economy to secure the

future energy need.”

The successful internationalization of Indian state-owned

companies has followed the liberalization and modernization of

the sector. But one issue still remains in the domestic market, and

is arguably the main reason private companies are barely present

in India’s downstream sector: price controls for final consumers.

K. Venkataramanan, president (opera-tions), Larsen & Toubro



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The lack of profitability directly affects the international competi-

tiveness of India’s downstream companies and their capacity to

acquire assets abroad and raise capital in financial markets.

Despite the challenges faced by oil and gas companies in the

Indian market, one sector that has seen much growth and success

over the years has been the service industry, and today, after many

triumphs in the home market, these companies are now ready to

expand internationally. “Once people see our credentials,” says K

Venkataramanan, president of operations at Larsen & Toubro, “the

first question they ask is why are we not already present interna-

tionally? We tell them that we have been building our track record

in India and now we believe that we have a sufficient number

of references to internationalize. We have achieved that critical

mass.” This is something of an understatement from Larsen & Tou-

bro, India’s largest engineering and construction company, which

on its 70th anniversary was hailed by India’s political and industrial

elite as ‘the company that built India’. Now, after conquering many

diverse Indian sectors, from oil and gas to defense, the company

is looking beyond its borders. As Venkataramanan says, “we have

reached the point now where we would definitely like to become

an international player, initially in the Gulf area, parts of Africa and

South East Asian markets.”

Currently, international projects account for 10% of Larsen &

Toubro’s business, but over the next five years, Venkataramanan

hopes to increase this to at least 30%. With this in mind, the com-

pany is restructuring its international affiliates. In the Gulf, Larsen

& Toubro has split its business into two clusters, one to service

Oman and Qatar, and the other to cover Saudi Arabia, Bahrain

and Kuwait. By recruiting local managers to lead the businesses,

Venkataramanan hopes that their experience will help to drive

the businesses. As well as this, the company has invested in a

manufacturing complex at Sohar, Oman, where recently the largest

structures ever made in the Gulf were completed and delivered:

two 15,000 ton jackets for ONGC’s Bombay High field. Addition-

ally, the company has representatives in London, Houston, Singa-

pore, Kuala Lumpur and Perth in order to drive more international

business. Venkataramanan is optimistic about Larsen & Toubro’s

future in new countries, but is well aware of the challenges that lay

ahead. “Larsen & Toubro is well regarded in the equipment space

because that is where we are best known around the world. As a

fully integrated EPC player, we are enlarging our circle of recogni-

tion. Companies might consider us for a $1 billion USD project,

but we need to get into the consideration set right up to $2.5 bil-

lion USD, and for a wider range of services.”

India’s greatest natural resourceAfter Reliance’s discovery in the KG basin back in 2002 and Cairn’s

discovery onshore in Rajasthan, two discoveries that have changed

the shape of the upstream oil and gas industry in India, it might be

tempting to believe that India could yet become one of the world’s

most important oil and gas investment destinations. However,

there is one aspect in which India is already a world leader, and



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this is in the impressive

human resource base

on which the country is

capitalizing. There are

very few countries in the

world where it would

have been easy for Fer-

nas to build a workforce

of 1600 employees from

scratch in two years; it

now has plans to grow to

a 5000-strong company

by the end of 2011. The

human resources are

readily available in a

country with a popula-

tion of 1.2 billion; the biggest challenge is to make sure this rapid

growth is completed sustainably.

Despite the successes of Indian education institutions in creat-

ing generations of engineers and

scientists, there were some in

the industry who believed that a

dedicated institution for oil and

gas-based studies was needed

in India. Sanjay Kaul, the founder

and president of the University

of Petroleum & Energy Stud-

ies (UPES) explains his desire to

found such an institution: “when

I was in the oil and gas industry

working for an oil company, I

could walk into any hotel on any

highway and find a hotel man-

agement graduate, whereas an

industry that contributed almost

16-17% of India’s GDP did not even have a university.” He goes

on to explain the short-term insights that contributed to his vision

for an institution like UPES: “IT just boomed, and suddenly there

were no software engineers, there were no hardware engineers.

Innovation could only come from overseas. I thought to myself

that if the same reforms come to

the power sector and oil and gas

sector, would this also happen?

That you have got the reforms

done, investment is pouring in,

you have got a multiplier effect

fuelled by the 9-10% growth rate,

but no talent to fuel it.”

Having had the initial idea

for UPES in 1995, it was only in

2001 that Kaul felt the time was

right to put his ideas into action.

He believed that the only hurdle

in the way of sectoral education

was that there was no precedent.

After successfully generating

interest for the idea in the indus-

try through round table events and forums, Kaul’s dream became a

reality, and the university became the first public private partner-

ship (PPP) to be recognized by the University Grants Commission,

an Indian statutory and regulatory body governing university

education in the country.

SJ Chopra, the chancellor of UPES, explains his perception of

the mission of the university today. “Our aim with UPES was to

address the knowledge and skill gaps covering the entire gamut

of the oil and gas industry: upstream, downstream and midstream

components. Further, also for the management programs, our

emphasis has been very specific to domains. This thinking is

reflected in all our academic programs. Over the years we have

made efforts to remain true to our stated vision of providing

quality education and also engage effectively in training, research

and consultancy in the core areas of energy, power and infrastruc-

ture. Our aim is to now address the growing needs of the entire

spectrum of the energy sector with the idea of developing human

talent that is tailor-made for the oil and gas industry.”

The Indian AdvantageMany local service and manufacturing companies have made

extremely good business out of the oil and gas sector despite

international competition caused by liberalization and a transpar-

ent tendering process, because their home market allows them to

focus on quality while keeping prices low. However, this advan-

tage initially acts as a double-edged sword for companies, as the

international reputation for products in a market like India are that

quality suffers in order to keep costs low. However, as the cases

below show, it is not only possible to keep high manufacturing

standards in India, but also to overcome this issue of reputation

and perception by international companies and clients.

One company that has capitalized on its Indian advantage is

Jindal SAW, India’s first and largest manufacturer of submerged

arc welded (SAW) pipelines, with revenues of around $1.5 billion

USD in 2010. According to Jindal SAW’s managing director Sminu

Jindal, “international markets already represent around 50% of

Jindal SAW’s revenues and we intend to continue expanding in

fast-growing markets, especially through greenfield investments,

and of course if any good acquisition opportunity comes along

anywhere else we will take advantage of it.”

Sanjay Kaul, president and founder, UPES

Sminu Jindal, managing director, Jindal Saw

UPES campus, Dehradun, courtesy of UPES



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CarUPES_OGFJ_1107 1 6/20/11 1:47 PM



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For Jindal, the initial challenges related to the general percep-

tion that Indian products lack of quality were quickly overcome

with high investments in quality and HSE standards. “This is a

perception that we had to fight initially but eventually our products

spoke for themselves. Jindal SAW’s experience in the USA speaks

volumes about how we managed to gain the confidence of our

international customers. Our products faired exceptionally well and

were in fact much above their prequalification criteria after which

we didn’t have to fight for recognition. Jindal SAW was the first of

its kind to go not only for ISO 9000, but also 18000 and 14000.”

Jindal SAW gained special recognition for its participation in

Cairn Energy’s Barmer Salaya pipe

line (BSPL) project. The project

involved the supply of longitudi-

nal submerged arc welded (LSAW)

line pipes for worlds' longest

underground pre-insulated heat

traced pipeline to transport waxy

and heavy crude which otherwise

solidifies at ambient temperature.

“By undertaking this challenge

and successfully completing the

task,” says Jindal, “Jindal SAW

Ltd. proved its technical compe-

tence and execution capabilities

to take on technologically chal-

lenging projects and accomplish

their execution to meet the

project’s requirement. We were

running on full capacity and to ful-

fill the requirement we had to set

up new thermal insulation coating

facility, new liquid epoxy coating

facility, new hydrotesting facility

for seamless tubes and sect tube

welding facility involving com-

plicated welding process – all

from scratch. We did this and

we also manufactured and sup-

plied 590km of thermal insulated

coated pipes all within 11 months – a record no one in the world

had accomplished before.”

Uma Shanker, chairman and managing director of Advance

Valves, recalls the challenges faced by Indian manufacturing com-

panies. In a concerted attempt to change the standard industry

template, Advance Valves opted for an extremely transparent way

of doing business that helped them win contracts with non-Indian

companies. “We were encouraged knowing that you could be suc-

cessful while disclosing the details of your technology—even as an

Indian company. Sometime in the 1990s, the West started listening

to Indian engineers. There was some resistance, but gradually they

began to accept our capability.”

Shanker believes that because of the high levels of quality

permeating the local market today, there is now no distinction

between international quality levels and Indian ones. “Indian buy-

ers are as technologically demanding as global customers. The

differences are vanishing more and more. Particularly with the

global market—the supplier base, and the vendor base, and the

engineering consulting base, are becoming more and more global;

and the scale of operation in India is ever growing.”

The fact that prominent Indian companies have been so

conscious about the quality of their products and services and

the safety of the environment and their employees has helped

to break paradigms in international markets about how Indian

companies are climbing the international value-added ladder while

maintaining their cost-competitiveness.

Jindal Drilling, part of the D.P. Jindal Group, is another example

of how Indian expertise has achieved international levels of quality.

Raghav Jindal, managing director, Jindal Drilling & Industries

Uma Shanker, chairman and manag-ing Director, Advance Valves

Manufacturing plant, Courtesy of Advance Valves



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CarIGL_OGFJ_1107 1 6/17/11 5:22 PM



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The company was incorporated in 1983 with a focus on providing

quality offshore drilling and correlated services and today operates

five jackup rigs and provides a wide spectrum of services such as

offshore drilling, directional and horizontal drilling, mud logging,

and manufacturing of seamless pipes.

Having built its business through working almost exclusively

with ONGC in the Indian market, the company is now planning to

spread its tentacles throughout the Indian market and beyond, as

Raghav Jindal, newly appointed managing director of Jindal Drill-

ing explains. “With the broadening of the Indian market, we will

be looking at partnering with various new entrants. Jindal Drilling

is bidding for tenders with some of the other already established

companies in the market such as British Gas, Cairn and Reliance

Industries and we recently did a drilling project for Cairn. Last but

not least, Jindal Drilling will also target the international market

and look into acquisitions abroad while participating in quality

partnerships.”

As part of its growing international recognition, Jindal Drilling

recently received an award from Forbes Asia, rating the company

as one of the top 200 companies on the continent that are under a

billion in market capitalization. “That was a great achievement for

the company. The ratings criteria are not specifically provided, but

some of the noted areas are growth opportunities in the future,

services, profit margins and turnover. There were only 37 compa-

nies selected from India, and just two or three from the oil & gas

sector,” says Jindal.

Gas is always greenerThe 2002 discovery of KG-D6

natural gas reserves by Reli-

ance has awakened India to the

potential of natural gas in recent

years. Today India is finally invest-

ing heavily in LNG terminals, gas

pipelines, city gas distribution

(CGD), compressed natural gas

(CNG) and liquified petroleum

gas (LPG), and many established

Indian players are using such

plays as a way to diversify their

domestic business in the face of

government subsidies on petro-

leum products.

The state-owned gas and

infrastructure giant GAIL is

involved in most of India’s major

infrastructure projects to increase

its gas import capacity. According

to GAIL’s chairman and manag-

ing director BC Tripathi, the main

“benefit GAIL has provided to

India is in the development of its

gas industry. When GAIL’s first

project started in 1984, India

didn’t have the necessary technol-

ogy, consultants, or materials

providers (such as pipes, compressors, and valves). Today India is

one of the largest exporters of pipes in the world, having almost

25% share of the world pipes industry. The same happened in the

construction industry: India had no contractors in 1984. When you

look at the various equipment suppliers (such as gas turbines, com-

pressors, wags), any item required in the industry is now produced

in India and exported elsewhere”. As a result, the “contribution

that GAIL has provided to India over the last 25 years, apart from

building the backbone infrastructure to the industry and support-

ing the energy supply, is the development of the Indian oil and gas

value chain.” The growth in GAIL’s turnover has impacted directly

on its investments, “In the last 25 years GAIL had an accumulated

turnover of $5.5 billion USD, but we are going to achieve more

than that in the next four years. The company currently has almost

4970 miles of pipelines and we are going to have 9320 miles by

2014/2015, almost doubling the available infrastructure.”

Petronet LNG is an example of the emphasis placed by the gov-

ernment of India on increasing the country’s energy supply through

gas. The company constitutes an effort to bring together four

major public sector undertakings (PSUs) to start a new business in

LNG, a field where India had no real experience, technology, or

expertise. “This was in 1998. The four companies – ONGC, IOCL,

BPCL, and GAIL – came together, and to have access to the neces-

sary technology, GDF SUEZ was taken as a strategic partner. The

Asian Development Bank also provided international support. In

this period Petronet LNG has done pretty well. The company has

the biggest re-gasification plant in the world and we have been

awarded the largest LNG sourcing contract,” explains AK Balyan,

BC Tripathi, chairman and managing director, GAIL

BC Tripathi, chairman and managing director of GAIL



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CEO of Petronet.

Petronet set up India’s first LNG receiving and

regasification terminal at Dahej, Gujarat, and is in

the process of building another terminal at Kochi,

Kerala, both on India’s west coast. While the Dahej

terminal has a nominal capacity of 10 million tons

per annum (MTPA) the Kochi terminal will have a

capacity of 2.5 MTPA.

However, there are challenges to delivering the

gas India so desperately needs. Balyan explains

why. “Petronet LNG needs to have reasonably

priced and affordable gas to make it available to

a billion people and that is a challenge. The world

gas scenario is very volatile and filled with uncer-

tainties. So one thing we are working on is to have

sustainable, long-term contracts at reasonable

price levels, to be able to import and bridge the

gap between demand and supply.”

Vikram Singh Mehta from Shell complements

Balyan’s comments; “You cannot produce gas

without infrastructure in place to support the

market. That means power plants must be con-

structed, fertilizer plants must be constructed,

and more. Demand is potentially huge, but you

have to facilitate the demand.” Even so, Shell and

its partner Total have built the $700 million USD

Hazira Terminal, which includes an LNG storage

and regasification terminal with a fully functioning

port. The industry hopes that current investments

in infrastructure will facilitate the access of oil and natural gas to a

largely unattended industry and population; LNG’s current prices

will help make it more competitive in a coal abundant, though

extremely polluted, country.

If finding major buyers looks challenging, try delivering fuel

directly to more than a billion people who are urbanizing at record

speed, with a 300 million-strong middle class growing in size and

purchasing power. This is what companies such as Indraprastha Gas

Limited (IGL) are doing. Their main achievement, as its managing

director Rajesh Vedvyas highlights, “has been to expand IGL’s infra-

structure so as to meet the ever growing demand. When I entered

the scene there were long queues at Delhi’s compressed natural gas

(CNG) stations, so I took as my first task the expansion of the infra-

structure at a rather fast pace to allow consumers to conveniently

refill their vehicles. In a matter of two years IGL

has built about 80 CNG stations from an initial

base of 160, and another 40 are under construc-

tion. There is a huge jump in the infrastructure

so as to make CNG refueling a pleasant experi-

ence for our consumers.”

Thanks to the enforcement of incentive laws

and the obligation for all public transport to

run on CNG, the pollution levels in Delhi have

diminished considerably, though there is still

a long way to go. Vedvyas expects that in five

years IGL will be at least four times bigger than

today in terms of turnover. “Last year IGL had

revenues of around $300 million USD, but our

target for 2015 is to become a $1 billion USD

company.”

IGL is also growing quickly in PNG city gas

distribution (CGD), though Delhi’s wide accep-

tance of this clean alternative has not been a norm

in India. “At the moment we have 40 Indian cities

where CGD has been rolled out in the last five

years, but in most of these cities, CGD business

has not taken off in real terms. There are issues

that need to be addressed before the PNGRB

tries to implement CGD in 200 plus cities they are

planning to. Even cities like Delhi and Mumbai

still have unresolved issues. The PNGRB needs

to act as a facilitator to resolve these problems

first before expanding the CGD business on such

a large scale. Unless they do that, it is doubtful

that CGD business can be successfully launched

in other cities.” Again, the problem is not lack of

demand, but how much large and small consumers

are willing to pay and how much the government

is willing to subsidize or enforce the use of cleaner

fuels.

Fernas, a Turkish construction company,

entered the Indian market explosively 2 years ago

through the medium of oil and gas, winning pipe-

line contracts with GAIL, IOCL, and ONGC’s Petro

Additions Ltd. It is already looking to diversify its

portfolio in India, firstly through power and road

projects, but also through city gas distribution, an

area where the company has experience as the owner and operator

of city gas distribution in the Turkish city of Diyarbaker, where it

supplies gas to more than 100,000 consumers.

As CEO of Fernas India Rohit Singhal explains, this would mark

a shift in the strategy of Fernas in India so far: “City gas distribution

is going to be another area where we may compete as an opera-

tor, rather than just as a constructor. The company outside India,

especially in Turkey, has moved away from construction to asset

ownership. We want to follow a similar strategy in India.” It seems

that despite the challenges of bringing gas to such an enormous

market, including the logistical challenges of bringing gas to new

cities and the legislative challenges still being faced regarding

distribution rights for new cities, there are companies in India today

willing to brave the challenges and seize the opportunities.

Rohit Singhal, chief executive officer (India), Fernas Construction Company

Rajesh Vedvyas, managing director, IGL

Pipelines in Rajasthan, Courtesy of Cairn India



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•India Pt.2

In 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 deep-

water 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.


Project Director: Federica Torgneur. Editorial Coordinator: Nicolas Carayon. Project Assistants: Mathilde Paquet & Fleur Richard. Editorial Con-tributor: Herbert Mosmuller. Report Publisher: Ines Nandin. For exclusive interviews and more info, please log onto energy.focusreports.net or write to [email protected]

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

www.ogfj.com Oil & Gas Financial Journal December 2011 energy.focusreports.net 3

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••

••

•India Pt.2

In 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 deep-

water 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.


Project Director: Federica Torgneur. Editorial Coordinator: Nicolas Carayon. Project Assistants: Mathilde Paquet & Fleur Richard. Editorial Con-tributor: Herbert Mosmuller. Report Publisher: Ines Nandin. For exclusive interviews and more info, please log onto energy.focusreports.net or write to [email protected]

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


advertisement



INDIA ENERGY•

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4 energy.focusreports.net December 2011 Oil & Gas Financial Journal www.ogfj.com

New Horizons Offshore

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

Bombay High oil�eld 160 kilometers off the coast of Mumbai. “The

Oil and Gas (O&G) discovery in Bombay High took the country

by surprise,” explained Satpal Singh, managing director and

CEO of Dolphin Offshore, one of the �rst Indian offshore support

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

resources. We had historic �ndings in Assam and Gujarat, which

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

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

source. There was no development of O&G technology; there was

no trading institution over here, although after a period of time,

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

institutions.”

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

ing there was no Indian company that had suf�cient expertise,”

Amit Biswas, CEO of Ambico, explained the initial development

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

offshore agency with Joint Ventures (JV) with Malaysian offshore

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

tralian offshore project contractor Tamboritha. “Over the last �fteen

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

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

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

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

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

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

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

�edged Indian companies taking lump sum turnkey jobs. Before,

only foreign companies were doing it, and Indian companies were

providing a bit of support.”

“The country’s offshore sector”, said Singh, “possesses such

levels of homegrown expertise nowadays that it could do without

foreign expertise. The growth and development of the Bombay

High �eld provided tremendous opportunities for Indian companies

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

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

Oil & Gas industry.”

Beyond Bombay High

While the output of the Bombay High �eld run by state-owned

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,

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

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

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

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

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

Bombay High �eld, the development of the operations at the east

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

companies, working hard to close the knowledge gap .

Reliance Industries’ operations in the KG basin were quickly

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

of the most important in the world; the �eld was the world’s largest

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

executive director, told Focus Reports, “our drilling partner, Trans-

ocean, says that our operations at a water depth of 10,194 feet are

the deepest that have ever been done [worldwide]”; this project

has also seen the participation of the Houston-based oil�eld service

company, Oceaneering, with an all Indian team.

“We had to start from scratch, so having created an organiza-

tion, trained a lot of people and acquired some competencies and

infrastructure, we are now looking at opportunities outside India,”

continues Prasad. “We have a very good safety, exploration, devel-

opment and project management record, and now we are looking

to capitalize on these competencies outside the country.”

Oil demand & supply

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

400350300250200150100500

Demand

2001-02

99.7

32.03

2002-03

114.3

33.05

2005-06

140

33.98

2011-12

199.6

33.47

2024-25

376.5

61.4Supply

InM

MT



INDIA ENERGY

CarBha_OGFJ_1112 1 11/9/11 2:59 PM



INDIA ENERGY•

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CarAmb_OGFJ_1112 1 11/22/11 10:58 AM6 energy.focusreports.net December 2011 Oil & Gas Financial Journal www.ogfj.com

Full of achievements, including

125 deepwater wells drilled and a

strong track record, Reliance Indus-

tries signed another milestone in its

international strategy by signing a

joint venture with BP last Febru-

ary through which the American

supermajor committed to invest 7.2

billion USD (30 per cent stake) in 21

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

sure you have the best Sherpa with you.”

Reliance’s successful deal was followed last August by news

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

increase oil and gas output of its Bombay High �eld.

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

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

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

company delivering mud logging services.

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

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

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

entry of foreign investment and private companies in the Indian

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

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

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

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

The growth should be supported by the upcoming Open Acre-

age Licensing Policies (OALP), which will replace the old NELP,

and could play an important role in bringing in the necessary

technologies.

“It will de�nitely attract further investment. Under the NELP,

Satpal Singh, managing director & CEO, Dolphin Offshore Enterprises

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



INDIA ENERGY•

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•


companies have to follow a �xed format and process and must

participate in the tenders. With the new Open Acreage Licensing

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

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

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

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

India is quickly becoming a strategic location for global players.

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

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 signi�cant contribution to the growth and Oceaneering is also

very keen on India for the future.”

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

support any type of operation. For any kind of dif�culty we come

up with a solution,” clari�es Nayyar.

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

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

pany that controls a �eet of offshore support service vessels and

construction vessels, when asked what made his company come to

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

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

CarDol_OGFJ_1112 1 11/8/11 4:55 PM

Kedarnath being towed by Great Offshore'sanchor handling tug supply vesselsCourtesy of Great Offshore



INDIA ENERGY•

•••

•

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CarOce_OGFJ_1112 1 11/9/11 4:16 PM


growing demand for offshore marine support services in India. India

has a signi�cant 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 of�ce in Mumbai. Olivier

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 technol-

ogies,” Konig said. “This sector has been driving the trend for India

to accept, bring in and adopt new technologies, being pushed by

service companies as well, consider-

ing we have the knowledge, the

understanding and the experience

in this sector.

“Weatherford has pioneered the

drilling of deep hot wells on the

east coast of India, Konig contin-

ued. “These are some of the tough-

est deepwater environments in

which we have deployed our tools

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?

R.K. Singh: The �rst priority was deciding where

we want the company to be in �ve years from

now. Having decided on our aspirations and

vision for Bharat Petroleum, we needed to work

out how to attain them. (…)

Predominantly, BPCL is a downstream

company dealing with re�ning and marketing of

petroleum products, but we have also looked at

other available opportunities and have entered

the upstream sector and have been fortunate to

make some discoveries along with other consor-

tium members. This has certainly encouraged us

and we now want to consolidate this upstream

business and work towards monetization of the

discoveries.

R.K.Singh, chairman & managingdirector, BPCL

FR: All your moves upstream have been in quite high-risk ventures so far – deepwater in Brazil, a wildcat well in Mozam-bique 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 Bra-

zil is concerned for example, we bought assets owned

by Encana Canada. A lot of data was available for us,

and we knew that the prospectivity was very good (…).

The second aspect of this is that Brazil is now having a

lot of discoveries in deep water. It is a big success story.

The operator of the blocks is Anardarko, a very estab-

lished player, and Petrobras also has a stake. They are

known to be experts in deep water drilling, and have all

the necessary rigs and the equipment that are required

for deepwater drilling. So the operator’s image, their

capabilities and data meant that we took the decision

that this would be the place to grow our upstream busi-

ness. I hope that by 2015, oil will start �owing in Brazil for

BPCL. Despite the high risk, I believe that the upstream

business is more pro�table.

Parmjit Singh Nayyar, country manag-er - India, Oceaneering International



INDIA ENERGY•

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CarOFI_OGFJ_1112 1 11/9/11 1:48 PMwww.ogfj.com Oil & Gas Financial Journal December 2011 energy.focusreports.net 9

in and have been immensely suc-

cessful in helping clients meet their

exploration objectives. It has been

more than 5 years since we started

out on the east coast and are cur-

rently involved in the development

drilling in that area.”

Going deeper:

the next step

for the shipping industry?

The deepwater developments are also attracting the Indian ship-

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

shipping companies have found a new potential area in servicing

the booming offshore industry.

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

and because of the technological improvement, the maritime com-

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

deeper, you require more engage-

ment of the maritime assets,”

explains S. Hajara, chairman and

managing director of the Shipping

Corporation of India (SCI), the

largest and most diversi�ed public

sector undertaking (PSU) under the

ministry of shipping. “Therefore I

believe offshore has a huge poten-

tial and we are trying to increase

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

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

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

nothing concrete has happened yet,” he continued.

The support industry as well is looking at the offshore industry

with more interest. Bharati Shipyard for instance, one of India’s

leading private shipyards, is targeting the deepwater offshore

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

Olivier Konig, country manager India, Weatherford Oil & Tools

S. Hajara, chairman and managing di-rector, Shipping Corporation of India



INDIA ENERGY•

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•


require vessels with high speci�ca-

tions, especially for deeper water

interventions,” P.C. Kapoor, the

company’s managing director, said.

“For instance, operations on the

east coast of India and in Brazil

require larger vessels. Bharati

Shipyard has decided to go on and

build these vessels. We see a lot of

growth opportunities in this area,

both in the east coast of India and

in Brazil.”

Bharati Shipyard acquired an integrated offshore oil�eld services

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

Great Eastern Shipping Company, capitalizing on the synergies

existing between the two companies. Kapoor continued. “Bharati

has been constructing ships for Great Eastern as well as for Great

Offshore for the last twenty years. A major portion of Great

Offshore’s �eet that is currently

operating has been constructed by

us. There were a lot of interactions

between the two companies before

the acquisition, even before we had

a single share.”

Since the acquisition, Bharati has

been actively growing and renew-

ing Great Offshore’s �eet, phasing

out the older ships to adapt it to

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

we have already purchased six vessels for �ve or six years, available

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

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

will double the �eet in the next �ve years, not in terms of number

of vessels, but in terms of operating capacity.”

Christopher Phillips, director of Seatech, a ship broker and char-

terer founded in 2008, has been making good use of the oppor-

tunities 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 re�ning 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

CarSea_OGFJ_1112 1 11/8/11 5:16 PM

P.C. Kapoor, managing director, Bharati Shipyard Limited, and execu-tive director, Great Offshore Limited

Christopher Phillips, director, Seatech



INDIA ENERGY•

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CarGEI_OGFJ_1112 1 11/9/11 1:51 PM


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.

Gas Thirsty!

In looking to secure its ever-

growing 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 trans-

mission 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 �scal year, eight LNG

deliveries have been sourced, and the

company expects another �ve or six in

the remainder of the year. In the next

couple of years, its spot gas portfolio

will increase four- to �ve-fold.

B.C. Tripathi chairman and managing

director of GAIL told Focus

Reports about current

and future plans in LNG.

He states, “The company

has already sourced half a

million tons of LNG, for the

�rst time doing it indepen-

dently, and we are now

discussing various other

major supply projects.

GAIL intends to import �ve

million tons of LNG in the

next two to three years.

That is why we are gearing

up GAIL’s infrastructure so

the receiving terminals get

ready and the pipeline infrastructure is in

place in due time.

B.C. Tripathi, chairman & managing director, GAIL

“GAIL is looking not only to grow in

the domestic market but

internationally. Hence, we

would like to have partner-

ships with companies that

are ready to work with us

in the international arena,

to source more LNG, for

instance. It could be either

an upstream investment for

producing or near-producing

blocks, or it could be LNG

and petrochemical plants.

What GAIL can bring in is its

unique 25 years of experi-

ence and expertise in one of

the world’s most challeng-

ing, but most promising, energy markets,”

Tripathi concluded.

Since the establishment of GAIL in 1984 the Indian oil and gas industry has experienced major trans-formations, 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?



INDIA ENERGY

••

••

•

CarGEI_OGFJ_1112 1 11/9/11 1:51 PM


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.

Gas Thirsty!

In looking to secure its ever-

growing 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 trans-

mission 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 �scal year, eight LNG

deliveries have been sourced, and the

company expects another �ve or six in

the remainder of the year. In the next

couple of years, its spot gas portfolio

will increase four- to �ve-fold.

B.C. Tripathi chairman and managing

director of GAIL told Focus

Reports about current

and future plans in LNG.

He states, “The company

has already sourced half a

million tons of LNG, for the

�rst time doing it indepen-

dently, and we are now

discussing various other

major supply projects.

GAIL intends to import �ve

million tons of LNG in the

next two to three years.

That is why we are gearing

up GAIL’s infrastructure so

the receiving terminals get

ready and the pipeline infrastructure is in

place in due time.

B.C. Tripathi, chairman & managing director, GAIL

“GAIL is looking not only to grow in

the domestic market but

internationally. Hence, we

would like to have partner-

ships with companies that

are ready to work with us

in the international arena,

to source more LNG, for

instance. It could be either

an upstream investment for

producing or near-producing

blocks, or it could be LNG

and petrochemical plants.

What GAIL can bring in is its

unique 25 years of experi-

ence and expertise in one of

the world’s most challeng-

ing, but most promising, energy markets,”

Tripathi concluded.

Since the establishment of GAIL in 1984 the Indian oil and gas industry has experienced major trans-formations, 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?

••

••

•


The NELP has been a very successful policy in opening up

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

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

representatives, emphasizes the changes NELP brought. “You have

to understand that the rate of participation of private players has

considerably increased since the market liberalization took place.

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

The perceived deviations and imperfections are being taken care

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

the state requiring something to be done acts differently adopting

varying processes.”

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

evolved towards a market-friendly and level-playing �eld environ-

ment where private players are enjoying great scope for action.

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

existence.”

However, India is still lagging behind in exploring its offshore,

with underground risks keeping international players at bay in the

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

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

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

country has failed to do so suf�ciently, with available data lacking,

making investors hesitant to deploy activity.

The aforementioned BP deal and the ONGC negotiations with

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

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

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

administrative hurdles and questions on the risk/bene�ts ratio.

One aspect many believe should

change, as expressed by major

international energy companies

looking to conduct exploration

activities in India, are restrictions

imposed by the country's defense

and space authorities on explora-

tion activities.

Just over half a year after it

signed the biggest foreign direct

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

Indian petroleum ministry, expressed its concerns over these restric-

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

“This is also affecting the con�dence of international companies

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

India,” the letter read.

A world nucleus for the service industry

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

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

attracting international players supporting the oil and gas industry

through new technologies, solutions and equipment. Sajiv Nath,

managing director of Swiss-based instrumentation and process

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

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

bene�t to risk ratio is the best. India is rationally considered the

main investment destination for the group. India is a sustainable

market which also provides IPR (Intellectual Property Rights) to

protect. Looking at the growth market in India, the bene�ts are far

higher than the risks,” he continued.

One of the main bene�ts is undoubtedly provided by the

quali�ed Indian workforce. “The Indian manpower is a young pool

of engineers with high communication skills (…),” Rabindranath

Burman, director of US manufacturer ITT Corporation, summa-

rized. “India is not only a manufacturing hub but also a talent

pool, speci�cally from the engineering side. ITT demands from its

engineers that they support global projects at the R&D level, while

also synergizing new strategies". And they are up for the task: “We Pipelines in Rajasthan, Courtesy of Cairn India

A. K. Arora, director general, PetroFed



INDIA ENERGY

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echn

olog

y.

CarWea_OGFJ_1112 1 11/8/11 4:13 PM



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have extensive training programs, a strong team of people, migrat-

ing 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 increas-

ingly dif�cult 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, manag-

ing director of SKF, a global supplier of rolling bearings, seals,

mechatronics, services and lubrication systems said. “The rapid

growth will increase the demand for quali�ed resources, thus invit-

ing an increased focus on retention of talent. Innovation, energy

ef�ciency 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.”

Is India ready to pay the price?

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

Entering the Indian market

As the industry is booming, foreign companies are �ow-

ing 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 stron-

gest 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 confer-

ence 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, wher-

ever 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 play-

ers 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.”

Hydratight 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.

To find out more visit

www.hydratight.com

or email [email protected]

ENGINEERING MAINTENANCE TRAINING SERVICE

CarHyd_OGFJ_1112 1 11/8/11 4:58 PM

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



INDIA ENERGY•

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ization, India’s PSUs are dominat-

ing the industry both upstream

and downstream. Given their size,

entering into agreements with them

is a must for any company wanting

to be present in the Indian oil and

gas industry. Contracts are often

long-term and, given the state

backing of these companies, safe.

In their attitude to new tech-

nologies, there are major differences between India’s National Oil

Companies (NOCs) and International Oil Companies (IOCs), Olivier

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

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

IOCs are very forthcoming and open to trying new technologies

while NOCs often have stringent procurement,” he continues.

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

addition of new products and

services, when these are not part of

the scope of work that was decided

initially, even if they are brilliant

products that could meet their

objectives and more.”

Indeed, the procurement system

is very strict, as the selection of

suppliers, either service companies

or equipment providers, is based

exclusively on price, what is called the L1, or lowest bid.

Clearly, this process has changed the landscape of the industry,

in�uencing not only the local industry but also the international

companies, which have been progressively reducing their prices

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

managing director and CEO Satpal Singh explains, “the worldwide

economic situation and more particularly the reduction in offshore

CarEnd_OGFJ_1112 1 11/8/11 4:16 PM

Shishir Joshipura, managing director and country manager, SKF India

Sajiv Nath, managing director, Endress + Hauser



INDIA ENERGY•

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dollars a day. It has been very dif�cult for

Indian companies to pick up work.”

The same issue is faced by the equip-

ment suppliers. “The concept of L1 is

hurting the industry,” said Javed A Hawa,

managing director of Hawa Valves, speak-

ing 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

they do not have the in-depth knowledge

to understand what differentiates one valve company from the

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

the bid opening, but that evaluation is skewed from the beginning.

The process is �awed.” In order not to compromise with the qual-

ity 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 recog-

nized 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 �rst target, and one of the chal-

lenges is increasing the acceptance of new technologies. “Given

the importance of the public sector within the Indian market, the

idea �rst 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 opportuni-

ties. 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

CarHawa_OGFJ_1112 1 11/8/11 4:57 PM

Sulzer facilities, Pune

oil and gas development projects forced international companies

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

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



INDIA ENERGY•

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CarTem_OGFJ_1112 1 11/9/11 1:43 PMwww.ogfj.com Oil & Gas Financial Journal December 2011 energy.focusreports.net 17

accepted, he explained. Today it

is the innovative technical “geeks”

who drive the Indian market. In fact,

Indian technologies are more driven

by the end users than by EPCs.

Endress+Hauser has been success-

fully able to identify certain “geeks”

amongst these end users who have

been receptive to technological

change.”

This aspect has been con�rmed by Konig from Weatherford,

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

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

more open to new technologies, which supports Weatherford’s

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

supported by the entry of international companies There have been

several new private Indian companies that have secured blocks in

the latest NELP rounds”.

From price to quality: the Indian re-evolution

As historically many of the local manufacturers have been focusing

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

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

country impacted the reputation

of Indian manufactured products,

fairly or not.

“Up until 1990, there was not

much of a market scope for the

Indian industry, especially as far as

valves were concerned, Jagdish

Prajapati, managing director of

valve manufacturer Panam Engi-

neers recalls. “Indeed, the purchas-

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

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

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

began wanting to trade with us more.

While the situation has changed for the better and Indian prod-

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

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

and international quality], as far the industry world is concerned.”

“The acceptance of Indian products is much more prominent

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

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

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

Indian workforce has tremendous technical skills. Thanks to the

B. Balaji, president, Sulzer IndiaJaved A. Hawa, managing director, Hawa Valves



INDIA ENERGY•

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technical knowledge the employees have, they can now be trained

easily.”

The fact that Indian companies did overcome many of the

prejudices that haunted them earlier has been con�rmed also by

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

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

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

tion congress on Chemical Engineering, Environmental Protection

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

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

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

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

companies go there to sell their equipment and technology. They

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

facture from India.”

Overcoming the misconceptions, many Indian manufacturers

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

and managing director of Tema India, whose company belongs to

a small group on the globe able to

manufacture high quality, high pres-

sure heat exchangers.

“Foreign operations are de�-

nitely a central focus, due to the oil

sands in South America, Canada,

and Russia. We are ready to com-

pete with players overseas,” Sippy

said. “We are concentrating on

our Screw Plug heat exchangers in

O&G, for which we have a patented

design. The idea is to increase our

global market share to at least

40%.” Tema is one of the Indian

companies that has been strongly

investing in high quality and latest

technology. As Sippy highlights,

“There are several companies

that work with heat exchangers,

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 com-

panies who have not been able to

bring to the fore the combination

of design and an intricate manu-

facturing process. They may be

�nancially 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 �ve 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 arrange-

ment with GEI. Foreign visitors have a good opinion of Indian

CarPan_OGFJ_1112 1 11/9/11 1:23 PM

VP Ramachandran, secretary, PPMAI

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

Jagdish Prajapati, managing director, Panam Engineer



INDIA ENERGY

CarFur_OGFJ_1112 1 11/8/11 4:19 PM


capabilities,” said

C.E. Fernandes,

chairman and

managing direc-

tor of GEI. “There

was a time when

Indian qual-

ity was neither

appreciated nor

accepted in most

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

now con�dent of the quality and technology of Indian products,

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

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

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

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

Panam Engineers manufacturing facility

community should look global and

accept companies which are com-

ing up aggressively to meet the

demand in these areas, especially

large multinationals such as Chev-

ron, Shell, ExxonMobil. They should

open up in such a way that compa-

nies from the developing countries,

like GEI, can get a good participa-

tion to join in their progress.”

Re�ning, the future of India?

Even though India has been undoubtedly developing its offshore

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

ing sector in the O&G industry still seems to be re�ning. India already

contributes to 4% of the world re�ning, with an installed capacity

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

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



INDIA ENERGY•

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largest single-complex re�nery in the world, the Jamnagar complex

by Reliance Industries. Notwithstanding these impressive �gures, the

country is continuously adding new capacity and is expected to reach

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 re�nery

to 300,000 barrels a day, from 240,000. State-owned BPCL, based

in Mumbai, with a re�ning capacity of 30 million tons per annum, in

addition to expanding capacity at

its Kochi re�nery, has commissioned

the Bina re�nery, 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 state-

owned re�nery, HPCL, plans to

expand capacity of its Visakh Re�n-

ery by 9 million tons as well as a relo-

cation of the Mumbai re�nery, which currently re�nes 6.5 million tons,

to the west coast of India. The company furthermore commissioned

its �rst re�nery in the north of the country, in Bathinda in the state of

Punjab, through a joint venture with Mittal Energy. The HPCL Mittal

Energy Limited (HMEL) grass root re�nery will be commissioned by

March 2012 and is expected to produce 9 million tons per year.

The expansions in the country’s major re�neries have also allowed

the service industry to increase its capacities. Swiss manufacturer Sul-

zer for instance has been expanding its capacity in order to support

the boom in the re�nery industry. “In fact, Sulzer India has carried out

a signi�cant portion of the mega projects in re�neries 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 con�dence 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 re�neries 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

CarSul_OGFJ_1112 1 11/16/11 1:56 PM

Hydrocracker project, Haldia refinery, Courtesy of Punj LloydRabindranath Burman, director and country head, ITT Corporation India

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



INDIA ENERGY•

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CarITT_OGFJ_1112 1 11/10/11 2:48 PM


capacity in these re�neries “will de�nitely be a driving force

in both the top and the bottom line of the pro�t 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

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 re�nery]. We completed the expansion plans of the Haldia re�nery

as well. In fact, we were the �rst company to build the second hydrogen reformer at the Indian

Oil Corporation re�nery, with a capacity of 94.62 mmkCal/hr”. Currently, the company is work-

ing on three acid coolers with anodic protection design for Indian Oil Corporation’s Paradip

re�nery. “Many companies will �nd it dif�cult 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 re�neries for reconstruction, not for scrapping. We are able to dismantle, rebuild,

and also expand re�neries. Our capacity is unique in that respect”, continues Basheeruddin.

G. Sathiamoorthy, managing director of Tecnimont ICB (TICB), part of the Italian engineer-

ing, procurement and construction company, Maire Tecnimont Group, con�rms the number of

opportunities available, not only downstream: “India is currently buzzing with new opportuni-

ties for gas treatment, re�nery 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 re�ning segment. We do

foresee the re�ning sector to gain momentum next year with new expansion projects getting

�nalized.”

And with all the projects coming up, from upstream offshore to the re�ning sector, this

revolution happening in the Indian oil and gas industry is becoming less and less silent.

G. Sathiamoorthy, managing director, Tecnimont ICB

Correction: Country Report: India, the silent revolution - Part 1, Oil & Gas Finan-cial 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.



INDIA ENERGY

Special supplement:exclusive interviews with

VP ramachandran, Secretary of Process Plant & MachineryAssociation of India (PPMAI)

CE Fernandes, Chairman and Managing Director of GEI Industrial Systems

Christopher Phillips, Director of Seatech

alain Wald, EMEAI Business Leader, and Murali narasimhan, Country Leader, Hydratight



INDIA ENERGY

IntErVIEW WIth: interview with vp ramachandran – Secretary of proceSS plant & machinery aSSociation of india

Mr. ramachandran, could you give our readers a brief presentation of the Process Plant and Machinery as-sociation of India (PPMaI) and its role within the over-all Indian industrial sector?The association is forty seven years old and has been serving the process plant industries since its creation.

We are closely associated with all of our members, also in the Oil & Gas industry, including L&T, Aker Solutions, Uhde India, Forbes Marshall, Honeywell, Toyo Engineering, Tecnimont ICB, and so forth.

We serve them with respect, support them for any initiative that would involve authorizations from the government, as well as for technical endorsements. The association conducts various programs both on technical and commercial issues in order to support the members.

Our members do not have the sufficient time and man-power to deal with specific issues related to export, or taxa-tion, amongst other issues. They lack time to go and see the ministries and resolve their issues. We help them go forward.

For instance, the managing director of Tecnimont ICB is al-ways travelling. Albeit this, he came all the way from Punjab to a brainstorming that I organized at PPMAI in order to discuss the way forward for PPMAI members. This shows the attach-ment and relation between the association and its members.

the association is lobbying on behalf of com-panies that together have an estimated ca-pacity of six billion USd annually. how do you assess your influence to the authorities or the main public and private stakeholders of the in-dustries you are involved in, or speaking with one strong, credible voice?PPMAI’s lobbying is often successful. In our brainstorming, we

agreed to call both the Public Sector Undertaking (PSU) and the ministries, in order to discuss issues on an open platform.

The Indian industry has got a feeling that the Indian min-istries, unlike ministries of other Asian countries, do not give the priorities to the local industry. The local industry would grow only when the PSUs will take the firm decision that a certain percentage of major projects should go to the Indian industry only. So far, PSUs have agreed on that. In spite of a few regulation problems - they are not able yet to break through the ice - it should be decided soon.

amongst numerous activities, the associa-tion participates in national and international symposiums and exhibitions. In these events, how do you usually portray India and its in-dustrial capabilities?

These events are good opportunities to display the engi-neering capabilities of out members, as well as their equip-

Today, we are only playing a role of a facilitator, but

tomorrow, our role will have evolved

with the growth of the sector.



INDIA ENERGY

ment. We circulate information on Indian companies among the different chambers of commerce.

CB&I Netherlands has also been helping us. Although they are today withdrawing their activities from India, thanks to their help we have publicized the Indian Engineering partici-pation at the ACHEMA. At this event the managing director of CB&I will be with us as he wants the Indian engineering capabilities to be displayed.

In fact, we receive a lot of enquiries and we are able to bring business to our members. They are always willing to participate in any exhibition that is being put up, both in India and abroad.

Ten years back, engineering companies used to go and visit ACHEMA to understand the latest foreign technologies, learn from them, , and perhaps buy them. The situation has now changed: the technology transfer goes the other way around. Now, Indian companies go there to sell their equipment and technology. They are looking for buyers for the technologies they are able to manufacture from India.

It is naturally of our readers’ interest to know how developed the Indian financial market is in order to provide the necessary capital for the major local projects. how would you define India’s finance model today?The sector does depend on public financial institutions like it is the case in Russia and Brazil, considering that institutions do

support the sector. But I would say that India is more market oriented rather than state oriented. Locally, financial support needs be generated form the various banks and resources.

In your view what are the future outlooks for the industry in general and the role PPMaI members can play within it?O&G will be growing very strongly for another 20 years. India is one of the fastest growing economies in the world thanks to specific sectors. Although we also represent other indus-tries such as chemicals, in my opinion, the growth will be cen-tered around oil and gas, power, and fertilizers.

as an association, what do you target for PPMaI in the next five years?Indeed, we also look for a certain growth. One thing is sure: the responsibilities of the association will be increasing. Today, we are only playing a role of a facilitator, but tomorrow, our role will have evolved with the growth of the sector.

India gathers a large pool of managerial, engi-neers & technical manpower with work expe-rience in different countries in the world and with English language proficiency. how much is the industry taking advantage of this in-credible pool?I often hear from the industry complains about a shortage in Indian manpower, compared with the requirements.

In my opinion, skilled people are available in India. How-ever, it is true that Indian engineers often go abroad both to study and work. The Indian government is doing everything possible to change this, including new developments, estab-lishing training institutes, creating incentives to keep these lo-cal talents in India. The government has certain programs in place. Today, with the current economic problems in Dubai and its low activity, many engineers come back from there to work in India.

as an advice to young professionals, what would you say are the must have to succeed in this industry?You need to be more dedicated. Truthfulness to the job that you do will take you to heights.

India is one of the fastest growing

economies in the world thanks to specific sectors. Although we also represent

other industries such as chemicals, in my opinion, the growth

will be centered around oil and gas, power, and

fertilizers.



INDIA ENERGY

IntErVIEW WIth: c. e. fernandeS - chairman and managing director of gei induStrial SyStemS

GEI Industrial Systems (GEI) is the market leader in India for heat transfer technol-ogy, serving mainly the Pow-er and O&G industries. the company enjoys a market share of 45% in air Cooled heat Exchangers in the Oil & Gas Sector and about 70% in air Cooled Vacuum Steam

Condensers, in the Power sector. What has al-lowed this positioning?GEI is a very active player in India and has been steadily growing over the last four decades. The technology that we have is fully Indian as a result of continuous and heavy investments in research and development (R&D) and innovation. The growth, based on this, has allowed us to become number one in India and number three in the world for cooling systems.

GEI has been growing despite the international competition and our customers are very well known players in the field. We have the advantage of being an Indian company with our own technology. So most of the Indian players like L&T or IOCL, who are extremely happy with our product, are willing to give a push to Indian companies, like us. Over a period of time, we have been successful in maintaining quality and reliability of the product, which has given a lot of confidence to Indian customers.

In India, GEI is the only approved party by ONGC to offer the complete cooling range for offshore applications. Clients are aware of the company’s quality, applications, as well as manufac-turing capabilities.

This has been the main factor enabling us to grow in a sustain-able way.

GEI is listed on the Bombay Stock Exchange and national Stock Exchange. Cost of capital is an is-sue today in India, where interest rates are at the lowest in worldwide markets. What is your as-

sessment over the difficulty to raise funds for the Indian industry and why was it a good strategy to finance your growth on financial markets?To finance GEI’s growth in India, we have a fairly easy access to Indian capital. As long as I remember, the cost Indian capital has been about 15% in the earliest stages, and after the government liberalized the market, it came down to around 11%. Because of the inflation, it has again gone up to 12 to 13%.

With forty years of experience and an excellent track record, GEI has gone from a small scale industry to a key player, thanks to sound finances. GEI is a profit making company that rewards investors adequately. Debt is kept at a minimum, and when the company raises capital, whether it is through debt or equity, it is done in a given time frame, so that we always raise funds before we go for a project.

Last year GEI had a turnover of 4.16 billion ru-pees (approximately 90 million USd) thanks to a 54% growth. how are you planning to sustain this growth?Presently, GEI’s role within the O&G and Power industries is to provide equipment packages: the cooling systems. GEI wants to move up in the value chain to total packaging, in which the air cooling system would only be a part of the whole - around 50%. Thus, 50% of our product portfolio would be other items, which we will be sourcing from other manufacturers - e.g. compres-sors from Dresser Rand-, and then offer a total package to O&G companies.

Going for packaging will bring more revenue to the company. For instance, a 50 million contract for a cooling system would become a 100 million contract.

today, most of your clients in O&G are in down-stream. India is definitely becoming a refining hub with plans to double its capacity by 2012. to what extent can GEI benefit from this?



INDIA ENERGY

There are a lot of new projects, such as the offshore gas going through pipelines to Jamnagar, and the HBJ pipeline going from Hazira on the Gujarat coast right up to Delhi and beyond. All this requires a lot of investment in the piping and booster compressor stations, which need large cooling systems and therefore gener-ate a lot of revenues for GEI.

The government also needs gas based power stations, which offers a lot of opportunities for us.

to what extent does the competition come form international markets as opposed to Indian com-panies in your overall business?As far as O&G is concerned, GEI does not face much competition from Indian companies. Competition comes mainly from Italy and Korea.

With equipments installed on the five conti-nents, we can say today that GEI is an Indian company that has brought Indian expertise and equipments on international markets. What is the level of awareness of the worldwide indus-try about the quality of Indian equipments and technology?There was a time when Indian quality was neither appreciated nor accepted in most 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 now confident of the quality and technology of Indian products, which are at par with European vendors.

as an ambassador of the Indian expertise and technology, what can you do to increase Indian branding and what is lacking in your opinion for Indian output to be internationally recognized, and not only as a human resources powerhouse?

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 capabilities; we expect a good turnover to come from these resources.

are you looking today at growing organically or are you looking also at JV opportunities with in-ternational players or acquisitions of businesses in your areas of expertise?As of now, GEI is making substantial investments for expansion. Therefore our immediate concern is on completing the expansion and getting the facilities ready. It is urgent for us to be in the posi-tion to meet the explosive demand arising in our own country.

Given the numerous opportunities in Middle East, Far East, and African countries, GEI is also constantly looking for partners to explore operations there rather than manufacturing here and sending the production over.

Considering you are looking both at the domes-tic and international markets, how challenging is it to allocate the right resources?We are an international player. The message is very clear among all our executives that we are going to be a global brand. We have local agents in Oman, in Brazil, in Singapore, which are key cen-tres for the O&G business. We operate in these markets through JV with key local players.

However, to balance both focuses, the timing is very impor-tant. We have an association in Oman, where we were supposed to invest 20 million USD. Because of the circumstances in oil mar-kets, we did not proceed with the project, and today the demand is starting to go up again.

What are your personal ambitions in the devel-opment of GEI Industrial Systems? I want the GEI brand to be internationally well known, and we are aggressively working to achieve that.

We want to develop facilities in different locations on the globe, to be in a better position to supply different markets. The next market to enter will probably be South Africa, where we are in the process of sending someone to explore the potential. My ambitions should be fulfilled in around three to five years.

are you optimistic about India’s future develop-ment?We see a lot of activity taking place in India, especially in infra-structure, power and O&G. These last couple of years, we have been seeing the highest growth of the last 80 years. In order to maintain and sustain India’s Gross Domestic Product (GDP) growth rate of about 8% to 9%, the country needs investment in infrastructure and in the O&G and power sectors.

I strongly feel the time for India has come to grow globally.

There has been a shift in perception in recent

years, and many are now confident of the

quality and technology of Indian products,

which are at par with European vendors.



INDIA ENERGY

IntErVIEW WIth: chriStopher phillipS – director of Seatech

Established in 2007, Seat-ech has grown substantially within four years of its in-ception. What would be your first assessment of Seatech’s development and growth in India? During the last four years, we have been aggressive in the market despite of being a very young team. We have

a good combination of both young and experienced profession-als.

There is a lot of potential in the shipping industry in India, especially on the East coast belt which is really rich in minerals. 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, some of the states - especially Gujarat - have experienced a lot of industrial growth over the last decade.

This is how we have been able to grow from Mumbai. We started our operations at the right place, considering that Mum-bai is the financial capital of India, and we have been able to grow extensively from here, branching out into other metropoli-tan cities of India, and spreading out our offices on the East and West coasts of India.

We started in 2007 with a small office and we saw the branch-ing out as a necessity since we could not support all the agents from the Mumbai office. We now have offices in Chennai, Pune, Jaipur, Bangalore, Kandla, Krishanapatnam, Kolkata, Delhi, and Vadodara. This strategy has paid back.

Seatech’s business is based on a combination of project car-goes and port agency services. The ships that come into the country help us in promoting project cargoes rather aggressively.

The infrastructure in India has drastically increased over the last five years, which has opened up a lot of opportunities for us. For instance, we executed a project for the oil and gas (O&G)

industry for a project cargo in Chittagong. The cargo was 200 CBM but the ship needed to have a short transit time.

We have also carried out projects for many of the new ports that have come up on the east coast belt. On the Krishnapat-nam coast for instance, which is around 30 nautical miles from Chennai, the port has a move around of about 15 cranes from Antwerp.

We have moved a lot of port equipments as well. We have catered to a lot of international freight forwarders who have es-tablishments in India. As a result, we are very strong with char-tering with ships along with having port agencies so it really is a combination of the two.

the company was promoted at a delicate time considering the sharp contraction in world trade and the dropping in shipping rates the two years after inception. how have you been able to absorb the crisis and make your mark in this market? When we started in 2007, the international market was just starting to drop but collectively India still had demand and there were opportunities available. So while the international markets

We intend to back more O&G projects which we are trying to get on panel, especially with PSUs, and we hope to get on board with this over the next four years.



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were facing a crisis, India was still at a point of growth and that helped us maintain our business to a great extent. A lot of im-port shipments and the overall Gross Domestic Product (GDP) growth in India has been consistent over the past 5 years, from 7 to 7.5%.

Seatech’s main activity is ship chartering and ship broking. as the world economy picks up again, the pressure on margins as an intermedi-ary between ship owners and cargo undergoes less pressure. how has the market place be-haved in this sector of activity in 2011? The market is very competitive and India is immensely price sen-sitive. Everyone wants good prices but at the same time, if low prices affect the transit time and if companies have to deal with incompetence, caution will creep in.

One of our prime concerns has been piracy - it has been an important issue worldwide, lately. The ships were not pay-ing for armed guards. However, after several incidents, people have begun to invest - I recently dealt with an individual who in-vested $50,000 for security on board, despite having been wary for a long time on the idea of the necessity of having security on board.

There is price sensitivity in India, but awareness has crept in so there is positive movement.

Seatech’s extensive network and key strategic locations on the east, west, south and in the hinterland enables the company to direct cargo movement to the open sea. as a manager, what challenges do you see in operating in such a massive country in terms of logistics and alloca-tion of resources? Indeed, it is very challenging to operate in India given the size of the country, and that is why we had to branch out. We focused on operating from Mumbai and that was not very effective so after branching out and advertising extensively, we have estab-lished a significant network. India is a massive market, so operat-ing from the specific locations is the best option for us.

amongst Seatech’s numerous projects, what have been the most challenging assignments? Some of the most challenging ones have been during the mon-soons since the bigger projects are year long. Among them, we have handled one for one of our associates Combi Lift, based in Denmark. They bought some import cargoes for Essar for a ter-minal in Gujarat and these had to be discharged in the anchor-age. In the rough seas, in the monsoons, executing this project along with our team of experts was very tough.

There are U.N. project cargoes as well, which are time bound and are equally tough - if not more - along with the ones for the O&G industry. Since we know the routes and operations, we feel

like we have an edge.

Seatech represents ship-owners/principals at ports offering chartering, clearing and forward-ing for all types of cargoes for both import and export. In O&G, the country is importing two thirds of crude oil and exporting downstream 40% of its refined production of oil, mostly through shipping. What are the implications for Seatech? We are a young establishment; therefore we have to be aggres-sive with our approach and look into every opportunity that comes our way. We work with Bertling, DHL, Panalpina, and many others. We have support from multinationals and there are a lot of projects coming up so it is a combination of all these aspects that will drive our business forward. We have handled many ships for O&G and we are thinking big at the moment.

as a newcomer to the market but as an Indian dynamic company, how challenging was it to establish strong relationships with the PSUs, dominating the O&G market, whether it is in shipping of across the O&G value chain? Dealing with PSUs in general is tougher, but we are slowly and steadily working into it with our sales and marketing teams of specialists.

Seatech looks today at the Middle East and East-ern african regions for its future development. What are the next steps in Seatech’s expansion both in India and abroad? We have created a strong presence in India but we still need to set up more offices. We are also planning to open an office in Shanghai considering there are a lot of logistical movements in China.

Today, I believe that China, Singapore and Dubai would be the right steps forward. Therefore they will be the next steps ahead in our expansion plans. I believe it is too soon to think of areas like Brazil.

We are currently focusing on geographical areas that are close to India. Essar, for instance, has imported its materials from China and most of the east coast belts’ materials come from China as well. Of course there is Europe as well, but most of the materials come from China and for us this country makes good sense as the next step ahead.

Where will we see Seatech in four years from to-day? You will certainly see us as an internationally recognized or-ganization. In addition, we intend to back more O&G projects which we are trying to get on panel, especially with PSUs, and we hope to get on board with this over the next four years.



INDIA ENERGY

IntErVIEW WIth: alain wald, emeai BuSineSS leader and murali naraSimhan, country leader hydratight

as the US and Eu-ropean economies tremble, emerging economies are the ones still respon-sible for the world economic growth. to what extent does the Group look at emerging

economies and especially at India, with a fore-casted Gross domestic Product (GdP) growth around 8% for the next five years?Alain Wald - Fifteen months ago we started a process called “growth and innovation”, where we decided to focus more on process, time and investment. We have identified several markets in the world as growing and emerging markets, and India is one of them.

In India, we used to handle accounts in a highly unstruc-tured way; therefore we have decided to place someone in the country responsible for developing the Indian structure. The objective is to make operations simple yet international: we will bring people into the country to handle projects and we will give India a global dimension.

Indeed, we are now able to handle from India global stand-ards like Health, Safety and Environment (HSE) as well as all the processes we have worldwide, but applying them with a local approach in order to fully benefit of the growing rates you mentioned.

after twenty years of operations in India through a distributor, hydratight has eventu-ally set up a subsidiary here three months ago. Why have you waited so long to do so?Alain Wald - In the past, India had not been a top priority, while we had been growing dramatically in other parts of the world. India has immense potential but the markets are not as

well organised as in other parts of the world.Now, the time has come for us to have a better under-

standing of the Indian market. We have had active agents in some segments of the markets and in some geographical areas but the time has come for us to cover the market in a structured way with a tactical manner, which we were not ready to do before.

We are manufacturing and renting products as well as han-dling the services related to these specific products. Before setting up the office here, we were just supplying products to a few major accounts and bringing in rental equipment into the country.

Renting equipments is not something that customers in In-dia are used to do, which is why Hydratight has to work on changing the mindsets of the customers. It has proven to be a success in other places already. When a client requests a certain product, we should be able to bring it into the country within the following month, and the product is in fact already booked for the next three months.

We approach joint integrity as a

holistic concept where we have very

strong connections with our operators

as well.



INDIA ENERGY

to what extent is hydratight India able to bring in the market the group’s full range of products and services, to introduce the lat-est technology and also to access resources to grow extensively and make a strong and fast footprint in the Indian market?Murali Narasimhan - We plan to introduce products in India in a progressive phase. At the moment, we are in the launch phase. The entire Hydratight portfolio will not be available in the country before 18-24 months.

Hydratight’s portfolio is extremely wide. We are manufac-turers as well as service providers. We approach joint integrity as a holistic concept where we have very strong connections with our operators as well. We intend to implement in India a strong cultural change. Indeed, certain operators place tre-mendous emphasis on safety; joint integrity as a concept is something that they closely associate with. This level of un-derstanding is picking up momentum in India, and we need to harness and drive this further, especially with operators such as Reliance.

It is not only about being a rental company, or simply sup-plying products. It is about asserting integrity.

Alain Wald - The Indian market is indeed requesting the highest standards from us.

However Hydratight’s full portfolio needs yet to be brought into the Indian market. Today, with respect to the connector business, if we require technicians already well trained, we need to bring them from overseas. Nonetheless, we try to hire people within India and train them in accordance with inter-national standards. That is a major move for the development Hydratight’s operations in India.

What are the main priorities in terms of build-ing up on strong foundations to ensure that hydratight will grow for the long run?Murali Narasimhan - The first priority will be to focus on a more structured market development approach. We need a better understanding of the nuances of the market and a bet-ter assessment of the market potential which in its turn will help us define our service and business lines.

Alain Wald - The learning phase we are going through at the moment is also a priority with respect to investments. The question is not whether we will invest or not since we intend to invest anyway; the question is where we will invest first.

The whole idea is to better learn and understand the ne-cessities and the functionalities of the market. It is likely that some of our customers are in a learning curve as well with regards to the renting products. Hiring the latest technologies over a short period of time is new to most of them.

hydratight addresses the bolted joint needs of several industries. to what extent does hy-dratight’s product portfolio fit to the O&G re-lated activities in India?Alain Wald - Originally, our core activity was bolting and joint integrity. Today, it is about 25% to 30% of our business. We are very strong in special on-site machining and auto services such as on-site testing. The range of products that we have today is very large and is not limited to joint integrity. Our market approach has constantly worked around our joint mar-

We need a better understanding of

the nuances of the market and a better

assessment of the market potential which

in its turn will help us define our service and

business lines.



INDIA ENERGY

ket approach, and everything is planned within the spectrum of our involvement with the different services.

What is your assessment over Hydratight’s capacity to tailor its approach to the idiosyncrasies of the Indian O&G market, a very state dominated market undergoing many changes and transforming itself with the recent opening?

Murali Narasimhan - Looking at the state-owned compa-nies, we already have a strong relationship with ONGC. We are well-engaged with them with respect to working with emergency pipelines, as they purchase critically engineered connectors - which are highly engineered products.

In addition to the PSUs, we are targeting major companies like Reliance or Essar. There are very few companies in the world of our scale that can offer the kind of engagement that we can offer with respect to O&G. We expect this factor to be a major business driver for us in the years to come. Within two years from now, we intend to triple our turnover.

Alain Wald - Many companies in the Indian oil and gas in-dustry are state owned, but the process itself, be it upstream or downstream, is very similar to the one in the other parts of the world. We have a reputation of being a key supplier of the services that we support along with the brand itself. The fact that we have completed all the jobs with all the major players that are not necessarily state-owned will open doors while validating our competence of working within the sector.

In this context, how could grow the impor-tance of India for the group?Alain Wald - Hydratight is a global company with 20 foot-prints in the EMEA region - Europe, Middle East and Africa. Currently, we do not aim to have India developed as a base to provide help on a global level. The aim in the initial stages is to have a strong operation base in India that caters to the needs and requirements of the Indian market.

Nevertheless, one of the major benefits today is that we work with an Indian company that helps us export to Europe, China or Brazil.

Murali Narasimhan - We have also worked with Origi-nal Equipment Manufacturers (OEM) like Larsen and Toubro (L&T), where we offered customised products such as bolt ten-

sioning equipments and critically engineered heat exchangers. Over time, we could be looking at localising the engineering of these products so that our response time to our customer could be much faster. This is under discussion.

Alain Wald - Our primary objective remains to have a special team in India that looks exclusively after the Indian market.

Considering India is the world’s fourth largest oil consumer after the United States, China, and Japan, consuming around 3 million bbl/d in 2010 while producing only about 900 thou-sand bbl/d, the government is strongly pro-moting the exploration and production (E&P) activities. downstream, the industry keeps adding new capacity every year. Where do you identify the best growth opportunities for hy-dratight?Murali Narasimhan - The opportunities within our line of vi-sion, and as far as the services portfolio is concerned, are cer-tainly with the upstream line of the business. At the moment,

India is a priority. The question is how to

organise ourselves in a way that we have

strong footprints and strong operations in

the country to support our customers.



INDIA ENERGY

even though this is our domain of expertise, we are not fo-cused on maintenance and on asset integrity.

For example, Shell has flawless start-up initiatives when-ever they have a new global project in a different part of the world. Their objective is to look at the number of joints that go into the construction of a refinery or any other asset. During the commissioning phase, they like to avoid surprises. That is where our engagement helps.

Although this belongs to our domain of competencies, we need to explore the market to understand how well it our services would be received in the country. If Shell were to partner with someone in the country then we have already engaged through them. We expect this route through them is going to affect our project taking shape in the future.

Alain Wald - From a worldwide perspective, we are strong-er in the upstream applications. We have yet a lot to develop in the downstream sector. Outside India, we pay close atten-tion to downstream applications because we have a lot to offer to the downstream sector, especially the expertise that comes from the upstream experience.

What role can hydratight play in India in a booming offshore sector?Alain Wald - We have always been a major player in O&G within both the offshore and onshore sectors, considering all the work that we have done in the North Sea, the Gulf of Mexico, as well as in the West Coast of Africa. Our presence is dual.

how would you like to position yourself in the market in three years from today?Alain Wald - We have a project chart for the next three years, where we see ourselves in three years seven times of what we are today. It is not just open statements, given that we have the total support from our parent companies with re-gard to investing in India.

India is a priority. The question is how to organise our-selves in a way that we have strong footprints and strong operations in the country to support our customers. We need a better understanding of the need of the customer, and the market knowledge will follow. It is not as organised as it is in the US or in Europe, but we aspire to stick to our theory of developing our knowledge of the market and to establish a relationship with our customer.

Murali Narasimhan - From a group’s perspective, since a couple of companies are already set up in Bangalore, it can be safe to assume that for us, Bangalore is going to be the hub for our industry. To cater to a market like India, no single operation can realistically handle the entire country’s needs, be it from Mumbai or Delhi.

There needs to be hub, which we are setting up in Banga-lore, and in addition we intend to develop satellite bases across the country. Primarily, our main focus is going to be

the western part of India - that is where the key O&G players are located. Progressively, we need to work on developing the northern and eastern sides of the market. There is a lot of development taking place in the Kakinada project in the south.

Alain Wald - As opposed to the Middle East or to Europe, where we have operations in Aberdeen, The Netherlands, Germany, France, and Italy, it would be very difficult to han-dle both upstream and downstream markets from one place in India. Similarly, we have 6 or 7 bases in the Golf Coopera-tion Council (GCC) from Kuwait, Dubai, Abu Dhabi, Qatar, Oman. No one would have just one base and then try to serve all countries from this very base.

Therefore the future development strategy of the Indian operations is to eventually expand out from Bangalore and move within a closer range of our customers.

What are your final messages to the local and global oil & gas community?Alain Wald - Today, everything is moving very quickly. With the pace, realities are changing alongside it. We have to work in and with the emerging economies, where the growth is going to come from, and a close attention to Indian market specifically needs to be paid.

Murali Narasimhan - The global business landscape is changing today, with tremendous focus being placed on the Eastern part of the world. We need to capitalize on this po-tential and harness this opportunity. India offers long-term perspectives.

We have always been a major player in O&G

within both the offshore and onshore sectors,

considering all the work that we have done in

the North Sea, the Gulf of Mexico, as well as in

the West Coast of Africa. Our presence is dual.



INDIA ENERGY

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PaSt rEPOrtS

http://issuu.com/focusreports/docs/russia_oil_gas_report_march_2012

http://issuu.com/focusreports/docs/mexico_ogfj_2012

http://issuu.com/focusreports/docs/oil_gas_peru_2011

http://issuu.com/focusreports/docs/oil_gas_australia_2011

http://issuu.com/focusreports/docs/oil_gas_singapore_2010

http://issuu.com/focusreports/docs/oil_gas_australia_2010

http://issuu.com/focusreports/docs/oil_gas_brazil_2010

http://issuu.com/focusreports/docs/o_g_russia_2010



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