1. Oil & Gas Markets: Risks and Opportunities India Energy Conference CEO Forum 3 October, 2008 New Delhi R S Sharma Chairman & Managing Director, ONGC Chairman, ONGC Group of Companies

2. With 16% of global population; 0.5% of world’s Petroleum reserve & 6.7 % of world’s Coal reserve; with a 8- 9% GDP growth target and 4.5% CAGR (’97-’07) in primary energy demand the situation is pretty Challenging… India: Energy Scenario

3. India: Energy scenario India: the 5 th largest energy consumer –CAGR (1996-2006): 4.5% (global CAGR: 2.1%) –Per capita energy consumption to rise from 375 Kgoe in 2007 to about 1200 Kgoe in 2030 Source: BP Statistical Review 2008 Primary Energy Consumption (MTOE) 3.6% of total

4. Energy Basket Source: BP Statistical Review 2008 WorldIndia* Gas consumption in India increased at a CAGR of 6.1% (Global: 2.6%), next only to China (13%) in last ten years (1997-2007) *India’s consumption based scenario excluding export

5. Source: BP Statistical Review 2008 India: Oil Scenario India’s oil consumption (2007) 128.5 Million Tonnes –the 4 th largest consumer of Oil: 3.3% of total –Oil consumption increased at CAGR of 4 % (1997-2007) against the world CAGR of 1.4%. Oil Consumption (MMT) *India’s consumption excluding export

6. India: Oil Scenario Import dependence increased from 69.5% in 2002-03 to 74.9% in 2007-08 Import dependence may rise to 80-90% around 2030 Growing Import Demand –Supply gap in Oil to exist MMT

7. Source: BP Statistical Review 2008 India: Gas Scenario Gas constitutes ~9% in Pry energy basket; likely to increase, thanks to Gas strikes at East coast Situation to improve by 2012. Demand-supply gap to exist MTOE

8. Growing Primary Energy demand … India *Source: BP Statistical Review 2007Projected figure Source: Integrated Energy Policy With development of East Coast, new & marginal fields of West coast, CBM, UCG, and likely trans-national gas trunk lines- the gas demand seems to be achievable For oil, though importer for over 25 years, considering the dramatic rise in volume demand, the balance of trade for oil is a critical issue 404 MTOE 1633 MTOE CAGR= 6% Gas CAGR= 7.9% Oil CAGR= 5.2%

9. Risks & Opportunities: (UPSTREAM) Risks & Opportunities: (UPSTREAM) Indian Oil & Gas Business

10. 1.Inadequate Reserve Base India with 16% of world’s population, endowed with only 0.4% of world’s oil & 0.6% of gas reserve »Oil & Gas Production only 1% of the world »R/P Ratio for oil <20 and for gas <35 years India has 4% sedimentary basins of the world (3.14 million sq. km) »About 80% area yet to be explored extensively »Out of 26 basins, exploration yet to be Initiated in 11. »Favorable open NELP regime »Abundant opportunities Risk Opportunity

11. 2.Depletion of Mature Fields All major producing fields are more than 30 years old Most of them have produced through their peaks »80% of total indigenous production coming from such mature fields »Pressure of almost all of these fields are depleting fast »Cost-intensive IOR/ EOR processes required to keep them flowing Risk Established IOR/ EOR technologies to enhance recovery Fast track monetization of New & Marginal field to make up the ‘less’ from existing assets Looking for new source of energy like, CBM, UCG, Winds, Nuclear etc. Opportunity

12. 3.Growing Dependence on Imports Over dependence on oil & gas leading to import dependence from 70-85% 92% Import dependent on geo-politically sensitive Middle East and Africa »37% of total M-East crude comes from Iraq & Iran »About 45% of total African crude comes from volatile Nigeria Source: PPAC Risk

13. 4.Suitable & cost-effective technology Technology development lead time is long- but economic cycle often short Less Focus on R&D- a global oil & gas industry phenomenon Unavailability of suitable technology at cost-effective price- threat to realizing discovered assets »Deepwater development still at embryonic stage »Gas hydrate not out of laboratory »G&G accuracy still dependent on costly drilling Risk Rising affordability for investing in R&D, Technology acquisition and assimilation »Globalization has increased the access to global technological developments »Empowered policy might help in fast and direct access to latest technology »Strong Indian Academia: Greater Industry-Academia synergy possible Opportunity

14. 5.Technical Manpower Crunch Growing human capital deficit- most significant strategic threat to the industry »Huge exodus to abroad, especially Middle East »Less interest by young generation to pursue G&G »Badly suffered NOCs Huge Young Population »More institutes like RGIPT, Bareilly »Assurance of encouraging career and compensation »Competitive compensations for NOCs Opportunity Risk

15. 6.Procedural Constraints Procedural constraints affecting the process of Resource acquisition –Acquiring patented technology or single-owner technology; Hiring Drilling rigs or FPSO; procuring Hi-tech equipments; acquiring Land… –Time… the essence of decision making affected by regulations »Deepwater drilling rig day-rate has increased 3-5 times in last four years »Availability constrained in near future Regulation & less empowerment resulted in many lost-opportunities for OVL Risk Regulatory bodies may become facilitator through guidance »Making energy security a prime national agenda would remove many hierarchical constrictions »Coordination between MoEF, MoHA, MoF, MoP&NG, MoD etc More Empowerment of OVL essential for energy security »Time, secrecy & aggressive bidding- key factors in acquiring overseas assets Opportunity

16. 7.Fiscal Policy Constrictive Fiscal policy »Non-transparent Subsidy Formula »Artificial insulation from price rise »Gas pricing issue »Custom duty/ Royalty imparity Risk Encouraging Fiscal Policy would bring more investment »Attractive NELP-regime heralds bright future for further investment »Globalization and liberalization has already made Indian market attractive Opportunity

17. 8.Environmental legislation Over-activism or Adventurism regarding environmental issues may pose a threat in near future »Drilling & exploration in forest lands/ river bed might be required in the greater interest of energy security & growth »A balance between conservation and energy generation might be needed Risk Oil & Gas industry, by virtue of its resource, may play even greater role »in Carbon emission control, afforestation and climate control »in R&D for new and alternate source of energy Opportunity

18. Thank You