India has to do a lot to achieve the energy security especially as far as the oil requirement is concerned. India is clearly depending on the imported oil for its domestic consumption. The demand for petroleum is increasing substantially as the economy grows with its full potential.  Some of the estimates show that India’s crude oil output for the financial year ended March 2007 was up 5.6 per cent to 33.98 million tonne (mt) compared with 32.19 mt in the previous fiscal. During the same period, the country produced 31.55 billion cubic metres (BCM) of natural gas. India ranks sixth in the world in terms of petroleum demand and by 2010, India is projected to replace South Korea and emerge as the fourth-largest consumer of energy, after the United States, China and Japan.  Estimated to be a US$ 110 billion industry, the Indian oil and gas industry is among the largest contributors to the central and state exchequers in India. Its share approximates US$ 13.58 billion. Most of the country’s 19 refineries, barring two, with a capacity to process about 160 million tonnes per year are run by state-run companies.

India is one of the largest importer of oil in the world. There is a growing concern in India that the spiraling price of oil in the International market may affect India’s growth potentials in the long term. The oil in the global market has increase by more than 100% in the last couple of years. India’s dependence for oil is posing a challenge.. In recent years there has been some efforts to utilize the relations with the central asian republics to form an arrangement for India’s oil requirements.  However, the major thrust still lies in searching for hydrocarbons in onshore and offshore blocks in India. Recent finds are making oil majors take notice of the potential in prospective basins.

The cost effectiveness of refining in India is drawing many global players here. This is because India is logistically well placed for refineries. Besides being a major market for crude oil and petroleum products, it adjoins major demand centers such as China.
Also, crude oil from West Asia can easily be brought to refineries in India.

While the new refinery (which will be the world’s only full-export-oriented refinery) will be the world’s sixth-largest, the combined capacity (RPL along with RIL) will turn the Jamnagar complex into the world’s largest single-location refinery. In fact, during 2006-07, refined petroleum products formed the largest chunk of total exports overtaking the Gems and Jewellery sector.

Besides the refining sector, heavy investments are being made in the petroleum exploration and production (E&P) sector by giants such as ONGC, RIL, Cairn India, Gujarat State Petroleum (GSPC) and others. India’s production of natural gas is also slated to double in the coming couple of years as the gas fields off the eastern coasts commence production. Of late, a number of players have evinced a keen interest in laying pipelines in the domestic market to supply gas to the consumers. For example, Gujarat State Petronet Ltd, a group company of the Gujarat State Petroleum Corporation, plans to connect all 25 districts of the state with 2,200-kilometre high pressure gas pipeline laid down across the state. Reliance will invest US$4 billion to lay a 1,386-kilometer pipeline from Andhra Pradesh to Gujarat. India is also one among the four countries which have the world’s richest gas hydrate reserves.

Currently, 100 per cent FDI is allowed in petroleum refining, petroleum product and gas pipelines and marketing/retail through the automatic route. A number of global majors have already made their presence in this sector. Shell has invested in refining and retail; British Gas has invested in city gas distribution; BP has invested in to lubricants and exploration; Exxon Mobil has invested in lubricants; other significant foreign players in India include Gaz De France, Chevron, Total, BG Group among others.

The Government is working on increasing the country’s investment potential to US$ 250 billion. And with the current investment wave, it appears that day would not take long in arriving.