As India, an emerging market economy and newly industrialized country, comes of age in the next few decades, more “elephants” will be required to support its rapid development.

Since the early 1990s, India has become one of the fastest-growing economies, second only to China among the world’s major developing countries. While global markets have regained some balance from financial instability in 2008 and 2009, and as crude oil prices have reversed a steep downward trend, rapid industrialization in emerging Asian energy giants India and China continues to drive up oil demand.

According to BP’s “Energy Outlook 2030,” India’s projected annual economic growth of 6% until 2030 lags just behind China’s at 6.3% per year, with both countries’ economies and populations expected to drive up energy demand approximately 4% per year – more than doubling energy consumption over the next 20 years.

Meanwhile, as its economic growth rate and population remain in a state of flux and with the transport sector expected to accelerate dramatically, India’s fossil fuel dependency will demand more “elephants” to provide the necessary energy resources. Today, the country depends on imports to meet about 30% of its total energy needs.

According to the US Energy Information Administration (EIA), the majority of India’s total energy consumption comprised three dominant sources as of 2007: coal/peat at 40.8%; combustible renewable and waste at 27.2%; and oil at 23.7%.

The future supply picture for India is one of growth. The country’s energy consumption has soared 190% over the past 20 years, according to BP’s energy outlook, and consumption will crest another triple-digit level in the next 20 years to 115%.

Domestically, India has stepped up support of the hydrocarbons industry to meet this demand by holding a series of licensing rounds via its 2000 New Exploration Licensing Program (NELP) policy to spur more E&P development, while also taking steps to deregulate and encourage foreign investment. These licensing rounds have attracted more than US $11 billion of investment commitments and have led to 87 oil and gas discoveries so far, with 235 exploration blocks awarded to date. The latest bid round, NELP-IX, is under way with 34 more blocks due for award by year-end 2011.

India’s latest bid round, NELP-IX, is under way with 34 blocks due for award by year-end 2011. (Map courtesy of the India Ministry of Petroleum and Natural Gas)

A expanding energy footprint

Increased E&P in the petroleum sector is critical for Indian energy security.

According to the EIA, most of India’s crude oil reserves lie offshore, with a substantial amount in the Bay of Bengal and in the west and northeast areas of the country.

In 2009, India was the world’s fourth largest oil consumer after the US, China, and Japan, consuming approximately 3 MMb/d based on EIA data. It also produced nearly 880,000 b/d from more than 3,600 wells, of which 680,000 b/d was crude oil. Through 2011, the EIA projects India’s consumption growth will total 100,000 b/d annually.

India was the world’s sixth largest net oil importer in 2009, importing nearly 2.1 MMb/d, 70% of which come from the Middle East, according to the EIA. The agency predicts India will become the fourth largest net oil importer behind the US, China, and Japan by 2025.

In an effort to support its energy security, India is constructing a strategic petroleum reserve. The first storage facility is expected to hold 9.8 MMbbl of crude oil and is slated for completion by year-end 2011. The second facility (11 MMbbl) and third (18 MMbbl) are expected to be finished by year-end 2012 and 2013, respectively.

With India importing roughly two-thirds of its crude oil requirement, major E&P projects to lift domestic oil production, which has flatlined in recent years amid surging oil consumption, have been implemented by the country’s key energy players.

Major state-owned oil companies behind the effort to harness more energy supplies include Oil and Natural Gas Corp. (ONGC), Oil India Ltd. (OIL), and Indian Oil Corp. ONGC and OIL, for example, have attempted to curtail flagging production from their aging assets by boosting their capex in an attempt to bring new fields onstream.

India’s largest private-sector energy conglomerate, Reliance Industries Ltd. (RIL), also has a defining role in tapping more energy resources, both in India and abroad in the US shale plays.

In addition to the Indian oil majors, UK-based Cairn Energy and BG Group play a significant role in India’s oil sector. However, international oil and gas companies currently operate only a small number of the region’s fields.

While oil production is growing, natural gas is expected to be the fastest growing fossil fuel in India, with demand increasing at a rate of nearly 5% annually between 2010 and 2030. Indicative of this trend is the fact that India produced approximately 1.4 Tcf of gas in 2009 – 20% more than in 2008.

Currently, natural gas constitutes around 10% of the country’s energy supply compared to the global average of 24%, making it an area with enormous growth potential, according to major conventional and unconventional gas player RIL.

In 2011, the RIL-operated KG-D6 offshore block in the Bay of Bengal was the largest source of domestic gas, accounting for approximately 35% of the country’s total gas consumption and more than 40% of total domestic gas production. The company’s KG-D6 gas fields also averaged 21,971 b/d; 8 MMbbl of oil and 1 MMbbl of condensate were produced for fiscal year 2011.

According to RIL, an integrated development plan for all of its KG-D6 gas discoveries is being conceptualized and will encompass existing wells and other discoveries within the block. KG-D6 is India’s largest gas find to date.

In addition to this major resource, Reliance made six discoveries so far in 2011: the W1 well in the KG-V-D3 block; and the AF1, AJ1, AT1, AN1, and AR1 wells in the onshore CB-10 block.