A Study on Rural Markrting of Hpcl 2014
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A STUDY ON RURAL MARKRTING OF HPCL 2014 PART – A History of the oil industry in India The history of the Indian oil industry extends back to the period of the British Raj, at a time when petroleum first became a primary global energy source. The origin of the Indian oil & gas industry can be traced back to the late 19th century, when oil was first struck at Digboi in Assam in 1889. At independence, oil exploration and production activities were largely confined to the North- Eastern region, particularly Assam and the daily crude oil production averaged just 5,000 barrels per day. In the downstream sector, the first refinery was set up at Digboi in 1901. In view of the significance of the oil & gas sector for overall economic growth, the Government of India, under the Industrial Policy Resolution of 1954, announced that petroleum would be the core sector industry. In pursuance of the Industrial Policy Resolution, 1954, petroleum exploration & production activity was controlled by the government-owned National Oil Companies (NOCs), namely Oil & Natural Gas Corporation (ONGC) and Oil India Private Ltd (OIL). With the discovery of the Cambay onshore basin (in 1958) and the Bombay offshore basin (in 1974), the domestic oil production increased considerably. As a result, in the early 70s, almost 70% of the country‟s oil requirement was met domestically. However, by the end of the 1980s, some of the existing oil & gas fields were experiencing a decline in their production since they had already been in production for several years and were past their 3 plateau phase. At the same SRN ADARSH COLLEGE 1 A STUDY ON RURAL MARKRTING OF HPCL 2014 time, there was a steady increase in consumption of oil & gas, leading the two NOCs to meet only about 35% of the domestic oil requirement. After the oil shock of 1970s, the nationalisation of both the upstream & downstream sectors was initiated and was completed on October 14, 1981. This resulted into the exit of the international oil companies from the Indian oil & gas industry. Moreover, the resource crunch in the beginning of the 1990s that held up the NOCs from developing some of the then newly discovered oil & gas fields (such as Gandhar, Heera Phase-II & III, Neelam, Ravva, Panna, Mukta, Tapti, Lakwa Phase-II, Geleki and Bombay High Final Development scheme), had adversely impacted domestic oil production. Apart from this, controls were imposed by the Government on the pricing and distribution of crude oil and petroleum products in India. Factors like the administered oil prices and non- availability of appropriate technology logistics augmented the problem. Upto 1990s, there were three rounds of exploration bidding with no success in finding new oil/gas deposits by the foreign companies who only were allowed to participate in the bidding process. This led the government to initiate Petroleum Sector Reforms (PSR) in 1990, under which the fourth, fifth, sixth, seventh and eighth rounds of exploration bidding were announced during 1991- 94. For the first time, Indian companies with or without prior experience in exploration & production activities were allowed to participate in the bidding process during these rounds. In 1995, the Government announced the Joint Venture Exploration Programme. However, this was viewed as a deterrent by major private sector oil companies. This led the government to announce New Exploration Licensing Policy (NELP) in 1997 (operationalized in 1999) as part of its Hydrocarbon Vision SRN ADARSH COLLEGE 2 A STUDY ON RURAL MARKRTING OF HPCL 2014 2020, a landmark 25-year planning document. Under NELP, licenses for exploration are being awarded only through a competitive bidding system and NOCs are required to compete on an equal footing with Indian and foreign companies to secure Petroleum Exploration Licenses. In addition to NELP, other efforts were made to address the need for achieving energy security. These include: 1. Acquisition of Oil and Gas assets abroad; 2. Developing strategic storage facilities at identified locations; 3. Exploring alternate sources of Energy, including Coal Bed Methane, gas hydrates, etc. 4. Improving the recovery of oil and gas from existing fields through methods such as Enhanced Oil Recovery (EOR) and Increased Oil Recovery (IOR). Consequent to the various initiatives taken by the government, currently the area under exploration has increased fourfold. Prior to implementation of NELP, 11% of Indian sedimentary basins area was under exploration. With the conclusion of seven rounds of NELP, the area under exploration has increased to about 50%. One of the world‟s largest gas discoveries was made by Reliance Industries Ltd in 2002, in Jamnagar (about 5 trillion cubic metres). Besides, the entry of international companies like Hardy Oil & Gas, Santo, GeoGlobal Resources Inc, Newbury, Petronas, Niko Resources and Cairn Energy into India has helped boost the growth of the industry. SRN ADARSH COLLEGE 3 A STUDY ON RURAL MARKRTING OF HPCL 2014 Stages of evolution in petroleum industries Colonial rule, 1858-1947 The first oil deposits in India were discovered in 1889 near the town of [Digboi] in the state of Assam. This discovery came on the heels of industrial development. The Assam Railways and Trading Company (ARTC) had recently opened the area for trade by building a railway and later finding oil nearby. The first well was completed in 1890 and the Assam Oil Company was established in 1899 to oversee production. At its peak during the Second World War the Digboi oil fields were producing 7,000 barrels per day. At the turn of the century however as the best and most profitable uses for oil were still being debated, India was seen not as a producer but as a market, most notably for fuel oil for cooking. As the potential applications for oil shifted from domestic to industrial and military usage this was no longer the case and apart from its small domestic production India was largely ignored in terms of oil diplomacy and even written off by some as hydrocarbon barren. Despite this however British colonial rule laid down much of the country‟s infrastructure, most notably the railways. SRN ADARSH COLLEGE 4 A STUDY ON RURAL MARKRTING OF HPCL 2014 Independence, 1947-1991 After India won independence in 1947, the new government naturally wanted to move away from the colonial experience which was regarded as exploitative. In terms of economic policy this meant a far bigger role for the state. This resulted in a focus on domestic industrial and agricultural production and consumption, a large public sector, economic protectionism, and central economic planning. The foreign companies continued to play a key role in the oil industry. Oil India Limited was still a joint venture involving the Indian government and the British owned Burmah Oil Company (presently, BP) whilst the Indo-Stanvac Petroleum project in West Bengal was between the Indian government and the American company SOCONY-Vacuum (presently, ExxonMobil). This changed in 1956 when the government adopted an industrial policy that placed oil as a “schedule A industry” and put its future development in the hands of the state. In October 1959 an Act of Parliament was passed which gave the state owned Oil and Natural Gas Commission (ONGC) the powers to plan, organize, and implement programmes for the development of oil resources and the sale of petroleum products and also to perform plans sent down from central government. In order to find the expertise necessary to reach these goals foreign experts from West Germany, Romania, the US, and the Soviet Union were brought in. The Soviet experts were the most influential and they drew up detailed plans for further oil exploration which were to form part of the second five-year plan. India thus adopted the Soviet model of economic development and the state continues SRN ADARSH COLLEGE 5 A STUDY ON RURAL MARKRTING OF HPCL 2014 to implement five-year plans as part of its drive towards modernity. The increased focus on exploration resulted in the discovery of several new oil fields most notably the off-shore Bombay High field which remains by a long margin India‟s most productive well. Liberalization, 1991-present The process of economic liberalization in India began in 1991 when India defaulted on her loans and asked for a $1.8 billion bailout from the IMF. This was a trickle-down effect of the culmination of the cold war era; marked by the 1991 collapse of the Soviet Union, India‟s main trading partner. The bailout was done on the condition that the government initiates further reforms, thus paving the way for India‟s emergence as a free market economy. For the ONGC this meant being reorganized into a public limited company (it is now called for Oil and Natural Gas Corporation) and around 2% of government held stocks were sold off. Despite this however the government still plays a pivotal role and ONGC is still responsible for 77% of oil and 81% of gas production while the Indian Oil Corporation (IOC) owns most of the refineries putting it within the top 20 oil companies in the world. The government also maintains subsidized prices. As a net importer of oil however India faces the problem of meeting the energy demands for its rapidly expanding population and economy and to this the ONGC has pursued drilling rights in Iran and Kazakhstan and has acquired shares in exploration ventures in Indonesia, Libya, Nigeria, and Sudan. SRN ADARSH COLLEGE 6 A STUDY ON RURAL MARKRTING OF HPCL 2014 India‟s choice of energy partners however, most notably Iran led to concerns radiating from the US. A key issue today is the proposed gas pipeline that will run from Turkmenistan to India through politically unstable Afghanistan and also through Pakistan.