New insurance policies after India elections might revive upstream atmosphere: S&P Global

Attracting worldwide participation might be essential for India’s upstream progress

China’s crude manufacturing exhibiting upward pattern, rose to nine-year highs in 2023

India and China are accelerating their upstream push to make sure vitality safety at a time when geopolitical turbulence and clear gasoline drive are altering the worldwide panorama, however analysts imagine that whereas Beijing will proceed to witness early wins, New Delhi has an even bigger battle on the coverage entrance.

Taking cues from the newest yearly information of 2023, the a lot slower upstream output progress in India in comparison with China is a sign that the previous has to rapidly discover methods to revive upstream output if it desires to attain its ambitions to scale back dependence on imported fossil fuels.

India’s total oil and fuel output rose 1.3% on the 12 months to 1.15 million boe/d in 2023. Upstream output has been declining almost 1.1% on a compound annual progress charge over the previous 10 years attributable to pure drop in mature fields of state-run upstream producers ONGC and Oil India, in addition to attributable to an absence of monetization of current discoveries and diminished variety of new discoveries, in line with S&P Global Commodity Insights.

“The upcoming federal elections in 2024 in India and government stability could result in the revival of the upstream environment in the country and attract international oil companies to invest. However, such change will be dependent on more favorable upstream policies,” mentioned Mansi Anand, senior analysis analyst at S&P Global.

Some progress seen

Analysts mentioned state upstream producers are persevering with to evaluate their manufacturing portfolio with commitments to meet authorities’s mandate to lift oil and fuel manufacturing.

“ONGC-operated KG-DWN-98/2 project in the Krishna-Godavari region will move the needle for India’s upstream production, a 3% year-on-year rise in 2024 after years of continuous decline,” she added.

ONGC’s progress path continues to stay difficult however the firm’s challenge growth pipeline, which incorporates the Ok-G Cluster III and the Daman Upside Development challenge, may very well be recreation changers and enhance the general manufacturing in India within the coming decade, in line with S&P Global.

New Delhi has introduced quite a few upstream coverage reforms to draw worldwide oil firms. ONGC can also be searching for worldwide companions, having deepwater and ultra-deepwater working expertise, for its troublesome fields and acreages within the nation. Therefore, participation of worldwide firms within the upcoming Open Acreage Licensing Program (OALP) bid rounds might be vital.

“India’s upcoming upstream story now largely depends on ongoing and planned upstream activities and successes in the recently awarded OALP blocks,” mentioned Rahul Chauhan, upstream analyst at S&P Global.

“So far, discoveries in OALP blocks are not big enough to make a key change to country’s oil and gas production portfolio. However, ongoing and planned offshore campaigns, primarily in deepwater, ultra-deepwater and frontier basins can flip the coin, if operators would be able to discover a field similar to the size of Mumbai high in frontier basins,” he added.

China tells a special story

China’s upstream story sounds comparatively extra promising at this stage. It continues to spice up crude manufacturing, with output reaching a nine-year excessive of 4.2 million b/d in 2023, rising 2% on the 12 months, information from China’s National Bureau of Statistics confirmed.

The quantity accounted for 27% of the whole crude provides to China, as state-owned oil giants accelerated efforts to make sure vitality safety.

China’s annual crude manufacturing reached a excessive of 4.22 million b/d in 2014 earlier than easing to as little as 3.81 million b/d in 2018 attributable to ageing of the flagship onshore oil blocks — Daqing and Shengli. But output started to recuperate in 2020, with offshore oil manufacturing being the principle contributor of China’s crude manufacturing progress.

Tianjin metropolis and Guangdong province, the place the offshore blocks Bohai and South China Sea are positioned, led the year-on-year manufacturing progress with 5.4% and 6% in 2023, respectively, NBS information confirmed.

“The Chinese government has been putting energy supply security at the forefront of its energy policies. They have been investing heavily in domestic upstream, striving to stabilize crude production and accelerate that of natural gas. The program has yielded satisfactory results thus far. It reversed the country’s declining trend of crude output since 2015 and ramped up gas production quickly,” mentioned Baihui Yu, senior analysis analyst at S&P Global.

“We expect in the coming decade that China’s upstream growth momentum will be maintained since energy supply security would remain an overarching goal in mainland China’s energy policies,” she added.

According to S&P Global, China’s nationwide oil firms have been investing in exploration to curb the decline of reserve base, with every of them persistently investing almost 20% of its complete capex in exploration. They at the moment are focusing on advanced and technical-challenging performs for future supply of progress.

Although introduced in-place volumes are usually substantial, it poses nice challenges to the group to unlock these newly found home barrels.

“Nevertheless, they have little strategic optionality as the nation’s energy security is on their top agenda. More domestic discoveries are to be made. Although the size might be smaller and little costly,” Yu added.