India Pt. 2: The Silent Revolution

December 1, 2011

Kedarnath jack-up rig, drilling depth 20,000 feet, courtesy of Great Offshore Limited

Project Director: Federica Torgneur. Editorial Coordinator: Nicolas Carayon. Project Assistants: Mathilde Paquet & Fleur Richard. Editorial Contributor: Herbert Mosmuller. Report Publisher: Ines Nandin. For exclusive interviews and more info, please log onto energy.focusreports.net or write to [e-mail]

In its search to solve the question of India's energy security, the Indian state government has been pushing to promote exploration activities in the country, and efforts of both public and private sector enterprises have recently been concentrating on the offshore exploration. With shallow water expertise steady in place, India's shores are witnessing a new round of development as deepwater explorations attract high levels of both domestic and foreign engineering and manufacturing.

Nonetheless, the dominance of state-owned players, strong price awareness, and modest foreign investment might throw grit in the machine of India's offshore oil and gas sector.

Focus Reports presents you with an inside look from Mumbai, India's offshore epicenter.

New Horizons Offshore

The story of India's offshore started with the discovery of the Bombay High oilfield 160 kilometers off the coast of Mumbai. "The Oil and Gas (O&G) discovery in Bombay High took the country by surprise," explained Satpal Singh, managing director and CEO of Dolphin Offshore, one of the first Indian offshore support companies. "There was no expectation that India had offshore oil resources. We had historic findings in Assam and Gujarat, which had been found during the days of the British presence in India. The entire production was oil - hardly any gas was restricted to that source. There was no development of O&G technology; there was no trading institution over here, although after a period of time, Oil & Natural Gas Corporation (ONGC) started to develop certain institutions."

"It actually all started with a lot of foreign companies, considering there was no Indian company that had sufficient expertise," Amit Biswas, CEO of Ambico, explained the initial development of India's offshore industry. Biswas' company is a service bound offshore agency with Joint Ventures (JV) with Malaysian offshore engineer IEV, British Found Ocean and a partnership with the Australian offshore project contractor Tamboritha. "Over the last fifteen years, a lot of Indian companies have come in, for exploration and production (E&P) of offshore oil and gas," Biswas continued.

"The crews of the vessels, along with the companies mastering the supply vessels, were foreigners," Biswas continues. "It took us some time to train local people and qualify them (…) My partner was, in fact, the first ever Indian master to handle an offshore vessel. Slowly, Indian companies came in. Now we see some JV or full-fledged Indian companies taking lump sum turnkey jobs. Before, only foreign companies were doing it, and Indian companies were providing a bit of support."

"The country's offshore sector", said Singh, "possesses such levels of homegrown expertise nowadays that it could do without foreign expertise. The growth and development of the Bombay High field provided tremendous opportunities for Indian companies to start new ventures and over the next 2 decades the country grew towards self reliance in being able to meet the requirements of the Oil & Gas industry."

Beyond Bombay High

While the output of the Bombay High field run by state-owned ONGC decreased from a 20 million ton peak in 1989 to 9 million tons now, India's offshore industry received a next boost in 2002, when Reliance Industries, India's largest private player in the petroleum sector, discovered the biggest natural gas reserves in India. This was in the D6 block in Krishna Godavari (KG) basin, 37 miles off the Indian east coast in the Bay of Bengal. The field has proven plus probable reserves of 11.3 Tcf. Similar to what happened in the Bombay High field, the development of the operations at the east coast has seen India's domestic industry, with the support of foreign companies, working hard to close the knowledge gap.

Reliance Industries' operations in the KG basin were quickly recognized as India's most important offshore activity and even one of the most important in the world; the field was the world's largest gas discovery in 2001. Indeed, as P.M.S. Prasad, Reliance Industries' executive director, told Focus Reports, "our drilling partner, Transocean, says that our operations at a water depth of 10,194 feet are the deepest that have ever been done [worldwide]"; this project has also seen the participation of the Houston-based oilfield service company, Oceaneering, with an all Indian team.

"We had to start from scratch, so having created an organization, trained a lot of people and acquired some competencies and infrastructure, we are now looking at opportunities outside India," continues Prasad. "We have a very good safety, exploration, development and project management record, and now we are looking to capitalize on these competencies outside the country."

Full of achievements, including 125 deepwater wells drilled and a strong track record, Reliance Industries signed another milestone in its international strategy by signing a joint venture with BP last February through which the American supermajor committed to invest 7.2 billion USD (30 per cent stake) in 21 of Reliance's oil and gas blocks.

Amit Biswas, CEO, Ambico	Satpal Singh, managing director & CEO, Dolphin Offshore Enterprises	Ashley Jerome D'sa, CEO, Oil Field Instrumentation (OFI)

In a press conference following the signing of the deal, Reliance Industries chairman Mukesh Ambani said that "These guys are the best (in exploration). If you want to climb the Mount Everest, make sure you have the best Sherpa with you."

Reliance's successful deal was followed last August by news that ONGC was holding talks with international oil companies already present in India including Shell, Eni and BG to sell stakes in its deepwater wells off the country's resource-rich eastern shore. At the same time, ONGC has also been carrying out a Rs. 9,000 crore (approximately 2 billion USD) redevelopment investment to increase oil and gas output of its Bombay High field.

Indeed: "In India we are endowed with around 138 billion barrels of oil and oil equivalent, but most of them lie in frontier locations/deep water and ultra deep water. In order to search for these resources our country needs advanced technology," explains Ashley Jerome D'sa, CEO of Oil Field Instrumentations (OFI), a company delivering mud logging services.

D'sa praises the New Exploration Licensing Policy (NELP) introduced in the early 1990's to further liberalize participation at E&P tenders, as: "the general impact of such policies is the increasing entry of foreign investment and private companies in the Indian upstream market. Obviously, this has also given more opportunities for growth in the sector that we are in. We have been working on almost every project; with ONGC for instance, we have been working with them in all the assets and basins – onshore as well as offshore. We have also been working with private and MNC's like Cairn, Reliance, GSPC, British Gas, Shell, Gazprom, NIKO, Hardy Petroleum and many others. If the exploration industry continues to grow we hope to see growth in OFI's business as well."

The growth should be supported by the upcoming Open Acreage Licensing Policies (OALP), which will replace the old NELP, and could play an important role in bringing in the necessary technologies.

"It will definitely attract further investment. Under the NELP, companies have to follow a fixed format and process and must participate in the tenders. With the new Open Acreage Licensing Policy, whether it happens in 2012 or 2013, there should be more opportunities for new players to come in. This would also give easy access of geological data to E&P operators," hopes D'Sa.

Kedarnath being towed by Great Offshore's anchor handling tug supply vessels Courtesy of Great Offshore

As the government is working on more investor-friendly policies, India is quickly becoming a strategic location for global players. Parmjit Singh Nayyar, Oceaneering country manager India, is one of those who clearly spots India as key for business: "Wherever there is deep water, Oceaneering comes in," he told Focus Reports. "We have always gone for strategic locations, and in fact India is a standalone location. The country has a lot of open future for oil and gas and that is why India was selected. The country currently makes a significant contribution to the growth and Oceaneering is also very keen on India for the future."

The company can also provide a solution not only in deep waters but even when it comes to shallow water. "Let's say where divers cannot go, we come in. We are the kind of company that can support any type of operation. For any kind of difficulty we come up with a solution," clarifies Nayyar.

"India is a strategic location to establish operations," agrees K.G. Remesh director of Swiber Offshore, a Singaporean company that controls a fleet of offshore support service vessels and construction vessels, when asked what made his company come to India."We believe India to be one of the most dynamic and fastest growing markets for offshore oil and gas activities, with a big and growing demand for offshore marine support services in India. India has a significant pool of engineers and is a strategic location for market expansion."

BPCL: Moving upstream and offshore For the full interview with R.K. Singh, chairman and managing director of Bharat Petroleum Corporation (BPCL), log onto energy.focusreports.net FR: Since you became chairman & managing director in December 2010, what have been your biggest priorities? R.K. Singh: The first priority was deciding where we want the company to be in five years from now. Having decided on our aspirations and vision for Bharat Petroleum, we needed to work out how to attain them. (…) Predominantly, BPCL is a downstream company dealing with refining and marketing of petroleum products, but we have also looked at other available opportunities and have entered the upstream sector and have been fortunate to make some discoveries along with other consortium members. This has certainly encouraged us and we now want to consolidate this upstream business and work towards monetization of the discoveries.

R.K.Singh, chairman & managing director, BPCL

FR: All your moves upstream have been in quite high-risk ventures so far – deepwater in Brazil, a wildcat well in Mozambique and shale gas in Australia. These are all areas where even experienced players are quite wary about entering. What was the rationale behind such moves?

R.K. Singh: Two things played in our mind. As far as Brazil is concerned for example, we bought assets owned by Encana Canada. A lot of data was available for us, and we knew that the prospectivity was very good (…).

The second aspect of this is that Brazil is now having a lot of discoveries in deep water. It is a big success story. The operator of the blocks is Anardarko, a very established player, and Petrobras also has a stake. They are known to be experts in deep water drilling, and have all the necessary rigs and the equipment that are required for deepwater drilling. So the operator's image, their capabilities and data meant that we took the decision that this would be the place to grow our upstream business. I hope that by 2015, oil will start flowing in Brazil for BPCL. Despite the high risk, I believe that the upstream business is more profitable.

Another deepwater specialist, Weatherford, has been active in India since 1996, when it opened an office in Mumbai. Olivier Konig, country manager India of Weatherford Oil & Tools, sees an important role for the deepwater sector in modernizing India's O&G industry. "Deep offshore operations require top class technologies," Konig said. "This sector has been driving the trend for India to accept, bring in and adopt new technologies, being pushed by service companies as well, considering we have the knowledge, the understanding and the experience in this sector.

Parmjit Singh Nayyar, country manager - India, Oceaneering International

"Weatherford has pioneered the drilling of deep hot wells on the east coast of India, Konig continued. "These are some of the toughest deepwater environments in which we have deployed our tools in and have been immensely successful in helping clients meet their exploration objectives. It has been more than 5 years since we started out on the east coast and are currently involved in the development drilling in that area."

Going deeper: the next step for the shipping industry?

The deepwater developments are also attracting the Indian shipping industry. As the sector is going through a global downturn, shipping companies have found a new potential area in servicing the booming offshore industry.

Olivier Konig, country manager India, Weatherford Oil & Tools	S. Hajara, chairman and managing director, Shipping Corporation of India

"Offshore today means going deeper and deeper into the sea, and because of the technological improvement, the maritime component of the offshore segment is increasing. Obviously if you go deeper, you require more engagement of the maritime assets," explains S. Hajara, chairman and managing director of the Shipping Corporation of India (SCI), the largest and most diversified public sector undertaking (PSU) under the ministry of shipping. "Therefore I believe offshore has a huge potential and we are trying to increase our presence there, but we have not been able to break into the higher segment of rig platforms as of yet. That is very much in our minds and we have had discussions with a couple of players but nothing concrete has happened yet," he continued.

The support industry as well is looking at the offshore industry with more interest. Bharati Shipyard for instance, one of India's leading private shipyards, is targeting the deepwater offshore sector. "There is a new trend in the industry where companies require vessels with high specifications, especially for deeper water interventions," P.C. Kapoor, the company's managing director, said. "For instance, operations on the east coast of India and in Brazil require larger vessels. Bharati Shipyard has decided to go on and build these vessels. We see a lot of growth opportunities in this area, both in the east coast of India and in Brazil."

P.C. Kapoor, managing director, Bharati Shipyard Limited, and executive director, Great Offshore Limited	Christopher Phillips, director, Seatech

Bharati Shipyard acquired an integrated offshore oilfield services provider, Great Offshore, in June 2010 from the family-owned Great Eastern Shipping Company, capitalizing on the synergies existing between the two companies. Kapoor continued. "Bharati has been constructing ships for Great Eastern as well as for Great Offshore for the last twenty years. A major portion of Great Offshore's fleet that is currently operating has been constructed by us. There were a lot of interactions between the two companies before the acquisition, even before we had a single share."

Since the acquisition, Bharati has been actively growing and renewing Great Offshore's fleet, phasing out the older ships to adapt it to deep water operations. Kapoor explains that, "since we took over, we have already purchased six vessels for five or six years, available in very attractive places. This purchase brings the total size of our fleet to 47 vessels, out of which 10 or 12 are to be phased out. We will double the fleet in the next five years, not in terms of number of vessels, but in terms of operating capacity."

Christopher Phillips, director of Seatech, a ship broker and charterer founded in 2008, has been making good use of the opportunities generated by the development of the offshore industry, especially by the discovery in the KG-D6 basin. "There is a lot of potential in the shipping industry in India, especially on the east coast belt which is really rich in minerals," said Phillips. "In the light of a few power companies increasing their activities in the region, there are a lot of project movements on this belt. Even Mumbai has specialized in project cargoes. Simultaneously, in the West, the states - especially Gujarat - have converted a lot of industrial growth over the last decade."

Given that India imports two thirds of its energy needs and exports about 40% of its refining products, additional opportunities arise for the shipping industry to support the oil and gas sector. This is the approach that has been taken also by Seatech: as "we are a young establishment; we have to be aggressive with our approach and look into every opportunity that comes our way," explains Phillips.

Foreign investment in restraints

While India's O&G sector has received a good deal of foreign investment in past years, many feel it's not close to what it should be yet. India's regulatory environment and the high complexity of the market are often mentioned as holding off foreign players. In fact, major international companies are said to be waiting for the country to be ‘mature enough'.

Gas Thirsty! Since the establishment of GAIL in 1984 the Indian oil and gas industry has experienced major transformations, especially related to the market liberalization and modernization of the country's major PSU's. How has GAIL adapted to this new environment and helped shape it? In looking to secure its ever-growing hunger for energy, Indian demand for LNG is growing. Domestically produced gas saw a lower output, making imported gas more crucial. Growth projections for natural gas demand are 4.7 percent annually, which would mean it would reach about 600 million standard cubic meters per day (mscmd) by 2030. GAIL, India's principal gas transmission and marketing company, is preparing its Dabhol, Hazira and Kochi LNG terminals for 100-120 mscmd of R-LNG, and is establishing an LNG plant in Maharashtra from where it is planning to progressively bring more LNG to India. Already, under a memorandum signed last June, Gazprom agreed to supply 7.5 million tons of LNG over 25 years to Gujarat State Petroleum Company, Petronet LNG Limited, and GAIL. In this fiscal year, eight LNG deliveries have been sourced, and the company expects another five or six in the remainder of the year. In the next couple of years, its spot gas portfolio will increase four- to five-fold. B.C. Tripathi chairman and managing director of GAIL told Focus Reports about current and future plans in LNG. He states, "The company has already sourced half a million tons of LNG, for the first time doing it independently, and we are now discussing various other major supply projects. GAIL intends to import five million tons of LNG in the next two to three years. That is why we are gearing up GAIL's infrastructure so the receiving terminals get ready and the pipeline infrastructure is in place in due time.

B.C. Tripathi, chairman & managing director, GAIL

"GAIL is looking not only to grow in the domestic market but internationally. Hence, we would like to have partnerships with companies that are ready to work with us in the international arena, to source more LNG, for instance. It could be either an upstream investment for producing or near-producing blocks, or it could be LNG and petrochemical plants. What GAIL can bring in is its unique 25 years of experience and expertise in one of the world's most challenging, but most promising, energy markets," Tripathi concluded.

Aboveground, India's reputation is good due to its stable democracy, clear regulations and policies, especially in the upstream sector, and widely praised production sharing contract (PSC) systems in place.

The NELP has been a very successful policy in opening up the industry for private players and liberalizing the market. A.K. Arora, director general of Petrofed, one of India's top oil and gas representatives, emphasizes the changes NELP brought. "You have to understand that the rate of participation of private players has considerably increased since the market liberalization took place. However, in an evolutionary process you have to start somewhere. The perceived deviations and imperfections are being taken care of in a gradual and democratic process, unlike other regimes where the state requiring something to be done acts differently adopting varying processes."

"What no one disagrees with is that the system in India has evolved towards a market-friendly and level-playing field environment where private players are enjoying great scope for action. One may criticize the speed of these changes, but can't deny their existence."

However, India is still lagging behind in exploring its offshore, with underground risks keeping international players at bay in the upstream industry. The country has the reputation to be unexplored, and, although it's the government's ardent wish to get exploration going in as many basins as possible, some say the country has failed to do so sufficiently, with available data lacking, making investors hesitant to deploy activity.

Pipelines in Rajasthan, Courtesy of Cairn India

The aforementioned BP deal and the ONGC negotiations with Shell, Eni and BG to sell stakes in its deepwater developments on the country's eastern shore are promising signs for foreign companies looking to enter India. Nonetheless, there are still many administrative hurdles and questions on the risk/benefits ratio.

One aspect many believe should change, as expressed by major international energy companies looking to conduct exploration activities in India, are restrictions imposed by the country's defense and space authorities on exploration activities.

A. K. Arora, director general, PetroFed

Just over half a year after it signed the biggest foreign direct investment in India's history, BP, in a joint letter with BHP to the Indian petroleum ministry, expressed its concerns over these restrictions as they would block medium and long-term commitments. "This is also affecting the confidence of international companies in undertaking high-cost, high-risk frontier exploration in offshore India," the letter read.

A world nucleus for the service industry

"While in the upstream segment there is ample room for improvement on the regulatory front, India has been very successful in attracting international players supporting the oil and gas industry through new technologies, solutions and equipment. Sajiv Nath, managing director of Swiss-based instrumentation and process automation company Endress+Hauser, said "We could have gone anywhere in Asia, but we went to India because this is where the benefit to risk ratio is the best. India is rationally considered the main investment destination for the group. India is a sustainable market which also provides IPR (Intellectual Property Rights) to protect. Looking at the growth market in India, the benefits are far higher than the risks," he continued.

One of the main benefits is undoubtedly provided by the qualified Indian workforce. "The Indian manpower is a young pool of engineers with high communication skills (…)," Rabindranath Burman, director of US manufacturer ITT Corporation, summarized. "India is not only a manufacturing hub but also a talent pool, specifically from the engineering side. ITT demands from its engineers that they support global projects at the R&D level, while also synergizing new strategies". And they are up for the task: "We have extensive training programs, a strong team of people, migrating from one part of the world to another, and we have the best of both worlds."

Entering the Indian market As the industry is booming, foreign companies are flowing in to set a direct base in the country. But what is the best entry strategy in a country as wide and dispersed as India, that counts so many hotspots for the oil and gas industry? We asked Hydratight, the boltied joint solutions specialist, that is currently setting up the Indian operations. "The question is how to organise for ourselves the strongest possible base here. We need a better understanding of the needs of our local customers (…). The market here isn't as formal and organised as in the US or in Europe, but we stick to our plan: develop a profound knowledge of the market and establish strong relationships with customers", explains Alain Wald, EMEA area leader, when we met him in the occasion of the Offshore India and Unconventional Oil & Gas India conference and exhibition in Mumbai.

Murali Narasimhan, country leader India, and Alain Wald, EMEA business leader, Hydratight

Murali Narasimhan, country leader India, adds that, despite Bangalore being the hub for the Indian operations, "no single place can realistically handle the entire country's needs, wherever it is based. Bangalore will be the hub, but we intend to develop satellite bases across the country. Our initial focus will be the western part of India, which is where the key O&G players are located. Progressively, we will work on developing the northern and eastern sides of the market. There is also a lot of development taking place at Kakinada in the south."

There are worries, however, that the demand for skilled labor in India's oil and gas sector might outstrip supply making it increasingly difficult to attract and retain talent, which is critical in a fast growth economy. "The working environment is very demanding from a human resources perspective," Shishir Joshipura, managing director of SKF, a global supplier of rolling bearings, seals, mechatronics, services and lubrication systems said. "The rapid growth will increase the demand for qualified resources, thus inviting an increased focus on retention of talent. Innovation, energy efficiency and reliability of operations while managing costs in an ever improving way are some of the challenges all industries are faced with," which, according to Joshipura, could lead to nothing less than "a war for talent."

Is India ready to pay the price?

Despite a very fast changing environment and the sector's liberalization, India's PSUs are dominating the industry both upstream and downstream. Given their size, entering into agreements with them is a must for any company wanting to be present in the Indian oil and gas industry. Contracts are often long-term and, given the state backing of these companies, safe.

In their attitude to new technologies, there are major differences between India's National Oil Companies (NOCs) and International Oil Companies (IOCs), Olivier Konig, country manager India of Weatherford found. "NOCs and IOCs in India have a very different approach to technologies. The IOCs are very forthcoming and open to trying new technologies while NOCs often have stringent procurement," he continues. "Besides, with NOCs, there is not enough flexibility to allow the addition of new products and services, when these are not part of the scope of work that was decided initially, even if they are brilliant products that could meet their objectives and more."

Sajiv Nath, managing director, Endress + Hauser	Shishir Joshipura, managing director and country manager, SKF India

Indeed, the procurement system is very strict, as the selection of suppliers, either service companies or equipment providers, is based exclusively on price, what is called the L1, or lowest bid.

Clearly, this process has changed the landscape of the industry, influencing not only the local industry but also the international companies, which have been progressively reducing their prices in order to secure contracts with the PSUs. As Dolphin Offshore's managing director and CEO Satpal Singh explains, "the worldwide economic situation and more particularly the reduction in offshore oil and gas development projects forced international companies to come to India and bid competitively. They started to dump prices to get work in India, just to keep their assets deployed. As a consequence, in the last two years, the rates of construction barges have gone down from 455,000 dollars a day to 175,000 dollars a day. It has been very difficult for Indian companies to pick up work."

Sulzer facilities, Pune

The same issue is faced by the equipment suppliers. "The concept of L1 is hurting the industry," said Javed A Hawa, managing director of Hawa Valves, speaking on the valve industry. "There is an evaluation done by engineers; however, those engineers are not valve engineers. They will look at any company and their products against some parameters that have been set by their management but they do not have the in-depth knowledge to understand what differentiates one valve company from the next. In fact they are carrying out an evaluation, which is prior to the bid opening, but that evaluation is skewed from the beginning. The process is flawed." In order not to compromise with the quality standards, the company decided to focus on the global market, rather than the Indian one. "We realized that the values that we were bringing to the investor in terms of HSE were better recognized by the global end users in the hydrocarbon sector, rather than the PSUs."

However, for international companies that are setting their foothold in India, PSUs remain the first target, and one of the challenges is increasing the acceptance of new technologies. "Given the importance of the public sector within the Indian market, the idea first needs to be sold to them," said Sulzer's India President B. Balaji. "At the same time, as markets are developing, customers also are willing to try new technologies. This has opened up doors for us, as we are able to bring a lot of world class technology in India through the Sulzer Chemtech channel."

Luckily, interest in advanced technology is increasing and the international players are capitalizing on these nascent opportunities. Endress+Hauser's managing director Sajiv Nath has seen landslide changes in the way in which the country deals with new technology. "The market has predominantly consisted of PSUs but has evolved over time. I still remember the phase during the 1980s, when talking about new technologies and software was not well accepted, he explained. Today it is the innovative technical "geeks" who drive the Indian market. In fact, Indian technologies are more driven by the end users than by EPCs. Endress+Hauser has been successfully able to identify certain "geeks" amongst these end users who have been receptive to technological change."

Javed A. Hawa, managing director, Hawa Valves	B. Balaji, president, Sulzer India

This aspect has been confirmed by Konig from Weatherford, who is currently at his second stint in India. "Over the years the country's O&G business has evolved and the country is today much more open to new technologies, which supports Weatherford's growth strategy," he said. "The opening up of the market has been supported by the entry of international companies There have been several new private Indian companies that have secured blocks in the latest NELP rounds".

From price to quality: the Indian re-evolution

As historically many of the local manufacturers have been focusing on lower prices in order to guarantee an access to a very price-conscious market, for many years the image of India as a cost killer country impacted the reputation of Indian manufactured products, fairly or not.

"Up until 1990, there was not much of a market scope for the Indian industry, especially as far as valves were concerned, Jagdish Prajapati, managing director of valve manufacturer Panam Engineers recalls. "Indeed, the purchasing mentality abroad was laden with a few prejudices in terms of region, business ethics, etc. But once they came to the realization that products from countries like India can be of high quality, they began wanting to trade with us more.

While the situation has changed for the better and Indian products are sold on foreign markets, Indian companies still have a gap to close," Prajapati said. "There is still a little gap [between Indian and international quality], as far the industry world is concerned."

"The acceptance of Indian products is much more prominent now as compared to 10 years ago", admits Nath of Swiss-based Endress+Hauser. To him the ability of Indian engineers to learn and integrate new technologies has much to do with this success: "The Indian workforce has tremendous technical skills. Thanks to the technical knowledge the employees have, they can now be trained easily."

The fact that Indian companies did overcome many of the prejudices that haunted them earlier has been confirmed also by V.P. Ramachandran, secretary of the Process Plant and Machinery Association India (PPMAI). "Ten years back, Indian engineering companies used to go and visit ACHEMA [an international exhibition congress on Chemical Engineering, Environmental Protection and Biotechnology, held yearly in Frankfurt, Germany] to understand the latest foreign technologies, learn from them, and perhaps buy them," says Ramachandran. "The situation has now changed; the technology transfer goes the other way around. Now, Indian companies go there to sell their equipment and technology. They are looking for buyers for the technologies they are able to manufacture from India."

Overcoming the misconceptions, many Indian manufacturers

look abroad to sell their products. So does H.K. Sippy, chairman and managing director of Tema India, whose company belongs to a small group on the globe able to manufacture high quality, high pressure heat exchangers.

Jagdish Prajapati, managing director, Panam Engineer	VP Ramachandran, secretary, PPMAI	H.K. Sippy, chairman and managing director, Tema India

"Foreign operations are definitely a central focus, due to the oil sands in South America, Canada, and Russia. We are ready to compete with players overseas," Sippy said. "We are concentrating on our Screw Plug heat exchangers in O&G, for which we have a patented design. The idea is to increase our global market share to at least 40%." Tema is one of the Indian companies that has been strongly investing in high quality and latest technology. As Sippy highlights, "There are several companies that work with heat exchangers, although it is true that very few of them have the design capabilities that we possess. We have been able to elevate the standards of our company to its current standing. Apart from that, there are companies who have not been able to bring to the fore the combination of design and an intricate manufacturing process. They may be financially stronger and larger as an establishment, but technically, they have not been able to bring this kind of engineering excellence."

Panam Engineers manufacturing facility

With equipment installed on the five continents, GEI Industrial Systems, specializing in heat transfer technology, is another Indian manufacturer that has found a way to bring Indian equipment to international markets. "Almost every week, somebody visits us from abroad to establish a JV or some kind of manufacturing arrangement with GEI. Foreign visitors have a good opinion of Indian capabilities," said C.E. Fernandes, chairman and managing director of GEI. "There was a time when Indian quality was neither appreciated nor accepted in most countries; however, in the last decade or so a lot has changed. There has been a shift in perception in recent years and many are now confident of the quality and technology of Indian products, which are at par with European vendors", he continues.

C.E. Fernandes, chairman & managing director, GEI Industrial Systems

With JVs in Oman, Brazil, Singapore, and plans to enter South Africa, Fernandes has a word of advice on how the international O&G industry should deal with companies like his. "The O&G community should look global and accept companies which are coming up aggressively to meet the demand in these areas, especially large multinationals such as Chevron, Shell, ExxonMobil. They should open up in such a way that companies from the developing countries, like GEI, can get a good participation to join in their progress."

Refining, the future of India?

Even though India has been undoubtedly developing its offshore sector, as well as a vibrant manufacturing industry, the most promising sector in the O&G industry still seems to be refining. India already contributes to 4% of the world refining, with an installed capacity of almost 200 million tons per annum in 2011, and showcase the largest single-complex refinery in the world, the Jamnagar complex by Reliance Industries. Notwithstanding these impressive figures, the country is continuously adding new capacity and is expected to reach 300 million tons per annum by 2017.

Hydrocracker project, Haldia refinery, Courtesy of Punj Lloyd

Most of the state owned players are adding capacity. The PSU Indian Oil has recently completed the expansion of its Panipat refinery to 300,000 barrels a day, from 240,000. State-owned BPCL, based in Mumbai, with a refining capacity of 30 million tons per annum, in addition to expanding capacity at its Kochi refinery, has commissioned the Bina refinery, which will have a capacity of 120,000 barrels per day with the potential to raise it to 300,000 barrels.

The other Mumbai-based state-owned refinery, HPCL, plans to expand capacity of its Visakh Refinery by 9 million tons as well as a relocation of the Mumbai refinery, which currently refines 6.5 million tons, to the west coast of India. The company furthermore commissioned its first refinery in the north of the country, in Bathinda in the state of Punjab, through a joint venture with Mittal Energy. The HPCL Mittal Energy Limited (HMEL) grass root refinery will be commissioned by March 2012 and is expected to produce 9 million tons per year.

Rabindranath Burman, director and country head, ITT Corporation India

The expansions in the country's major refineries have also allowed the service industry to increase its capacities. Swiss manufacturer Sulzer for instance has been expanding its capacity in order to support the boom in the refinery industry. "In fact, Sulzer India has carried out a significant portion of the mega projects in refineries in 2006 and petrochemical in 2007 & 2008. Considering we expanded our plant's capacity in 2005 and 2006, so before the booming really started, the timing was excellent. Successful execution of large projects has given a lot of confidence to our customer for future collaborations also", Sulzer's president of Indian operations B. Balaji said.

The new projects have also created a shift in the structure of the industry, as "there has been a shift from a PSU dominated market to a number of private partnerships. For instance, the biggest refineries in India are not PSUs but Reliance and HMEL, which is a partnership with the Mittal Group", ITT's managing director Burman pointed out.

A. Basheeruddin, managing director and co-founder, Furnace Fabrica

Indeed, these major expansion projects have created a number of opportunities for the service industry and Burman believes that the extra capacity in these refineries "will definitely be a driving force in both the top and the bottom line of the profit and losses (P&L)" of the company.

G. Sathiamoorthy, managing director, Tecnimont ICB

Furnace Fabrica, an Indian EPC player with a strong focus on the downstream, has been taking advantage of these new projects as well. As managing director A. Basheeruddin explained, "We successfully completed expansion projects for Hindustan Petroleum Corporation Limited (HPCL). Now we are executing a sulphur recovery unit for the same client. We expect to get a major chunk of the business from [the expansion of the Bombay refinery]. We completed the expansion plans of the Haldia refinery as well. In fact, we were the first company to build the second hydrogen reformer at the Indian Oil Corporation refinery, with a capacity of 94.62 mmkCal/hr". Currently, the company is working on three acid coolers with anodic protection design for Indian Oil Corporation's Paradip refinery. "Many companies will find it difficult to meet the stringent requirements," Basheeruddin said on this last project. "There were only two bidders. One was from America and we were the second. We beat them out on the price, which is often one of the main criteria in India, considering it is a highly price-sensitive market.

"In addition to this, we are one of the few international companies with experience in dismantling refineries for reconstruction, not for scrapping. We are able to dismantle, rebuild, and also expand refineries. Our capacity is unique in that respect", continues Basheeruddin.

G. Sathiamoorthy, managing director of Tecnimont ICB (TICB), part of the Italian engineering, procurement and construction company, Maire Tecnimont Group, confirms the number of opportunities available, not only downstream: "India is currently buzzing with new opportunities for gas treatment, refinery and fertilizer units. TICB has the references and the capabilities to undertake these projects. There is a lot potential in the O&G industry, some LNG terminals are under discussion. The company is eyeing few prospects in the refining segment. We do foresee the refining sector to gain momentum next year with new expansion projects getting finalized."

And with all the projects coming up, from upstream offshore to the refining sector, this revolution happening in the Indian oil and gas industry is becoming less and less silent.

Correction: Country Report: India, the silent revolution - Part 1, Oil & Gas Financial Journal, July 2011: on page 72 the photograph on top is of Dr. A. K. Balyan, CEO & managing director, Petronet LNG Limited, and not, as wrongly stated, of B. C. Tripathi, chairman and managing director, GAIL.

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