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View from the top: Looking through the lenses of Indian oil CEOs



BP eyes India's 'molecules, markets and minds' to push growth

By Sambit Mohanty


For BP, India's big push to boost the share of clean fuels in its energy basket has opened a window of opportunity to play a much bigger role, prompting the UK-based oil and gas firm to commit huge volumes of investments for the next few years to expand in one of Asia's fastest growing markets.


Sashi MukundanBesides natural gas, BP, along with its domestic partner Reliance Industries, also plans to explore options to invest in other advanced low-carbon energy businesses in India, as New Delhi remains firmly committed to the Paris climate change agreement, said Sashi Mukundan, BP's Regional President and Country Head for India.


"BP and Reliance are working to develop energy and mobility solutions to help transition to a low-carbon world," Mukundan told S&P Global Platts in an interview. "The two companies will jointly explore options to develop differentiated fuels, mobility and advanced low-carbon energy businesses."


India consumes over 5 billion cubic feet a day of natural gas and aspires to double the consumption by 2022. Gas accounts for less than 7% in India's energy consumption basket, compared with the world average of above 20%. Prime Minister Narendra Modi has set a target to boost the share of gas to 15% in India's energy basket in coming years, while stepping up efforts to cut dependence on crude oil imports.


"We believe in the potential of India. India offers the 3 Ms -- molecules, markets and minds. We want to produce the hydrocarbon molecules to supply the growing energy market using Indian minds and also developing India's skills base," Mukundan said.


"We intend to work with the government and Reliance as India's quest for enhanced energy security is stronger than ever. We see our investment as along-term opportunity to create value," he added.



THE GAS PUSH


In June 2017, Reliance and BP said they would jointly invest up to $6 billion to develop already-discovered deep water gas fields, off the east coast of India, which would help to boost gas output by 30 million-35 million cu m/d (1 Bcf/d) in a phased manner over 2020-2022.


The two companies announced that that they would award contracts to progress development of the R-Series deep water gas fields in Block KG-D6, where Reliance made the biggest gas discovery of India.


Gas output from the integrated development is expected to help reduce India's import dependence and contribute to the country's incremental gas demand by 2022. This will benefit domestic consumers at large and help India save $20 billion on account of LNG import substitution.


"The developments that we plan to execute will help in reducing imports and encourage more gas use," Mukundan said. "Gas will need to play a key pillar in the National Energy Policy as it is not only a clean and better fuel but also helps in the transition to a low-carbon energy world."


In a partnership finalized in 2011, BP took a 30% stake in multiple oil and gas blocks in India operated by Reliance, including the producing block KG-D6. Since the formation of the partnership, BP has invested around $1billion in activities related to sustaining production from the two declining fields in block KG-D6, Mukundan said.


"India's energy demand in the long term is robust. Today, India is the fastest growing energy market with a consumption growth rate of over 5%. We expect this to continue," he added.



POLICY REFORMS

He added that India's Ministry of Petroleum and Natural Gas, over the last three years, had implemented several reforms to encourage the production and usage of natural gas and cleaner fuels.


"With India committing to the climate change agenda at COP21, we are seeing the policy framework being developed to grow responsibly and ensuring that renewables and energy efficiency become a part of the agenda," Mukundan said.


He said that plans were afoot to develop a gas hub in India where the price of gas would be established through gas-on-gas competition and the government was working to set up an additional 15,000 km of gas pipelines to increase the accessibility to cleaner fuel across the country.


"We believe that these steps will help in augmenting the exploration and production activities in the country," Mukundan said.


But he added that India still needed to take more steps in order to give a much bigger push to boost gas consumption.


"Developing a gas-based economy will require to include gas and gas-based infrastructure in development models for transport, electricity, cooking, heating, smart cities, industrial corridors, and in replacing liquid fuels," Mukundan said.


"Gas hubs with infrastructure, supply sources, and demand centers should be encouraged to build economies of scale. This will also require transformingthe industry and regulatory structure, as well as non-discriminatory open access to pipeline infrastructure," he added.


As India develops its energy policy, Mukundan said there were a few key areas that would need special focus.


"Affordability would be driven through the development of a competitive market place. This will require access, availability, and choice to the consumer.


It will also require bringing efficiency in the marketplace by providing access to existing infrastructure.


"A clear and immediate plan will be required for unbundling content and carriage for all forms of energy. Regulatory plans should also ensure commerciality of energy options to support real and sustainable energy forms," he added.


Mukundan said that BP, along with Reliance, was looking at other new opportunities too.


"In addition to conventional transportation and aviation fuel retailing, we plan to develop unconventional mobility solutions, address fuel and electrification needs, and employ digitization and disruptive mobility trends. These collaborations will seek to address the energy needs of urban, rural, farm, industrial, commercial and highway consumers in India," he said.


S&P Global Platts India CEO Series: Mukesh Kumar Surana, HPCL | Sudhir Mathur, Cairn | Sashi Mukundan, BP | Dinesh K. Sarraf, ONGC | B. Anand, Essar Oil | Sanjiv Singh, IOC


Interviews in this series were conducted and first published by S&P Global Platts in September 2017, except for the IOC interview which was conducted and published in November 2017.







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