Share of India’s oil consumption domestically produced20 percent
Local company price preference that ended October 201410 percent
Oilfield services in IndiaSeptember 4, 2015
HLS Asia managing director Rajeev Grover talks to TOGY about the latest developments affecting India’s local oilfield services sector and market opportunities. HLS Asia specialises in wire logging and anticipates generating 12-15 percent yearly growth in India as the country ramps up its upstream activities.
What can India’s oilfield services market do to maintain its positive growth trajectory?
India’s services sector must continue adopting the best international practices and technologies. It must also continue to invest in training and development of local expertise as a means of supplying the growing demand from the country’s upstream sector as the new government tries to boost domestic production.
Multinational services companies must also support the Indian government’s Make in India initiative in addition to bringing some of their own manufacturing facilities to India.
How do you expect the Indian market to react to the ongoing oil price slump?
India produces only about 20 percent of the oil it consumes, importing the rest. Whether prices are $50 or $100 per barrel of oil, India must still increase its domestic production. The drop in prices is not expected to negatively affect the market in any significant way. However, some short-term slackening of exploration and production is likely for private operators.
The reduction in global upstream activity will likely increase the availability of oil and gas equipment at competitive prices. This is a positive long-term development for India’s hydrocarbons market, which must increase exploration and production to meet growing demand.
How would you rate the country’s oilfield services sector in terms of capability?
Local services companies in operation have managed to develop adequate expertise and sector capabilities. The emphasis for local oilfield services companies should continue to improve health, safety and environmental standards, along with quality control measures and the continuous development of local talent.
There is a noticeable market trend concentrating on long-term investment in quality, safety and training that ultimately prevents short-term losses and accelerates growth. Companies that elected not to follow this trend are already out of business. The long-term direction for local oilfield services companies should be to prioritise integrated services, research and development and the Make in India initiative.
How do you view the lifting of the 10-percent price preference in October 2014?
The lifting of the 10-percent price preference, which had given local players a competitive edge against international companies, in October 2014 has not come at an opportune time. This policy will negatively impact the sustainability and growth of the services sector.
This policy is simply “insurance” without any cost to public sector oil companies, as it only asks local firms to match the lowest foreign bidder. Most countries including Indonesia, Malaysia, Brazil and Nigeria to name a few, implement policies that favour domestic companies to bolster economic growth and local content development. Hopefully the government’s Make in India initiative will help to review and modify this purchase preference policy.
How does manufacturing affect India’s ability to modernise its hydrocarbons market?
In 2014, HLS Asia dedicated the vast majority of its yearly turnover to the purchase of state-of-the-art equipment from overseas. Indian manufacturers specialising in reliable high-end, modernised hydrocarbons tools are limited.
India must develop research and manufacturing capabilities for advanced equipment typically required by they hydrocarbons industry.
However, manufacturing high-volume items, such as perforating hardware and charges is feasible and economically viable in the short term, given the rising market demand. This move would ultimately translate into opportunity for Indian businesspeople and entrepreneurs leading to economic growth and more jobs in India.
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