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India uses Brent crude prices to price oil and accordingly should be given more importance. Investors need to look at both WTI and Brent crude, the two primary crude prices used globally. Investors need to look at the volatility and oil price trend since these are driven by multiple factors globally.When looking at investing in companies from the sector, one needs to assess the following factors: Downstream Segment: India has 21 refineries and expansion is planned with FDI in export-oriented infrastructure, including product pipelines and export terminals the development of CGD (city gas distribution) in many cities (including Tier 2 and 3 cities) and the expansion of the petroleum product distribution network.Midstream Segment: Expansion of gas pipelines and LNG imports have increased, thereby giving an opportunity to boost production capacity in segments such as terminal operation, engineering, procurement and construction services.Upstream Segment: 78% of the sedimentary area is yet to be explored Secondary and Tertiary oil techniques.The Oil and Gas industry offers multiple opportunities including: The top 3 companies (IOCL, HPCL and BPCL) currently command over 80% of the total pipeline in India. The LPG pipeline stands at 18,465 kms as of Mawith IOCL currently having the largest share of the pipeline at 50.91%. The government of India plans to spend US $2.86 billion towards upstream oil and gas production to double the natural gas production to 60 BCM and drill over 120 exploration wells by 2022. The natural gas pipeline length overall stands at 17,126 kms for FY21 of which GAIL has the largest share at 11,884 kms. The total gas consumption stood at 60,646 MMSCM (million metric standard cubic meter) for FY21. On the LNG front, India is currently the 4 th largest importer in the world with imports at 33.68 BCM (billion cubic meters) for FY21. India has imported 3.96 MBPD (million barrels per day) as well as produced 0.61 MBPD in FY21, indicating that imports contributed to over 87% of total oil demand of 4.57 MBPD. India has proven reserves of 4,700 million barrels (1 barrel = 159 liters) and produced 37.5 million barrels in 2019.
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Crude oil production in FY21 was recorded at 30.5 MMT. The consumption grew by 4.5% in FY20 to 213.69 MMT while the crude oil production stood at 32.2 MMT. The energy demand is expected to double to 1,123 Mtoe (million tonnes oil equivalent) by 2040 in India. Private companies own about 35.19 percent of the total refining capacity in FY21. India is pegged to increase this capacity to 667 MTPA (million tonnes per annum) by 2040. As on May 1, 2021, India’s oil refining capacity stood at 259.3 MMT (million metric tonnes), making it the second largest refiner in Asia. India is the 3 rd largest consumer of energy as well as oil. Overview of the Oil and Gas sector in India
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The industry includes the Oil & Gas industry, the Coal mining industry, the Power generating industry, and the power distribution industry. The energy sector is one of the most crucial elements for an economy. So First Let’s Understand the Energy Sector A Detailed Table with Various Parameters of Energy Stocks.
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Watch Our Video on How to Analyse & Pick Energy Stocks.Overview of the Oil and Gas sector in India.