Emerging Innovations Used In Oil And Gas Sector And How To Tackle Price Volatility In Petroleum Industry
Sanya studied in University of Warwick and founded Humsafar in 2016 which is a doorstep diesel refuelling servicing company.
Petroleum Downstream Industry is passing through an Interesting phase. On one hand, climate change activists pushing out fossil fuels and also increased presence of Natural Gas world over as a part of Energy mix. India can't be an exception to these trends. In fact, these changes may present a unique opportunity from the point of view of dependence of country on imports. However, the newer forms of fuel be it Natural Gas, Electricity, Solar present their own set of challenges as Country is not blessed with required Natural Resources and largely looking at west and elsewhere for the Technology and raw inputs.
Let us look at the Broad Trends happening, Unique opportunities these present while all Stakeholders join hands to overcome hurdles.
Industry Trends
Growth of Renewal and Clean Energy
Though, Liquid fuels form bulk of Energy sources today, however, there are 3 major contenders 1. Natural Gas 2. Electricity 3. Solar. Though, one may argue that Biomass including Ethanol, Bio-waste also need to figure here.
Immediate provocation is the crying need for cleaner Energy world over at large, especially in Urban centres to begin with. Handling of Bio-waste and its disposal also presents a case in urban Centres.
In India, too, Natural Gas has witnessed aggressive expansion in the last 5 years through various CGD Licensing Rounds. LNG is however, promising to be a game changer for Heavy vehicles, long distance travels with lesser space needed for its storage. Govt of India has also advised its rollout independent of CNG. Similarly, in the space of Electric vehicles, a few pilots have been done. Finally, it would need a coordinated efforts on part of Petroleum, Power Industries, OEMs and Municipal Corporations to free space and also manufacture e-vehicles for its use.
Expansion of Fuel portfolio
With Liquid Fuel remaining the major Fuels, increasing presence of Natural Gas (CNG) vehicles is increasingly pushing for availability of all the Fuels in one Forecourt. Electric Charging stations are also beginning to be present in some urban Stations. Therefore, it makes a case of all types of Energy sources in one Forecourt. Going forward, with constraint on space and its high costs, Petrol stations are likely to look a lot different with varieties to choose from.
However, Electric charged vehicles would need much wider presence even outside petrol Bunks, in public, parking spaces to become a viable option.
Mobile Dispensing takes roots
MOPNG amended petroleum Rules 2002, in 2019. It made 2 loud openings: 1. Door Delivery for B to B 2. Startups, besides Petrol Pump dealers permitted. Currently, Door Delivery is opened for static equipments and Heavy Machineries. However, it seems a matter of time before other sectors are opened too.
Presence of Startups notably Humsafar, Repos in Diesel Retailing, has potential for a shake up as monopoly of OMC dealers is threatened. To that extent, customer service gets a thrust.
Minister of Petroleum and Natural gas has gone on record to say that Petrol and CNG door delivery may also be opened in near future.
This amendment alone has scope for major disruption in petroleum Retailing in the country.
Technology, Algorithms play differentiators
Today, all Petrol pump stations are fully automated. All major Oil OMCs have embarked upon CRM solutions. Combining these 2 developments sets stage for Data to play a bigger role. Every individual customer is to be the Market segment and would receive a unique treatment based on his purchase behaviour.
This applies to Door Delivery Models too. To that extent, chase for MSME and individual consumers would become interesting.
Mass Marketing increasingly withers down
Technology, Algorithms, IOT demolishes Mass Marketing and Market Segmentation approach. Each Customer truly becomes the king. Taking forward, it may also have potential to enhance customer service and also threaten Margins.
Challenges
Policy Interventions by Govt
If India is to truly use the opportunity and sector being quite regulated, Govt of India has to play a very proactive role in leading the change. Quite a few actions including Gas Allocation Rounds, LNG independent of CNG, SATAT programmes, Diesel Door Delivery are examples of these.
But, is the pace good enough? Or, is the scale adequate? These questions may need hard scrutiny. Sooner, rather than later!
Large scale Investments needed to facilitate New Energy Forms Availability
Government of India is trying to answer this by freeing up this highly regulated sector and seen to be encouraging International players to make entry. It applies to Total, BP, ADNOC making entries. However, 2 issues are still crucial. Is pace good enough and secondly, hopefully, it may not happen at the cost of canabalising PSU OMCs!
Rapid Expansion of newer Forms of Energy
For this big ticket changes including Natural Gas, Elecrticity and even Solar power to become serious play, a great deal of coordination by Petroleum, Power , Commerce Ministries, OEMs and Municipal bodies is a prerequisite. Industries being so regulated and investments of GOI, later has a big role to play, to make it happen.
However, these are new Industries and country has opportunity to play an international Leader in some crucial parts.
Resistance by current stakeholders
As a few of these changes are and would cause disruption and interests of existing power players would be impacted, therefore, roadblocks may be caused. Government of India would have to contend with managing those from time to time.
Education of Masses
As changes in Energy mix and distribution models would change, besides making hardware changes at various levels, customer education at large scale would facilitate faster acceptance and safer transition. All Stake holders including investors would have to play a proactive role. It would need to designed.
OEMs need to switch
Most of the OEMs have International collaboration, a few may not have. Therefore, large scale investments by the OEMs would have to be made. As these investments have long lead, as Industry would take its own own time to open up, deep pockets, and government policy interventions to ease the pain would be needed.
Current Innovations
LNG entry without regulations
Big ticket change to open up LNG Market away from CNG marketing has been done by GOI recently. It is important as very large portion of Diesel consumption happens on High ways transport. For Natural gas to enter all segments of Petrol, Diesel market, entry of LNG is a must. This is likely to be beginning of the last segment left out so far. Investments wait to happen, likely to be led by PSU OMCs.
Mobile Dispensing
Door Delivery Service is causing disruption all over. How can Petroleum products stay away? Diesel retailing is already witnessing turbulence. It would become bigger with time and more amendments and more segments being freed. Petroleum Minister making statements about Petrol and CNG Door Delivery sooner is going to change the face of petrol stations for good. Dealers would need more investments, move out of forecourts and many more players bound to enter.
CNG enters major parts of Country
MOPNG has done a good job of rapid expansion of CNG Expansion. 10 CGD licensing rounds have been wrapped up. Petrol pumps in cities look different and so are vehicles. It is bound to percolate to 2, 3 tier towns and possibly rural areas too soon. Having said that, India is a large country with different levels. There are still many cities where Maruti 800 is still the main stay. Therefore, all kinds of fuels and methods of sales would have a say for a long time.
Price Volatility
Finally, with lots of noise around increasing price increase daily for more than a fortnight, how can an article be complete without price volatility on daily basis and is there a way to get past that. Fact is price change daily is based on fixed formula, which is rational. However, it is a common knowledge that implementation may not be very transparent and therefore, sharp crests do appear. Given the situation, public got to live and adjust as it suits Indian setup.
Petroleum Downstream Industry is passing through an Interesting phase. On one hand, climate change activists pushing out fossil fuels and also increased presence of Natural Gas world over as a part of Energy mix. India can't be an exception to these trends. In fact, these changes may present a unique opportunity from the point of view of dependence of country on imports. However, the newer forms of fuel be it Natural Gas, Electricity, Solar present their own set of challenges as Country is not blessed with required Natural Resources and largely looking at west and elsewhere for the Technology and raw inputs.
Let us look at the Broad Trends happening, Unique opportunities these present while all Stakeholders join hands to overcome hurdles.
Industry Trends
Growth of Renewal and Clean Energy
Though, Liquid fuels form bulk of Energy sources today, however, there are 3 major contenders 1. Natural Gas 2. Electricity 3. Solar. Though, one may argue that Biomass including Ethanol, Bio-waste also need to figure here.
Immediate provocation is the crying need for cleaner Energy world over at large, especially in Urban centres to begin with. Handling of Bio-waste and its disposal also presents a case in urban Centres.
In India, too, Natural Gas has witnessed aggressive expansion in the last 5 years through various CGD Licensing Rounds. LNG is however, promising to be a game changer for Heavy vehicles, long distance travels with lesser space needed for its storage. Govt of India has also advised its rollout independent of CNG. Similarly, in the space of Electric vehicles, a few pilots have been done. Finally, it would need a coordinated efforts on part of Petroleum, Power Industries, OEMs and Municipal Corporations to free space and also manufacture e-vehicles for its use.
Expansion of Fuel portfolio
With Liquid Fuel remaining the major Fuels, increasing presence of Natural Gas (CNG) vehicles is increasingly pushing for availability of all the Fuels in one Forecourt. Electric Charging stations are also beginning to be present in some urban Stations. Therefore, it makes a case of all types of Energy sources in one Forecourt. Going forward, with constraint on space and its high costs, Petrol stations are likely to look a lot different with varieties to choose from.
However, Electric charged vehicles would need much wider presence even outside petrol Bunks, in public, parking spaces to become a viable option.
Mobile Dispensing takes roots
MOPNG amended petroleum Rules 2002, in 2019. It made 2 loud openings: 1. Door Delivery for B to B 2. Startups, besides Petrol Pump dealers permitted. Currently, Door Delivery is opened for static equipments and Heavy Machineries. However, it seems a matter of time before other sectors are opened too.
Presence of Startups notably Humsafar, Repos in Diesel Retailing, has potential for a shake up as monopoly of OMC dealers is threatened. To that extent, customer service gets a thrust.
Minister of Petroleum and Natural gas has gone on record to say that Petrol and CNG door delivery may also be opened in near future.
This amendment alone has scope for major disruption in petroleum Retailing in the country.
Technology, Algorithms play differentiators
Today, all Petrol pump stations are fully automated. All major Oil OMCs have embarked upon CRM solutions. Combining these 2 developments sets stage for Data to play a bigger role. Every individual customer is to be the Market segment and would receive a unique treatment based on his purchase behaviour.
This applies to Door Delivery Models too. To that extent, chase for MSME and individual consumers would become interesting.
Mass Marketing increasingly withers down
Technology, Algorithms, IOT demolishes Mass Marketing and Market Segmentation approach. Each Customer truly becomes the king. Taking forward, it may also have potential to enhance customer service and also threaten Margins.
Challenges
Policy Interventions by Govt
If India is to truly use the opportunity and sector being quite regulated, Govt of India has to play a very proactive role in leading the change. Quite a few actions including Gas Allocation Rounds, LNG independent of CNG, SATAT programmes, Diesel Door Delivery are examples of these.
But, is the pace good enough? Or, is the scale adequate? These questions may need hard scrutiny. Sooner, rather than later!
Large scale Investments needed to facilitate New Energy Forms Availability
Government of India is trying to answer this by freeing up this highly regulated sector and seen to be encouraging International players to make entry. It applies to Total, BP, ADNOC making entries. However, 2 issues are still crucial. Is pace good enough and secondly, hopefully, it may not happen at the cost of canabalising PSU OMCs!
Rapid Expansion of newer Forms of Energy
For this big ticket changes including Natural Gas, Elecrticity and even Solar power to become serious play, a great deal of coordination by Petroleum, Power , Commerce Ministries, OEMs and Municipal bodies is a prerequisite. Industries being so regulated and investments of GOI, later has a big role to play, to make it happen.
However, these are new Industries and country has opportunity to play an international Leader in some crucial parts.
Resistance by current stakeholders
As a few of these changes are and would cause disruption and interests of existing power players would be impacted, therefore, roadblocks may be caused. Government of India would have to contend with managing those from time to time.
Education of Masses
As changes in Energy mix and distribution models would change, besides making hardware changes at various levels, customer education at large scale would facilitate faster acceptance and safer transition. All Stake holders including investors would have to play a proactive role. It would need to designed.
OEMs need to switch
Most of the OEMs have International collaboration, a few may not have. Therefore, large scale investments by the OEMs would have to be made. As these investments have long lead, as Industry would take its own own time to open up, deep pockets, and government policy interventions to ease the pain would be needed.
Current Innovations
LNG entry without regulations
Big ticket change to open up LNG Market away from CNG marketing has been done by GOI recently. It is important as very large portion of Diesel consumption happens on High ways transport. For Natural gas to enter all segments of Petrol, Diesel market, entry of LNG is a must. This is likely to be beginning of the last segment left out so far. Investments wait to happen, likely to be led by PSU OMCs.
Mobile Dispensing
Door Delivery Service is causing disruption all over. How can Petroleum products stay away? Diesel retailing is already witnessing turbulence. It would become bigger with time and more amendments and more segments being freed. Petroleum Minister making statements about Petrol and CNG Door Delivery sooner is going to change the face of petrol stations for good. Dealers would need more investments, move out of forecourts and many more players bound to enter.
CNG enters major parts of Country
MOPNG has done a good job of rapid expansion of CNG Expansion. 10 CGD licensing rounds have been wrapped up. Petrol pumps in cities look different and so are vehicles. It is bound to percolate to 2, 3 tier towns and possibly rural areas too soon. Having said that, India is a large country with different levels. There are still many cities where Maruti 800 is still the main stay. Therefore, all kinds of fuels and methods of sales would have a say for a long time.
Price Volatility
Finally, with lots of noise around increasing price increase daily for more than a fortnight, how can an article be complete without price volatility on daily basis and is there a way to get past that. Fact is price change daily is based on fixed formula, which is rational. However, it is a common knowledge that implementation may not be very transparent and therefore, sharp crests do appear. Given the situation, public got to live and adjust as it suits Indian setup.
