Oil and Gas sector in India

The oil and gas sector is pretty well developed in India, and contributes a large share to India’s energy basket and will be doing the same for the next 15–20 years. Oil and gas is a major part of the energy sector, which is essential for the growth of the manufacturing, utilities, infrastructure and commercial services industries. An estimated 7 per cent growth in the Indian economy is expected to approximately double India’s per capita energy consumption over the next 20 years. Since there is a link between energy demand and economic growth, the Indian oil and gas sector, which provides the country with a significant portion of its energy requirements, is a key metric that will drive future GDP growth. The future opportunities for the sector include assessing the feasibility of using non-conventional fuels such as coal bed methane, hydrogen and biodiesel. The sector must lay greater focus on developing midstream infrastructure, with specific attention on city gas distribution networks, and the construction of strategic storage facilities as a safeguard against short term disruptions in fuel supply. The government is constructing a total capacity of 15 million metric tons(MMT) in the form of strategic storage facilities for crude oil and petroleum products. As such this can be used as an emergency mechanism in the case of short term disruptions in fuel supply. In the first phase, the construction of the 5 MMT storage space has been started simultaneously at Vishakapatnam (1.3 MMT), Mangalore (1.5MMT) and Padur (2.5 MMT).

Theproposed storage structure is expected to bcome underground. Effectively capitalising upon potential opportunities, clubbed with the increasing demand for natural gas, favourable government policies, large scale investments and the recent discovery offshore gas reserves are expected to fuel strong growth in the Indian oil and gas sector . State-run oil and gas companies in India must form partnerships or joint ventures with foreign players so as to effectively use the technology and monetary resources for ultradeep water exploration, which can yield significant results. Currently, Indian companies are only equipped with the technology that helps in exploring on land, or in shallow basins. The Indian oil and gas industry has been providing significant opportunities in the development of midstream infrastructure, with expected capacity addition of 6,000–8,000 km pipeline to the National gas grid in different parts of the country. Apart from this, the gas distribution network is not developed in most parts of the country except in cities such as Delhi and Mumbai. This particularly offers alternative fuel in the vehicular segment, which offers a 20 per cent cost benefit over diesel.


Air Cargo -an overview

The Air Transport industry is undoubtedly an important element of national and global economies. Air cargo industry in India has an important role in the nation’s trade and economy because of its significant contribution to the economic prosperity and well-being of the country. Transporting goods via air except perishable or sensitive products was once costly affair for the businesses to afford infrequent basis but due to the recent forces of globalization, liberalisation, privatisation and cut-throat competition among the companies have changed the face of global logistics and supply chain management throughout the world.


In today’s competitive environment, efficient logistics planning and managing supply chain in a most cost-efficient manner such as initiating JIT (just-in-time) production and distribution approach that enables companies to reduce inventory carrying cost, are among the key factors for company’s success and existence in local and international market and which in turn have made air cargo the most lucrative option than other mode of cargo transportation . India is the the largest submarket in Southwest Asia, comprising about 63% of international flows in the region, and it possesses a vibrant domestic market as well. India‘s air cargo business is having muchmore potential in revenue generation than passenger business butstill, the air cargo market is untapped. Statistics indicate thatairlines spend more than 75% on transporting passengers, while only25% is spent on cargo. According to the Airport Authority of India, the total cargo volume is expected to increase by 11.5% from 2007-08to 2011-12, international cargo traffic expected to increase 12.1% of car and domestic cargo by 10.1% during the same period.

However, the rising fuel cost is one of the major concerns which can dampen the growth as fuel accounts for 20-30% of the operating cost. To handle the variety and complexity of managerial forecasting problems multiple forecasting techniques have been developed. These econometric modelling, judgmental analysis, trend analysis and potential analysis are considered useful to provide a forecast. Econometric modelling helps to determine the overall importance of the economic factors like GDP, trade, fuel price etc. and enables forecasts to be linked to expectations for those factors. TheJudgmental modifications often account for expected changes in non-econometric growth factors like trade quotas, services agreement sets etc. A simple trend analysis is used to evaluate changesin economic factors. This is useful in evaluating general changes inthe marketplace that can be attributed to the combined effects of anumber of factors. The potential analysis is useful, particularly forforecasting markets in their early stages of development. Air cargofacilitates transporting goods much faster from one multiple linearregression analysis has shown GDP and trades are having a positiveimpact on the growth of air cargo whereas fuel price is havingsignificant negative relation. As per the calculations, the cargogrowth will be more than that of GDP growth. Several forecastingmethods are applied along with the proposed econometric model withmultiple variables and single variable with time to compare theirpredictive ability and fitting effect with respect to actual valuepart of the world to another and consequently initiates internationalbusiness to grow and expand quickly than another mode of transportation. The simple generalized forecasting methods help topredict air cargo demand of any country and eventually helps inmaking strategies to boost the predicted growth.


What are the risks and threats in the maritime sector?

The excessive pressure and an ever-increasing demand to optimize the logistics management systems and operations and to improve connectivity, including digital connectivity, maritime shipping has become highly dependent on computerized systems and information and communications technology. Similar to other industry sectors that rely on such technology, computer systems on board vessels or marine facilities face the same risk of cyber attacks, including through hacking, malware, viruses, worms and denials of service, among others, and these can originate from hackers and criminals anywhere in the world. Cyber attacks are most likely to first target vulnerabilities along with a supply chain, including negligent users, wireless access points and removable media devices. Unauthorized usage of data or systems by authorized persons, such as ship or platform crew, can also have significant negative impacts.


Cybersecurity-relatedincidents may also arise from extreme weather events, includingclimate change-related events, which pose significant risks toindividuals and businesses, including ships and in ports and marinefacilities. In such circumstances, security measures need to be inplace to ensure that even in the event of partial or totaldestruction of facilities, data is secure and systems can resumeoperations as soon as possible. The illegal usage and/or failure ofinformation technology systems on board ships may disrupt the safenavigation and propulsion. Similarly, cyber attacks on other systemsand technologies used for container terminal operations and cargohandling, including inventory and container tracking systems, cancause significant disruptions to such operations. The offshorestability and the positioning of the offshore supply vessels can beequally vulnerable to cybersecurity-related impacts, either by modernpirates and smugglers through non-targeted malware, insider threatsand functions performed at the wrong time or under the wrongconditions. All such attacks have safety and security issue, withpotentially serious impacts on human life, the environment and theeconomy. Other cyber attacks may be aimed at stealing information, such as sensitive company data, which includes production and processing techniques or strategies for negotiating with trading partners. Along with the economic effect on companies directlyinvolved, such attacks may lead to national security, wider financialand other implications. Potential consequences and costs ofdisruptions from malicious cyber attacks have been compared to those caused by past major incidents involving the maritime transportsector. Cybersecurity is often considered as a technical issue forinformation technology specialists, which does not directly involveothers. In addition, risk assessments and management appear to focusprimarily on physical security in ships and ports, with inadequateattention to cyber security and the sharing of informationon mitigating cybersecurity threats. Inadequate awareness among key stakeholders, including Governments, port authorities, shipping companies and telecommunications providers, of the security challenges, vulnerabilities and threats specific to this sector, was considered one of the main causes of this situation. Other problemsthat were identified were the complexity of the maritime informationand communications technology environment and the fragmentation ofgovernance at different levels, whether international, regionalnational.


Indian Exports- the current scenario

India’s exports have declined for six consecutive months since DecemberIndia’s export basket is now highly diversified. Manufactured products constitute the largest share (around 67%), followed by petroleum products at 18%, agriculture products at 12.5% with ores and minerals contributing 1% to total exports. India is one of the few emerging economies whose share of manufactured goods in total exports has declined continuously over the years. India has diversified its export destination from developed economies to others in the last decade. Earlier more than 50% of India’s merchandise exports went to key developed markets like the US, the euro area, UK, Canada, Australia and Japan. But a decade and a half later, the situation has dramatically changed. Now only a third of India’s exports go to these developed markets and 71% goes to various emerging economies with 49% going to Asian economies. The recent falling commodity prices explain some weakness in export growth, but that is only part of the story. In terms of exports by destination, exports to the US have become the key support to overall exports in the last couple of years, in line with the gradual recovery of the US economy. India failed to improve its market share in its existing markets in developed economies while it diversified into other emerging markets. This is a purely defensive response and does not augur well for its future export performance because advanced economies will continue to have by far the largest share in global imports for the foreseeable future. Excessive diversification of India’s exports, both in terms of products and destinations, has made exports sensitive to global growth. India has managed to diversify its exports but with mixed results failed to claim a large market share in any export product category in the world and does not have depth in any of the export product or a market. A detailed study of manufactured product exports reveals that unskilled labour-intensive segments like textiles and leather have performed poorly despite the fact that India has a competitive advantage in the sector and there is a huge demand in the developed markets. India has to thus identify the sectors where it has a natural competitive advantage and focus sharply on providing necessary infrastructure and skills for these sectors. These sectors can also lead India’sefforts to integrate with global production networks which depend critically on the availability of adequate infrastructure and the ability to attract export-oriented FDI as in the automobile industry. Some macroeconomic factors like an appreciated rupee and rise in real wages have hurt export performance. This can be compensated by replacing capital-related subsidies with labour and employment-related promotion activity to reverse the trend of rising capital intensive exports. The inability to increase India’s share in global markets, in general, and in advanced economy markets, in particular, points sharply to the need for a thorough review of the working and performance of export promotion councils and other agencies like the Federation of Indian Export Organisation, StateTrading Corporation and Minerals and Metal Trading Corporation.

Reliant Institute of Logistics provides training for Logistics and Shipping management Certificate courses, Diploma courses, Professional Diploma and PG Diploma courses. We provide international certifications for our programs.

 


What is Marine insurance?

Marine insurance has an important role to play in the shipping industry and the shipowners ensure the ships that protect them against claims by third parties by purchasing “protection and indemnity” insurance. Cargo is usually insured against Storms, waves, and all type of wind or water damage. In order to get protected against losses incurred from war, the owner of the ship must purchase separate war-risk insurance or pay an additional premium to include war -risk in the basic policy. Incidents like piracy and possibilities like cross-border shoot-outs are also a major threat when it comes to water transportation and therefore in order to avoid any loss because of such events and happenings, in the interest of the corporation and the transporter, it is always beneficial to have marine insurance. Marine insurance is advantageous for shipping corporations and transporters as it helps to reduce the financial loss due to loss of important cargo. It also helps in highlighting the duty, dedication and the straightforwardness of the insurance companies.


Types of insurance:-
Cargo Insurance: Cargo insurance relates to the cargo of the ship and also pertains to the belongings of a ship’s voyagers and provides protection against all risks of any external cause that takes place during shipping, whether by land, sea or air. Cargo insurance provides a cost-effective way to cover physical loss or damage to goods in transit.


• Machinery Insurance: Machinery insurance is the protection of a vessel against damage. The vessel, including the machinery and equipment, is insured on the full value and, depending on the chosen cover, the following risks may be indemnified: The actual or constructive loss that may have caused when apart of the machinery is being repaired and other equipment, expenses paid for prevention, minimizing of damages or calculation of loss, are caused by an insured peril.


• Liability insurance: is an insurance system to protect the insured from the risks of liabilities imposed by lawsuits and similar claims. It protects the insured in the event they are sued for claims that come within the coverage of the insurance policy. The individuals or companies that faced a common peril, formed a group and created a self-help fund out of which to pay compensation in case of loss. The modern system is based on dedicated carriers, usually for-profit, to offer protection against specified perils in consideration of a premium. Liability insurance protects against the claims of the third party, i.e., payment is not typically made to the insured, but rather to someone suffering loss who is not a party to the insurance contract. Usually, the damage caused intentionally or as a contractual liability are not covered under liability insurance policies. In case of a claim, the insurance carrier has the right to defend the insured. The legal costs of defence normally do not affect policy limits unless the same is been
specified.


Freight Insurance: Freight insurance provides protection to merchant vessels’ corporations that may lose money in the form of freight in case the cargo is lost due to the ship meeting with an accident. This type of marine insurance solves the problem of companies losing money due to unprecedented events and accidents occurring.


Reliant Institute of Logistics provides training for Logistics and Shipping management Certificate courses, Diploma courses, Professional Diploma and PG Diploma courses. We provide international certifications for our programs.


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