Lorenzo Simonelli, president and chief executive of GE Oil and Gas, tells Shine Jacob the country needs clarity on policy and pricing to boost the sector. Edited excerpts:
Globally, in 2014, companies have cut capital expenditure. In such a scenario, where do you see the potential?
Globally, there is a lot of news from the international oil companies that there have been escalating costs. As you look at 2014, they are looking to reduce spending and improve productivity. A number of projects in the last few years got started and delayed, while a lot is in the pipeline that needs to be executed. Some of the fundamentals that remain solid are the perspective of the market. Demand continues to be there for resources and production rate continues to decline from old wells. Yes, the international oil companies are now more focused on being productive and we are going to provide them with more effective solutions and technology. There is need for continued increase in production and new exploration projects. As you look at the national oil companies and the independents, they are continuing to spend and overall, the sector spending continues to go up. The pace of increase is not as fast as it was in the past but is still going to be positive.
What is your outlook for India?
If you look at India specifically, energy needs within India are increasing. Demand continues to grow. For example, look at ONGC (Oil and Natural Gas Corporation), Reliance, Cairn, etc. You have a number of investments related to increase in production. We think this is the time when the Indian market will be interesting and one where potential for technology and services are high. We see our global revenue going up in the single digit this year. We are realistically small in India today and with a small base, we have to grow in double digits.
What are the issues the government should address from a global perspective?
GE Oil and Gas is a prominent provider of technological equipment and services to operators, explorers, producers and national oil companies. So, relating to them, what they look for is clarity and a clear legislative, financial and investment perspective. India is an exciting market. With continued production & exploration, $45 billion is expected to be spent over the next few years. It will happen, if there is clarity in the policy space and pricing. All of that will help us support our customers. You look at the opportunity: Only 25 per cent of the deposits in India have been explored and there is still a lot of energy needed. When you are looking at energy independence and growth, given the gas and oil that is available in the country, why not explore them?
Pricing of domestic natural gas has run into controversy in India. What is your take?
What companies look for is return and there has to be a price point attractive for the industry players. In downstream also, there are a lot of investments taking place in India, especially in the fertiliser and refineries sectors. Globally, technology equipment and services sector is growing at six-10 per cent. If you take US shale, I think some of the aspects that made the it successful are the open market, encouraging development of fields and ensuring a win-win chance for producers.