I am pleased to present a record performance of your company for your attention.
During the last financial year your company a reported 332% increase in revenues and a590% growth in profit after tax. This is the beginning of a major upswing in our financialperformance across the foreseeable future based on our existing order book andpreparedness.
However the big question that most analysts are asking is whether we are seeing thebeginning of a long-term decline in the prospects of the global oil industry. Theirconcern arises largely out of a combination of two concurrent realities: the sharpmeltdown in oil prices that we have seen in the last couple of years on the one hand and arapid embrace of renewable energy technologies the world over on the other.
At Alphageo we believe that the growth in oil consumption could taper but the age ofoil is far from over.
There are a number of reasons to support this conviction especially when this isapplied to the Indian context.
India took around 60 years to reach its first trillion dollars in economic size; ittook seven years to climb to its next trillion and the country's economy is expected totreble by 2030 to $7 trillion. This rapid economic growth will need to be built on theback of significant transformations across several building blocks the primary beinginfrastructure build-out energy availability and sustainability. The faster the countrygrows the more energy will be needed to fuel it and the greater the role of oil and gas.Besides even as the consumption appetite of the country increases in line with thecountry's economic growth India would still be playing catch-up: India's per capitaenergy consumption currently is only a third of the global average.
What we are now seeing in terms of India's energy growth represents a combination ofgrowth addressal and catch-up; the country's energy consumption has grown at a compoundedannual growth rate of about 6% during the last decade. BP Energy Outlook 2035 indicatesthat India could report the fastest energy consumption growth among all major economiesthe rapid increase in non-fossil fuel production notwithstanding. The result is thatIndia's energy consumption is expected to grow 128% by 2035. This outlook is influenced bythe reality that even as India's per capita energy consumption more than doubled over 15years almost 240 million Indians still do not enjoy access to affordable energy.
Besides according to IMF lower oil prices should translate into higher spending andtherefore catalyse global growth. The increase in spending by oil importers is likely toexceed the decline in spending by exporters; lower production costs will stimulate supplyin other sectors for which oil is an input. While the rise of electric cars has led somebig players in the industry to warn of oil demand tapering analysts at Morgan Stanleyindicate that the conventional global car fleet is increasing by 40 million a year net ofscrapping. This alone should account for about 600000 b/d of growth or half the 10-yearaverage. Besides a higher use in planes freight and petrochemicals could driveconsumption further.
So even as renewables hydroelectric and nuclear power are expected to provide half ofthe overall global growth across the next 20 years oil gas and coal could continue toremain the dominant energy sources. The result is that oil demand is predicted to grow byan average 0.7% per year to reach 110 million barrels per day by 2035. Even as oil gasand coal remain the dominant sources of energy accounting for 85% of the energy mix in2015 they could moderately decline to 75% in 2035.
Like China a decade ago India is seeking to hedge its emerging energy needs byinvesting in new production at home and abroad. The one difference in India's strategy andthat of China is that while China's additional spending came during a commoditysuper-cycle that saw WTI crude peak $147.27/bbl in 2008 India's increased explorationspending has come in the midst of the biggest energy price crash in a long time. I amhappy to communicate that the Indian government has responded to this meltdown in aproactive way. As the price of oil declined more than 50% from mid-2014 levels Indiaexpended $60 billion less on crude imports in 2015 than the previous year even as itbought 4% more oil. It is evident that India has prudently invested its savings inexploration kick-starting a virtuous cycle of probable self-sufficiency. The governmentis accelerating reforms in this area; the new Hydrocarbon Exploration and Licensing Policyis intended to kickstart upstream investments draw new players accelerating explorationactivity and enhance the possibility of new finds.
I am optimistic then that the sharp increase in the country's prevailing explorationspending is not a one-off exercise but the start of a long-term seriousness to enhance theproportion of oil ownership that could create a strong foundation for the country'ssustained economic growth.
In view of this I am optimistic that a serious upstream service provider like Alphageoaddresses a bright future with years of sustainable growth ahead.