The Hindu Business Line : No great prospects

The offer by the Norwegian company Norsk Hydro to sell a portion of its stake in Angolan and Iranian oil blocks has brought into sharp focus the Indian strategy of buying overseas oil assets to feed an economy on the upswing. The Indian record has been singularly disappointing in a competitive international market for exploration/production concessions where China has scored more than once, the Indian strategy being more in tune with a softer oil price regime. China was also able to sweeten its bids with promises of substantial development aid, something that India's public sector oil undertakings have not been able to do, given the tortuous inter-ministerial consultations any such decision demands.

Indian success, such as it is, has thus been confined to the hand-me-downs from Western oil companies that were not too comfortable with these oil assets given the political and human rights sensibilities of the countries where they have exploring concessions. Naturally, these assets are not the choicest considering the political risks they carry. Angola and Sudan, where India has secured or is in the process of getting oil interests, are still transiting towards a pluralistic and democratic structure. Iran, with its nuclear ambitions and with the additional disadvantage of being in a region that is a political tinderbox, poses its own challenge. To top it all, India lacks the capacity to project strategic power that can secure not just its commercial interests but also the lives of Indians who would be engaged in exploring in volatile regions.

In such a milieu India needs to revisit the conventional parameters of energy security. The policy of securing equity oil through successful exploration was shaped at a time when economies faced the twin risks of supply and price shocks. Such a situation no longer prevails in the context of OPEC's dwindling market share of global oil output and the diminishing enthusiasm for using oil as an instrument of political power due to the fiscal compulsions of the producing nations. In fact, even the scepticism about the cartel's pricing power is not entirely without merit. Moreover, economies that have oil assets abroad have not been able to escape the power of the market as logistics and quality constraints often dictate that they offload their equity oil in the market and source supplies from elsewhere.

On the other hand, international oil majors are able to leverage the market far better than national oil companies. In the event, getting them to invest in India would be a far better option from the energy security perspective than winning prospecting concessions abroad. India has a mature oil-marketing infrastructure in the public sector. Putting in place a policy of selective divestment could bring the MNCs in. The market stake that they would get is the surest way to ensure that India is not starved of oil to sustain its future growth.

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