Economy

Investments in hydrocarbon exploration, production to kick off in 18-24 months

Our Bureau New Delhi | Updated on January 17, 2018 Published on August 16, 2016

bl16_sashi mukundan

Industry expects ₹ 2.5-3 lakh crore to come in by 2022

Investments in the oil and gas exploration and production sector is expected to restart over the next 18-24 months as the policy environment has improved, according to Sashi Mukundan, Chairman of Confederation of Indian Industry’s National Committee on Hydrocarbons.

Mukundan, who is also the Country Head of BP Plc in India said “As CII, we have shared a roadmap for the exploration and production sector with the Ministry of Petroleum and Natural Gas….a lot of the action items have already been implemented by the government…we feel that if the suggestions are successfully implemented then by 2022, there could be investments of worth ₹ 2.5-3 lakh crore.”

He was speaking after a meeting of CII’s National Committee on Hydrocarbons with the Ministry and said that while a big share of these investments will go into existing deepwater fields as they require a large amount of capital, other areas such as discovered fields and unconventional hydrocarbons will also get their share of investments.

According to CII’s estimates, such investments can help unlock 10-15 trillion cubic feet of gas which would enable domestic production to substitute imports worth ₹ 10 lakh crore.

CII’s report on exploration and production identified focus areas such as accelerating production from existing discoveries, enhanced oil recovery, developing oil and gas services. It also gave international examples of incentives that work for enhanced oil recovery.

“Amongst the issues that CII raised with the Ministry over the last year was how to work better with the existing production sharing contracts,” said Mukundan.

He added that one of the positives with regard to the existing production sharing contracts (PSCs) is that no new issues have cropped up in the last two years and all work programmes and budgets have been cleared before the start of the financial years.

“This is a big step forward which shows that the whole focus has shifted towards increasing the activity in the oil and gas sector and supporting these activities,” said Mukundan.

Other issues that have been taken up by CII is how to make India a gas based economy. “Even a small switch from liquid hydrocarbons to gas will provide a lot of savings in terms of the import bill. The aim is to grow gas’ share from around 7 per cent currently to 15 per cent by 2020…Gujarat’s energy mix is 25 per cent from natural gas so it can be done in India,” said Mukundan.

“What we need to do is to build a business case towards all verticals of natural gas consumers – power, fertilisers, city gas distribution,” he added.

Mukundan also said that CII’s National Hydrocarbon Committee is of the opinion that the policy atmosphere has started to change which has given the players in the exploration and production space the confidence to plan their investments.

“Even if you believe crude oil prices will stay low, let us not forget the investments made around 15 years was when crude oil $20-30 per barrel. Capital costs of projects have already started coming down and in India there is a ready made market. If you find oil and gas, you can be sure that the asset won’t be stranded,” he added.

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Published on August 16, 2016
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