Oil – future uncertain

Can India ever say, ‘Oh, there is too much oil and gas here, we don’t need to rely on foreign oil?’

A wishful thinking, pessimists will argue. The fact that the country’s domestic production has been stagnant, backs their case.

After the discoveries made in the Mumbai High fields by ONGC way back in 1974, the two major discoveries were only in 2002 (Reliance Industries operated KG-D6 block) and 2004 (Cairn operated Barmer block), which where commercialised in 2008 and 2009, respectively.

The Bassein field off the West Coast discovered in 1978, which was termed as one of the biggest gas finds in the world, is going through natural decline.

The much talked about discoveries made in Krishna Godavari Basin by ONGC and Gujarat State Petroleum Corporation, are yet to go commercial.

Then, there were incremental discoveries such as the Raava fields off the East Coast, and the Panna-Mukta-Tapti off the West Coast.

The Petroleum & Natural Gas Minister Veerappa Moily, however, has an optimistic view. He accepts that very few discoveries have been made until now, but says, unless the country takes up aggressive exploration, 90 per cent of hydrocarbon requirements will have to be imported.

More exploration

“In the national interest, we should go in for aggressive exploration of not only oil but also gas. We should de-bottle these things. We are practically sailing in oil and gas but we do not explore it,” he says.

Moily says out of 205 billion barrels of prognosticated hydrocarbon resources, until now, only 73 billion barrels of oil and oil equivalent gas could be established through exploration, Thus, about 133 billion barrels of prognosticated resources remain to be unlocked. And this, he says, will be possible only through speedy implementation of new exploration programmes across the country.

“I have rolled out a New Vision and set ambitious targets that aim to reduce our imports by 50 per cent by 2020, 75 per cent by 2025, and eventually achieve self-sufficiency and energy independence for India by 2030,” he says.

In 2012-13, the total crude oil production was about 37.762 million tonnes, with a 30.7 per cent contribution from private/joint venture companies. For 2013-14, the projection is about 39.396 million tonnes, according to Petroleum Ministry. Natural gas production in 2012-13 was about 111.4 million standard cubic metres a day (mmscmd), with 39.7 per cent of the share coming from private/joint venture companies. In 2013-14, the natural gas production is likely to be 105 mmscmd.

“With the fresh investments in E&P sector, natural gas production is likely to further rise by end of 12th five year plan (2012-17),” Moily says.

Sailing in oil and gas! Then, why has the interest of oil and gas companies, domestic and foreign waned? When things are so rosy, why have the big boys, the ExxonMobils and Chevrons of the world kept away.

Although the Government has encouraged private and foreign companies to enter the upstream sector in recent years, the players have been largely absent. This was evident in the declining interest of the companies in the country’s oil and gas auction rounds — New Licensing Policy (NELP) — launched in 1998.

Critics are quick to point out that India’s upstream sector is dominated by ONGC and Oil India and foreign companies historically took the lead in exploring new offshore opportunities.

But, the main reason for the players shying away from India’s upstream sector till now has been the inconsistency in implementation of the production sharing contracts.

Thanks to its last mover advantage, India boasts one of the best production sharing contracts in the petroleum sector. But, continued tampering with the issues such as gas pricing, allocation, as well as issue of royalty, are proving to be a deterrent.

BP did strike a deal with Reliance Industries, and Shell is in talks with ONGC for a similar tie-up. In 2011, BP had bought 30 per cent stake for $7.2 billion in 21 blocks of Reliance Industries. The actual deal between RIL-BP was for 23 blocks, but due to technical reasons, the Union Cabinet had given nod for only partnership in 21 blocks only. Today, the two have seven blocks. The blocks were relinquished as contractors did not find the prospects exciting. Thus, geography also plays an important role in hydrocarbons strike rate.

Gas pricing policy

The Government is working towards correcting these issues in the production sharing contract and is formulating a natural gas pricing policy. It is also pushing for exploitation of unconventional sources such as Coal Bed Methane and Shale gas.

But, whether these result in attracting the big players in the proposed tenth edition of NELP only time can tell. Shale exploration — which raises issues of land acquisition, use of water, and damage to environment — is still an unknown entity.

Can the Minister’s goals of self-sufficiency and a change in the energy landscape be achieved? Only time will tell.

richa.mishra@thehindu.co.in

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