Delivering the 75th Independence Day (ID) address on August 15, 2021, Prime Minister, Narendra Modi set the country a target of 2047 – to achieve self-reliance in energy production through a mix of electric mobility, gas-based economy and making the country a hub for hydrogen production. While, electric mobility and hydrogen are futuristic areas, as regards gas-based economy, pursuit of this goal will involve increase in gas consumption to (i) meet additional energy needs for sustaining high growth and (ii) replacing polluting fuels such as coal, fuel oil etc. This could result in further increasing dependence on gas import which is already high at 50%. To prevent this and put India on the path of self-reliance, there is need for a...
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Category: Production vs imports
Stop the flip-flop
The policy drift on gas pricing must stop. The November 2014 norms provide a robust system of gas pricing which balances the interests of both the producers and consumers The Narendra Modi Government is keen to promote the use of gas and support it by increasing domestic production. But it wants to keep the gas price low so that it is affordable to key sectors, such as fertilisers and power producers, and is in sync with the macro objectives of keeping subsidy payments and fiscal deficit under check. This overarching objective is glossed over when it comes to pricing, even as the Centre is obsessed with giving a higher price to exploration and production (E&P) companies. Under the November 2014 guidelines for...
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Uniform transport tariff for gas – a flawed idea
Speaking at the launch of nation”s maiden online gas trading platform by Indian Gas Exchange (IGX), union minister for petroleum and natural gas (MPNG), Dharmendra Pradhan reiterated the commitment of Modi –government to raise the share of natural gas in the energy basket from existing around 6% to 15% by 2030 in sync with its avowed objective of promoting use of environment friendly fuel. Pradhan also alluded to ‘a new pipeline tariff policy that will replace existing practice of seven different pipeline operators charging separate rates and customers away from gas source paying more than those nearer to source’. The Chairman, Petroleum and Natural Gas Regulatory Board (PNGRB), Dinesh Kumar Sarraf was more specific when he hinted at ‘single rate...
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Oil and gas – don’t fiddle with formula-based pricing
India depends on imports for about 83% of its crude oil and 50% of gas requirement. Considering the huge quantities involved, the price at which these products are imported has a potent effect on the health of the economy by impacting the twin deficits viz. current account deficit [CAD] and the fiscal deficit [FD] and other related parameters such as inflation, interest rate, borrowing cost etc. Therefore, all stakeholders including the government – both Centre and states – always pray for reduction in their prices. The steep reduction price of crude from over US$ 70 per barrel at the start of 2020 to around US$ 35 per barrel currently [on April 22, it even went below US$ 20 per barrel] and...
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What India should do when oil prices have crashed
With crude price low, the govt should think of moving completely to DBT for food, fertiliser and power. Crude oil plummeted to less than US$ 30 per barrel – drop of 50% over its level in the beginning of 2020. ————————————————————— Much before Covid 19 had assumed monstrous dimensions, the international crude oil market was already oversupplied. Then, OPEC and non-OPEC suppliers failed to reach an agreement as Russia refused to back even a moderate cut. In sync with its past behaviour under similar circumstances (1997, 2015), Saudi Arabia pumped additional supplies prompting tit-for-tat by Russia. As a result, crude oil plummeted to less than US $30 per barrel – drop of 50% over its level in the beginning of...
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Detoxify oil pricing
The COVID-19 outbreak is a rare event and oil exporters may think that after this ends they can continue to extract a higher price from importing countries. This is flawed thinking On October 15, 2018, while interacting with global leaders from the energy sector in New Delhi, Prime Minister Narendra Modi had expressed concern over the steep increase in the international prices of crude oil (at $80 per barrel leading to corresponding increase in price of diesel and petrol) and had urged all leading producers/exporters to be more responsible in fixing the price, to bring it down to a reasonable level. At that time, no one had even contemplated a scenario wherein the price of crude would plunge to a fraction of...
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Detoxify oil pricing
On October 15, 2018, interacting with global leaders from the energy sector in New Delhi, prime minister, Narendra Modi had expressed concern over the steep increase in the international price of crude oil [then the price had touched US$ 80 per barrel leading to corresponding increase in price of diesel and petrol; this even hurt BJP politically as the party lost three state assembly elections viz Madhya Pradesh, Rajasthan and Chattisgarh] and urged all leading producers/exporters to be more responsible in fixing the price to bring it down from current high to reasonable level. Then, he might not have even contemplated of a scenario wherein the price of crude would plunge to a fraction of the October 2018 level; on...
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Is the oil sector ready for competition?
Last year, Petroleum Minister Dharmendra Pradhan had set up an expert committee under Kirit Parikh to “look at various issues related to implementation of existing guidelines for grant of marketing authorization of market fuels —petrol, diesel and aviation turbine fuel (ATF), identify entry barriers, if any, for expansion of retail outlets for private marketing companies and recommend easing of fuel retailing licensing rules.” On October 23, the government announced major changes in the licensing rules. These include dispensing with the requirement of minimum investment of Rs 2,000 crore in oil or gas infrastructure — in hydrocarbon exploration and production, refining, import terminals, transportation, etc. Henceforth, “the applicant needs to have minimum net-worth of Rs 250 crore and commit to invest...
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Fuelling new partnerships
India must broaden its vision of oil security which should go beyond increasing indigenous production, to cover arrangements with other nations for assured supplies of crude and gas Despite loud talk by successive Governments about increasing domestic production of oil and gas to make India self-sufficient in energy, we are producing less than 20 per cent of our requirement. The balance, over 80 per cent, continues to be imported. This heightens our vulnerability to a point whereby the slightest disruption in any of the major sources of imports (be it imposition of sanctions by the US against Iran or an attack on oil installations in Saudi Arabia) creates major ripples that have the potential to destabilise the country’s economy. The problem...
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Strategic partnerships for oil security
Despite loud talk for decades by successive governments for increasing domestic production of oil and gas to make India self-sufficient in energy, we are producing less than 20% of our requirement – balance over 80% continues to be imported. This heightens our vulnerability to a point whereby a slight disruption in any of major source of our imports [be it imposition of sanctions by USA against Iran or attack on oil installations in Saudi Arabia] creates ripples and causes a major destabilizing effect on the Indian economy. The problem is not with lack of resources [India has 26 Sedimentary Basins covering an area of 3.14 million sq. km.] but lack of a conducive policy environment besides cumbersome regulatory processes which...
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