The big bang reforms proposed by the Government for the oil and gas sector are laudable but without a stable and predictable policy environment in place, they can’t make much headway The Union Government is considering far-reaching reforms in the gas sector. These include the setting up of a local gas trading platform to facilitate price discovery, stripping the power sector off its priority status by withdrawing priority allocation of natural gas and hiving off the transportation unit of the Gas Authority of India Limited (GAIL), a public sector undertaking (PSU) which currently holds an overwhelming 75 per cent share of the gas transmission network. The stated objective of these reforms is to enable energy firms to invest in exploration and...
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Category: Production vs imports
Gas reforms – holistic approach needed
The Union Cabinet is considering far reaching reforms in the gas sector. These include inter alia setting up of a local gas trading platform to facilitate price discovery, stripping power sector off its priority status in the allocation of domestic natural gas and hiving off the transportation unit of the Gas Authority of India Limited [GAIL] – a public sector undertaking [PSU] which currently holds an overwhelming share of the gas pipeline network. The stated objective of these reforms is to enable energy companies to invest in exploration and development of gas fields in India so as to increase indigenous production and ensure that the country achieves self-sufficiency in this major source of clean energy [currently, 50% of our gas...
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India’s quest for energy security – challenges ahead
India is heavily dependent on imports for its energy needs viz. 83% in crude oil and 45% in gas. Prime Minister, N Modi has proclaimed his government’s commitment to reduce the import dependence on oil to 67% by 2022 and further to 50% by 2030. Meanwhile, two major developments on the global front are giving jitters to our policy makers. First, the OPEC [Organization of Petroleum Exporting Countries] – a cartel of exporters from the middle-east – which supplies over 80% of India’s oil imports – has decided to continue their planned cut in output [a strategy that was initiated from January 1, 2017]. Together with reduction in supplies from non-OPEC countries led by Russia, this will continue to affect global...
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Pricing freedom – not a panacea for India’s energy security
A committee under Dr Rajiv Kumar, vice-chairman, NITI Aayog on ‘Enhancing Domestic Oil & Gas Exploration and Production’ has recommended taking away 97 oil and gas fields – out of a total of 149 marginal fields – from public sector undertakings [PSUs] viz. Oil and Natural Gas Corporation [ONGC] and Oil India Limited [OIL], auction to the private entities and giving them ‘complete freedom of marketing and pricing’ on supplies from these fields. The committee has also recommended that ONGC/OIL should make efforts to improve performance of the remaining 52 fields to achieve specified production and financial targets within a given time frame failing which even these will be taken back by the government for privatization. Further, in respect of...
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Responsible oil pricing is the key
There are limits to the influence that can be brought to bear on the actions of oil producers. Enticing MNCs to participate in Indian exploration efforts and working towards alternative payment arrangements, however, is doable Interacting with global leaders from the energy sector on October 15, 2018, in New Delhi, Prime Minister Narendra Modi flagged three major issues: First, while expressing concern over the steep increase in international price of crude oil, he urged all leading producers/exporters to be more responsible in fixing the price to bring it down from the current high to a reasonable level. Second, keeping in mind the overarching need to increase domestic production India, he asked them to consider investing in exploration and development of...
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Urgent need for ‘responsible’ oil pricing
Interacting with global leaders from the energy sector that included ministers of Saudi Arabia and UAE – prominent members of OPEC [Organization of Petroleum Exporting Countries] – besides CEOs of leading MNCs on October 15, 2018 in New Delhi, prime minister, Narendra Modi flagged three major issues:- First, expressing concern over the steep increase in the international price of crude oil [and concomitant increase in prices of all petroleum products viz. diesel, petrol, ATF, LPG etc], he urged all leading producers/exporters to be more responsible in fixing the price to bring it down from current high to reasonable level. Second, keeping in mind the overarching need to increase domestic production India, he asked them to consider investing in exploration and...
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ACHIEVING SELF-RELIANCE IN OIL AND GAS
For fresh exploration efforts — in both conventional and unconventional hydrocarbons — the emerging policy and regulatory environment is conducive. However, Team Modi needs to walk an extra mile to reduce regulatory hurdles for existing operators under production sharing contracts A hike in the price of crude oil (courtesy, the US’s decision to reimpose sanctions against Iran and output decline in Venezuela) has drawn the attention to India’s dependence on oil import, which currently stands at 83 per cent, to meet its energy requirement. This, due to a lack of a conducive policy and regulatory environment that came in the way of boosting domestic exploration and production efforts so far. Until the late 1990s, exploration and production of oil and gas used...
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Self-reliance in oil and gas – HELP could be a game-changer
The current steep hike in the international price of crude oil [courtesy, re-imposition of US sanction against Iran and increasing global demand] has once again drawn attention to India’s unconscionably high level of dependence at 83% on import for meeting its energy requirement. This also brings in to focus the commitment of Modi to increase the share of domestic production by 10% in 5 years. Domestic supply – ‘precariously’ low There would have been some consolation if India did not have the resources to support the demand. But, despite the country having abundant resource and seven decades after independence, the domestic production of oil continues to languish at about 15-20% of the requirement. This is entirely due to lack of...
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Regulator for hydrocarbon sector – what is holding back?
At a FICCI seminar on ‘Unleashing India’s Domestic Exploration and Production Potential’, minister for petroleum and natural gas, Dharmendra Pradhan ruled out giving statutory powers to upstream oil and gas regulator Directorate General of Hydrocarbons [DGH]. He was responding to a suggestion made in a presentation by McKinsey that DGH should be given powers similar to the Securities and Exchange Board of India [SEBI] – an independent body which regulates the activities in securities market. DGH is a technical arm of the oil ministry which currently manages hydrocarbon resources, assists the government in auctioning oil and gas exploration fields and monitoring production sharing contracts [PSCs] – those are signed with private contractors who get the fields under the auction process....
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LNG contracts – put ‘India first’ for securing best price
India is deficient in energy resources [albeit conventional] especially oil and gas. Whereas, 80% of our oil requirement is imported, in case of natural gas, the import dependence is about 35%. The latter is a ‘clean’ fuel and ‘environment friendly’. It is therefore natural that in the overall energy mix, the government is laying greater emphasis on use of gas more so in fertilizer and power plants. Fertilizers and power together consume nearly 75% of the total gas consumption. These sectors also cater primarily to the requirements of vulnerable groups. Fertilizers supply essential plant nutrients to some 120 million farmers households more than 80% of whom are small and marginal or poor in short. Power too is used by farmers...
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