By Nantoo Banerjee

It is highly admirable that India’s public sector oil giants — ONGC and OIL — continue to vigorously using their experience and skill to explore new oil and gas reserves within the country. Oil exploration is considered to be a big financial and technological gamble until it leads to discovery of commercially viable reserves. It is also good to see at least one  private firm, Vedanta, is ready to make large on-ground investment in commercial exploitation of such proven hydrocarbon resources in India. The latest open acreage auction by the country’s upstream regulator, Directorate General of Hydrocarbon (DGH), showed overseas Indian tycoon Anil Agarwal-led Vedanta bagging 41 out of 55 oil and gas exploration blocks. Actually, Vedanta had bid for all the 55 blocks although local giant Reliance Industries (RIL) and other foreign concerns stayed away from the auction —  first time since India began offering oil and gas area for exploration and production through bids in 1999.

It is not clear if the latter’s disinterest in DGH auction is on the ground of future ‘commercial viability’ of these assets. The rest of the blocks on offer went to public sector bidders such as Oil India (9), ONGC (2) and GAIL, Bharat Petroleum and Hindustan Petroleum Corporation receiving one block each. Now, the big question is: when do these new oil and gas block allottees start pudding wells for production? India is starved of Crude Oil. Its small domestic production fell further by over five percent in last July. The oilfields operated by ONGC and other joint venture players are presently not producing enough. As a result, the country’s dependence on imported crude oil rose to 82.30 percent in July.

In the midst of such depressing news around the domestic oil production sector, two good new developments seem to change the mood. One concerns the response to DGH auction of oil and gas blocks.  The other is even more encouraging. India has freshly discovered  42 billion tonnes of oil equivalent (BTOE) reserves, after a 22-year gap. The latest estimate of reserves is 49 per cent higher than the last such assessment made in1996. The reserves, spotted in 15 sedimentary basins, including onshore, shallow water and deep water areas, at that time, were estimated at 28.09 BTOE. DGH’s new report is based on  in-place resources, around 41.872 BTOE, in 26 sedimentary basins. Noteably, the Mumbai offshore and Krishna-Godavari basins continue to hold the key to the country’s energy future with the maximum reserves. Further, last week, ONGC Director (Exploration) Ajay Kumar Dwivedi announced that the company has made oil and gas discoveries in West Bengal and Madhya Pradesh that may potentially open up two new sedimentary basins in the country. Both are onshore discoveries. The new oil find by ONGC and OIL comes as a great relief at a time when India has become highly dependent on costly oil import and a US sanction on import from nearby Iran looms large.

In July, ONGC’s crude oil output declined seven percent to 1,789 TMT as compared to 1,932 TMT produced in the corresponding month 2017. India’s largest crude oil producer’s output in April-July, this year, dropped five per cent to 7,181 TMT in comparison with 7,559 TMT produced in the corresponding period, a year ago. Oil India, the second-largest oil and gas explorer, reported a marginal fall in its crude production to 287 TMT while the output from the production-sharing contract fields, operated by private operators and joint ventures, too fell four per cent to 820 TMT in July 2018. The lower production in the first four months of the current fiscal brought down the country’s cumulative crude oil output to 11,703 TMT as compared to 12,085 TMT produced in the same period, a year ago.

India’s oil scene looks pretty gloomy despite a concerted effort by public sector oil companies to explore and produce oil from all possible sources at home and abroad. The higher rate of economic growth will lead to a much higher demand on the energy sector, of which oil and gas constitute a vital part. Under a British Petroleum Statistical Review of World Energy, last year,  India’s oil consumption growth will be the fastest among all major economies by 2035. Three years ago,  India pipped Japan to become world’s third largest oil consumer, behind US and China. While India’s energy consumption will grow by 4.2 per cent per annum—faster than all major economies in the world— its growth in fossil fuels consumption would be the largest in the world. India, the BP report said, will overtake China as the largest growth market for energy in volume terms by 2030.

It is a challenging task on the part of the government to ensure the country’s energy security, especially in the oil and gas sector. While India is much less import dependent on coal, its production of non-conventional energy is fast expanding. However, the increasing demand for crude oil and natural gas and their decreasing domestic supplies continue to be a major cause of concern. Surprisingly, few in the government like to directly talk about it and provide a true picture of India’s import dependence for crude oil and gas and how it plans to confront it. The officials are more comfortable about speaking on the ‘energy mix’ that seems to minimise the concern for the growing shortage of oil and natural gas. Under such circumstances, any news of new domestic oil and gas finds — offshore or onshore — provide a great relief. Interestingly, skeptics are not quite sure about DGH’s latest claim of new discoveries of oil and gas structures in the country. They think the discoveries are based on conventional data from ONGC and OIL. To be fair on investors, the government should engage an independent third party assessment of the new discoveries to attract more global firms in future rounds of bidding.

(IPA Service)

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