Open Forum
New Delhi,
13 June 2008
Oil & Gas Sector
PRIVATE FIRMS & INNOVATION VITAL
By Dhurjati Mukherjee
The demand for oil in the country
has been increasing at a very fast pace with the GDP growing at around 9 per
cent for the last few years. By 2010,
the demand is further likely to be anything over 150 million tonnes, while
another study has projected it to reach 172.47 million tonnes by 2011-12. Likewise,
the demand for gas is too bound to increase to 84 billion cubic metre (from 35
billion in 2004-05). Sadly, over two decades of oil exploration have not been
quite successful except in the past few years in which the private sector has
played a crucial role.
Thus, it goes without saying that
the oil and gas sector plays a crucial role in the socio-economic life of an
emerging nation like India.
Though prices of oil have been increasing to over $ 130 per barrel, the supply
situation appears to be quite bright, according to projections. A landmark
study of over 800 oilfields by the Cambridge Energy Research Association (CERA)
revealed that rates of decline are only 4.5 per cent a year, almost half the
rates previously believed, leading the consultancy firm to conclude that oil
output would continue to rise over the next decade.
The report’s author, Peter
Jackson has predicted that supplies would grow to well over 100 million barrels
a day by the year 2017 compared to the present supply of 85 million barrels a
day. The study analysed output of 19 billion barrels a year (out of the total
world’s production of 32 billion) including that of Saudi Arabia’s Ghawar, the largest
known oilfield. It observed that oil output, including unconventional oil, such
as tar sands, could allow to peak at much higher levels of as much as 112
million barrels per day with average rates of over 100 million barrels.
Though the international
situation appears to be quite comfortable as pointed out in the study and there
appears to be no crisis presently, the situation in India is somewhat different. Being
a big importer of around 70 per cent of its requirement (of 130 million tonnes
presently), the constant price rise has become a strain on the country’s
foreign exchange while also causing hardship to the common man. As is well
known, oil is the key input in the transportation sector and is very vital for
such a large country like India.
There are vast areas in the
country which seem to have an abundance of oil reserves. Its offshore basin of
380,000 sq. km. has about 30 billion tonnes of hydrocarbons. At present most of
the oil is obtained from Bombay High, Upper Assam,
Cambay and the Krishna-Godavari and Cauvery basins. However, India’s known
reserves are only 0.4 per cent of the world reserves of crude oil while
consumption is around 3 per cent of the world.
It may be mentioned here that India remains
one of the least explored regions in the world with a well density of 20 per 10,000
sq km. Though the number of wells drilled as well as the metreage has increased,
the current reserve accretion continues to be low. With the rising demand for
fossil fuel in the country, it is critical that upstream exploration and
production is geared up to find good reserves of hydrocarbons.
The discoveries in the KG basin
by the private sector giant Reliance was highly significant as it was billed as
the world’s largest. Estimates suggest that the basin indicates availability of
7 trillion cubic feet of gas. The power and fertilizer ministries have put in
demands for a large chunk of the gas at their own terms along with Andhra
Pradesh which also wants this gas to fuel its power plants. Apart from this,
the find at Mangla is expected to yield 450 to 1100 million barrels.
The Oil and Natural Gas
Commission (ONGC) has been a leader in the field of oil and gas exploration and
has added 44-45 trillion cubic feet of oil equivalent gas reserves in the last
decade. It has also ventured into foreign countries, acquiring a 25 per cent
stake in the Greater Nile project in Sudan. It has also acquired
interest in a few blocks in Sudan,
Libya Syria and Vietnam.
Similarly the Indian Oil Corporation is developing a gas block in the gigantic
South Pars gas field of Iran
and plans to sell LNG from it.
Some breakthrough has also been
made in Russia and Kazakhstan in
the oil search. However, it needs to be pointed out that with the country’s
good relations with Russia,
it would be possible to import one million barrels of oil per day or its gas
equivalent from Russia for
which strategic purchasing position should be linked by our state-owned
companies in Russia’s
oil and gas fields. This link would lead
to inviting Russian state-owned companies to participate in exploration and
downstream activities in India
and to supporting Gazprom’s participation in transnational pipeline
project.
Technological innovation and
encouragement to the private players, which started in 1998 under a New
Exploration Licensing Policy (NELP), have to be geared up through a proper
strategy to meet the problem in the coming years. It is possible to adapt
technologies which reduce the use of hydrocarbons. The blending of ethanol with
automotive fuels was cleared by the Cabinet Committee on Economic Affairs
(CCEA) and would be implemented at least in the sugar-producing States.
It has now become mandatory for
oil companies to blend five per cent ethanol with their fuel and subsequently
increase this to 10 per cent by 2008-09. With the selling price for ethanol
being fixed at Rs 21.50 per litre by the government for the next three years,
millers can be assured of better returns compared to selling refined sugar. India could draw a few lessons from other
countries like Brazil, which
has become the world’s second largest producer of ethanol after the U.S. In the
Brazilian model, around 20 to 25 per cent ethanol is blended in automotive fuels
and this also helps to cut down greenhouse gas emissions. Along with this,
coal-bed methane and its exploration and use has to be intensified to use it as
gas.
Fuel efficiency is a crucial area
where the government could save up to $ 36 billion if it is improved by around
50 per cent by 2030. With as much as 98 per cent of the total petrol stock and
diesel used for transportation, a mandatory fuel efficiency standard will
obviously turn into money savers for the consumers. It needs to be mentioned here
that this would greatly help the masses who commute daily in public transport.
There is need for R&D in this area and also foreign technology, if
required.
Developed countries such as the U.S. and Japan
and those in Europe have done this long ago and China has set up stringent norms
recently. The legal mandate to bring standards of efficiency should be
implemented at the earliest in our country.
The Integrated Energy Policy,
approved by the PM’s Energy Coordination Committee has emphasised the need to have
an independent regulatory body to regulate upstream allotment and exploration
of available oil and gas reserves. As a result of weak regulatory structure and
ad hoc policies, the petroleum sector has failed to attract foreign investors.
However, it is necessary to attract foreign investment and foreign technology
in a big way to exploit India
reserves so as to meet the emerging challenge.
India is currently the sixth
largest consumer of energy in the world and by 2012 will be in the top five.
The fact that there are many new entrants in this sector is beneficial for the
industry. More importantly private players along with their foreign entities
are constantly increasing their capacities. The future looks quite bright, but
more attention will need to be accorded to exploration with innovative
technology if the country wants to bring down imports steadily.--INFA
(Copyright,
India News and Feature Alliance)
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