Reducing dependence on crude oil imports not easy, says industry

In March 2015, Prime Minister Narendra Modi urged the oil and gas exploration companies to increase domestic production and reduce dependence on imports by 10 per cent by 2022, which was termed as ‘wishful’ thinking by some critics.

Both domestic and global players in the sector feel reducing import dependence by 10 per cent can be achieved only with support from a right set of policies and pragmatic production sharing contract (PSC) implementation process not only for future exploration and production activities, but existing producing acreages, too.

Players in Indian hydrocarbon space, such as BP, Reliance Industries, Essar and public sector giant ONGC have all raised their concerns with the Prime Minister as well.

While low oil prices would have brought temporary relief to India’s import bill, the country’s import dependence continues to rise as no new production source has come to flow.

The International Energy Agency, in its recently released India energy outlook report, has suggested that India’s import dependence will reach over 90 per cent corresponding to an oil and gas imports bill of $480 billion.

Fuel requirement Currently, 77 per cent of the country’s fossil fuel requirement is met through imports.

RS Butola, former Chairman, Indian Oil Corporation Ltd and Convener of the taskforce, Hydrocarbon Committee of the Confederation of Indian Industry (CII), said the right set of policies and pragmatic PSC implementation process, it is possible to increase crude oil production by over 100,000 barrels a day and augment gas production by over 50 million cubic metre a day by 2022.

“This will mean that the country’s crude oil production will increase to about 42 million tonnes from the current 37 million tonnes and gas production will increase to around 150 million cubic metre a day from current 95 million cubic metre a day by 2022,” he said.

A senior public sector executive told BusinessLine that the corrective measures sought by the industry, such as an increase in domestic output and making the upstream hydrocarbons space more attractive, does not necessarily have to be done in the forthcoming Union Budget. “These decisions can be taken through executive orders,” the executive said, adding that “someone has to bite the bullet and take decisions, given the set of controversies that the sector has attracted.”

Some of the specific industry recommendations include fast-track monetisation of discovered resources by prioritising production maximisation over revenue maximisation, allowing gas pricing and allocation freedom, and enhancing financial limits for procurement.

The other issues include timely contract extension, brownfield allowances incentivising enhanced oil recovery schemes, royalty and cess relief for production from difficult areas such as deepwater, ultra-deepwater, unconventional and tight reservoirs.

The industry has also been seeking access to all forms of hydrocarbons under single license, allowing shale exploration and production in existing PSCs, unconditional exploration in mining lease areas, cost recovery of the management committee approved expenditures.

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