Initiatives needed from India to reduce the import of oil

Vikram Mehta elucidates on country’s oil and gas outlook, import dependence for domestic energy needs and prospects of India getting gas from an international pipeline by 2040 in an interview with Furquan Moharkan of Deccan Herald. This interview first appeared in the  Deccan Hearld on December 7, 2015.

Recently, Petroleum Minister Dharmendra Pradhan spoke at the release of the IEA’s India Energy Outlook about cutting down of the country’s import dependence for domestic energy needs by 10 per cent by 2020-21. How can this be done?

There are three initiatives that the government needs to take when it comes to reducing imports. Two of them are on the demand front, while one is on the supply side. On supply, the production of oil and gas in India is declining. It is because there has been inadequate exploration, and also there has been inadequate use of enhanced oil recovery technology for maximising productivity of our producing oil fields.

The country, therefore, must accelerate the process of exploration. On the demand side, transportation is the largest consumer of oil in India. The government has to plan more efficient ways to manage consumption of oil there. The other front where we can reduce the amount of imports is the efficient use of oil for residential and commercial purposes.

Will the shift to revenue sharing and single licence encourage more participation from exploration companies?

The revenue-sharing model has many risks, and there is uncertainty associated with the exploration of oil. It is also not feasible, where the costs are high. It is more focused on increasing the productivity of existing oil fields. It would be good if the government retains its old profit-sharing model. As for the single licence, it is a very good idea. It is one of the many factors involved in oil exploration. This is a positive thing. But if other factors are contributing negatively, it can offset its effect.

What innovative policy measures can India initiate to make the most out of the current decline in crude oil prices?

On the policy front, decline in crude oil prices has been the single biggest contributor to the current account of India. It has saved import bills worth almost $50 billion. The government needs to recognise that oil prices are volatile, and we are dependent on imports for that. For this, we need to develop a long-term relationship with oil producing nations, especially the ones from the Middle East.

How can India make the most out of Iran’s arrival into the supply market?

India and Iran have a long-standing relationship. Iran has a surplus of gas, and we are importers of gas. We need a long-term deal with Iran for supply of gas and another way we can secure good relations with Iran is by helping it  develop more infrastructure for extraction of oil.

What more can be done by India to renegotiate Petronet LNG’s long-term LNG deal with Qatar?

As per recent reports, the deal has been renegotiated. If that is the case we should really appreciate the efforts of the government in this regard.

What more can be done by India’s oil refineries to increase their market share in the global market?

We should realise that the refining market is a very open market, which is based on the principles of supply and demand. Our refineries are world-class, and the only aspect we need to focus on is increasing the supply of oil.

What are the realistic prospects of India getting gas from an international pipeline by 2040?

I cannot say anything in this regard, because it is how politics and international diplomacy pans out.

Where is ONGC Videsh (OVL) lagging in getting access to increased share of oil and gas from oil fields abroad?

It is a misconception that OVL is lagging. It is not lagging in any regard. In fact, ONGC and OVL have increased their global footprint in the past 20 years. It is a matter of competition then.

The big question here is what is the driving force behind our pursuit in getting access to increased share of oil and gas from oil fields abroad? If it is for strategic reasons, then I will not support it. But if it is just for commercial purposes, I will more than welcome it.

Cairn Energy proved that a profitable private enterprise can be built up based on energy resources in India. What can the Centre do on the policy front so that more such home-grown enterprises can be created?

Oil refining is a very technologically-driven business. Companies operating in this segment need to have the necessary competence.

What the government can best do is to let companies manage their own business without any bureaucratic or political interference.