In recent times, oil prices have soared to record levels of $75 per barrel and its impact has heavily affected the country’s GDP and the daily lives of its citizens.
India is the third largest consumer of petroleum products after China and USA and demand for the hydrocarbon is on the rise. According to a report published by India Brand Equity Foundation IBEF, India’s energy demand is expected to double to over 1,500 million tonnes of oil by 2035 from 723.9 in 2016.
So how does India quench its thirst?
The reporting of oil pools in the soils of Assam began as early 1825. Nonetheless, oil exploration in India was not a primary focus of the Crown and the country lagged behind in this field having no major refinery to boast of other than the one at Digboi until independence in 1947. That’s when our dependence on oil imports increased, with most of it coming from the Anglo-Iranian Oil Company refinery in Abadan. Three companies sold the products through their distribution networks, Burmah Shell, Standard Vacuum and Caltex (now merged into Shell, Exxon, and Chevron).
However, it did feel the first pinch during the 1973 energy crisis. OPEC refused to ship oil to western countries that had supported Israel in the Yom Kippur War or 6 Day War, which Israel had fought against Egypt and Syria. As a consequence, OPEC raised the price of its crude from $3 to $12 a barrel. This is when these oil producing nations realised that they can significantly raise their revenue by cutting supplies and increasing the prices.
Iran and Russia came to our ‘assistance’ due to some deft diplomacy by then Prime Minister Indira Gandhi but it was time India understood that it should decrease its dependence on the Middle East.
Four decades have passed and the scenario is totally different. With the discovery of shale oil/gas in the US and Canada, huge oil reserves in Venezuela, untapped shale gas reserves in Argentina, and Mexico and Russia adding to world oil supplies, the world is relatively immune to blackmail. With the USA opening the doors after a 40-year-old ban on oil export in December 2015, India was ready to capitalise on the opportunities to import oil from the US.
Today, India proudly is the ground to world’s largest refinery, Reliance Industries Ltd (RIL) and fulfils its oil necessities through supplies by Iraq, Saudi Arabia, Venezuela, Nigeria, UAE, Iran, Kuwait and Mexico.
Although the news is not all that good. Where our oil consumption grew 8.3 per cent year-on-year to 212.7 million tonnes in 2016, (as against the global growth of 1.5 per cent), the production of crude oil fell for the sixth straight year in 2018 to 35.68 million tonnes. This colossal imbalance in production and consumption has pushed the country’s import dependence for crude to 82.8 per cent, with oil demand increasing to 10.3 per cent in the first month of 2018, the fourth straight monthly gain.
According to a report by DNA, India’s crude import from Nigeria, considered very good in quality, dropped around 23 per cent (from 27.9 MT in 2015-16 to 17.7 MT in 2016-17) due to security concerns and political uncertainty in the country. On the contrary, during the same period, Iran supplied 18.4 million tonnes of crude oil between April 2017 and January 2018, registering close to 100 per cent growth; making it the third largest supplier after Saudi Arabia (39.3 MT) and Iraq (37.75 MT). During April-August 2017, India’s top importers were Iraq, Saudi Arabia, Iran, Venezuela, Nigeria and UAE.
Despite these developments, due to the never-ending tensions in the oil-rich Gulf region (especially after ISIS), the West, due to sanctions placed by US on Iran, forcing India to cut imports; and also the US-China trade war, the international oil prices are always fluctuating to suit the needs of a few countries.
In early April, India’s Oil Minister Dharmendra Pradhan told Bloomberg that oil prices at $70 a barrel are ‘too high’ for India’s economy adding that if the Saudis were targeting $80 a barrel oil price, it would ‘pinch India in a big way.’
Iran too recently warned India of taking back the ‘special privileges’ of free shipping and insurance if India succumbs to pressure by the US to ‘cut oil imports from Iran to zero by November 4 or face sanctions’.
So among all this dilemma, why aren’t we producing our own crude oil?
Policies like the New Exploration Licensing Policy (NELP) now HELP, were envisaged in 1997-98 to fill the ever-increasing gap between India’s gas demand and supply. Many offshore fields were discovered, however, there is a lack of research and development in this field and the old ignorance carried from the colonial times in oil field exploration still persists. Where there should be a database of the already explored field ready to be extracted when asked by domestic or foreign refiners, India is one of the least explored countries in the world. It is believed that India has reserves of 763.476 MMT of Crude Oil and 1,488.73 BCM of natural gas.
Oil being the monopoly of ONGC, hence the government, there is a fear among private companies, be it big or small, of government taking a share of produce or profit. Hence, better opportunities and initiative should be taken up to attract private investments in this sector.
A recent development in the right direction was opening opportunities to foreign firms to invest in projects worth US$ 300 billion in India. State-owned Oil and Natural Gas Corporation (ONGC) has come up with the new blueprint to increase the crude oil production by 4 million tonnes and to double its natural gas production by 2020 to curb the country’s import dependency by 10 per cent. The company will raise its crude oil production from 22.6 million tonnes in 2017-2018 to 26.42 million tonnes in 2021- 2022.
Here, India should also take a pause and think of alternative renewable sources of energy, which leads to a cleaner future.eble sources of energy, which leads to a cleaner future.