India focuses on energy sector

New Delhi is introducing incentives and easing regulations as it looks to attract domestic and foreign investment to its oil and gasfields and increase self sufficiency in the face of growing demand.

Coal is expected to remain an important fuel in India. Ajay Verma / Reuters
Beta V.1.0 - Powered by automated translation

MUMBAI // India’s top energy officials gathered here on Monday, bringing investors together to tell them about the opportunities to develop discovered small oil and gasfields in the country.

Such a move could be critical as India tries to bolster its energy security. As the economy grows, its demand for energy is on the rise. India is heavily dependent on imports and its rising thirst for oil and gas means that India is stepping up its efforts to ensure a steady stream of fuel from abroad, while also looking at untapped opportunities for production at home.

“It is of paramount importance that we focus on this sector,” said Dharmendra Pradhan, India’s minister for petroleum and natural gas, at the conference in Mumbai.

He said that the government was offering 67 small oil and gasfields for bidding, located on land and offshore, which are estimated to hold more than 625 million barrels of oil and oil equivalent gas reserves.

Mr Pradhan said that this could be the start of “a new energy revolution in India”, which would “increase crude oil and natural gas production in the country, as well as the investment flow into the oil and gas sector …

“Given India’s nearly 78 per cent dependence on energy imports, I strongly believe that all quantities of hydrocarbon – big or small – are crucial for the country.”

India, the third-largest importer of crude oil globally, is striving to become more friendly to investors when it comes to its oil and gas sector.

“India’s reliance on oil imports rises above 90 per cent by 2040, requiring constant vigilance as to the implications for energy security,” says the International Energy Agency (IEA). It projects that crude imports will rise to 7.2 million barrels per day (bpd) in 2040, second only to China, sourced predominantly from the Middle East.

The energy demand is being driven by a growing population, rising incomes, urbanisation and the expansion of the manufacturing industry.

Narendra Modi, the prime minister, has said that he wants to reduce dependence on oil and gas imports by 10 per cent by 2022.

A P Sawhney, the additional secretary at the Ministry of Petroleum and Natural Gas, says that “a very large area within India is still to be explored, so there is tremendous potential here within the country for exploration and production, which we have tapped only to a certain limited extent. With the aim of augmenting and accelerating the domestic production of oil and gas, in the recent period the government of India has accelerated reforms and brought out a lot of policy measures to again reignite growing activity in this area”.

To attract investors to the discovered small fields, measures, including tax incentives, have been introduced against the backdrop of low oil prices.

At the same time, Mr Modi has been stepping up efforts to ensure that India has a steady stream of oil and gas from abroad.

Last month, Mr Modi travelled to Iran, where he met Hassan Rouhani, the Iranian president, partly with the aim of boosting energy ties between the countries. India is among the largest buyers of crude oil from Iran. Before the western sanctions against Tehran were lifted in January, India was under pressure from the United States to reduce its imports of Iranian crude and it steadily cut its shipments.

New Delhi increased its imports after sanctions were lifted.

On Sunday last week, Mr Modi visited Qatar, which is the largest source of liquefied natural gas and liquefied petroleum gas for India. The Indian government said in a statement following the visit that it “appreciated Qatar’s contribution to India’s energy security”.

India said it “highlighted the interest of its energy companies to pursue opportunities of mutual interest in Qatar, with Qatar Petroleum and other companies, in order to jointly explore new fields as well as development of discovered oil and gas assets, and exploit the existing resources of natural gas and crude oil in Qatar”.

The authorities also “invited Qatar to invest in India’s exploration and production sector by bidding for exploration blocks under the new hydrocarbon exploration and licensing policy, and discovered small fields policy”.

India is going to play an ever-larger role in the global energy economy over the coming years, the IEA says.

“India’s total energy demand more than doubles in our main scenario, propelled higher by an economy that is more than five times larger in 2040, and a demographic expansion that makes India the world’s most populous country,” says a report by the IEA. “With energy use declining in many developed countries and China entering a much less energy-intensive phase in its development, India emerges as a major driving force in global trends, with all modern fuels and technologies playing a part.”

Coal is expected to remain a hugely important source of energy for India, although the country has pledged to reduce its carbon footprint. The IEA projects that India will be the largest importer of coal before 2020, overtaking Japan, the European Union and China.

In its vision of India’s future energy landscape the IEA says that the demand for oil will increase by more than in any other country, approaching 10 million bpd by 2040. It says: “India steps up its deployment of renewables, led by solar power, for which India becomes the world’s second-largest market.

“Natural gas consumption also triples to 175 billion cubic metres. Although, at 8 per cent in 2040, it still plays a relatively limited role in the overall energy mix.”

The IEA says that most of India’s oil production currently comes from Gujarat, Rajasthan and Assam, which is in the form of onshore production, while offshore production largely comes from the Mumbai High field in the Arabian Sea, about 160 kilometres from Mumbai. This oilfield is operated by the state-controlled Oil and Natural Gas Corporation, which is the main producer and explorer in the country.

Analysts highlight that there could be good opportunities for investment and development of India’s energy resources, as government policy tries to make the processes easier for investors in the sector.

“There has been significant reform progress in India’s upstream sector over the past two years and some of the most notable changes have come from the discovered small field policy, the hydrocarbon exploration and licensing policy and a new gas-pricing formula for gas from deep water, ultra deep water and high temperature, high pressure fields,” says Rachel Calvert, the manager for the Asia Pacific region, petroleum sector risk, at IHS.

She says that India’s upstream sector is becoming more attractive for investors.

“As a result of these reforms, two of India’s oil and gas risk service scores for 2021 have been upgraded, the first of which is international openness. Reductions in offshore royalties and marketing freedom will result in an increase in international investment and, eventually, production in India’s upstream sector.

“Also, we have improved the score for India’s regulatory burden,” Ms Calvert says, referring to administrative processes for operating in the sector becoming more favourable for investors.

K D Tripathi, the secretary of India’s Ministry of Petroleum and Natural Gas, says the plan is to take a roadshow for discovered fields to other Indian cities, as well as abroad to cities that include Dubai, Singapore and London, to drum up interest from investors.

“We all know that India’s sustained economic growth is placing enormous demand on its energy resources,” he says. “To meet the growing demand requires serious efforts to augment the energy supplies. This demand for energy will continue to increase as the government of India is aiming at double-digit GDP growth in the coming years, and this definitely will generate new prospective avenues for investments in the energy sector of a growing India.”

Follow The National's Business section on Twitter