In the past 12 months, the oil and gas sector has seen the initiation of policy changes that could have useful outcomes a few years down the line. As of now, global crude and gas prices are slated to stay down and that’s been a boon for India, which imports about 80 per cent of its crude and 40 per cent of its gas. Low crude prices are primarily responsible for a narrower trade deficit. Low prices have given the centre (and state governments) leeway to free retail prices of most petro products, and to impose taxes to derive more revenues in the bargain.
However, this situation will not last forever, given the cyclical nature of global energy demand, the rising domestic demand for energy, and the troubled politics of the world’s oil-exporting regions. India is likely to see crude consumption rising even faster as economic growth takes off and it could become the world’s largest importer. To that end, there are multiple storage and transport projects on the anvil, including seven new LNG import terminals at some stage of planning or construction.
The government’s vision is clearly geared for that eventuality in that it aims to ramp up domestic production and reduce import dependence with clear timelines. A thrust towards increasing domestic exploitation of these fuels is also vital since production has fallen in both oil and gas.
The launch of the National Data Repository (NDR) will enable a move to the Open Acreage Licensing Policy and explorers are being allowed greater marketing and pricing freedom for gas production from new deepwater, ultra deepwater and high pressure-high temperature areas. The new Hydrocarbon Exploration and Licensing Policy addressed some key areas of contention in the earlier NELP by moving to a revenue-sharing regime with a single licence. The NDR could open up significant new areas for exploration. However none of this has yielded concrete results on the ground yet. More tweaks are required to fix other policy lacunae and open up the sector further.
There are also planned expansions in refining capacity, which is useful since excess refining capacity can be profitably utilised for exports. The pipeline infrastructure is also improving and that’s critical if CGD are to take off. The CGD experience has also been rather mixed so far but there are plans to revise the CGD policy, which could boost the prospects for this sector where there is a lot of suppressed demand.
The sector policy seems to be driven by sound strategic principles and is long term in nature.However, not only will policy implementation be key, but policy review must remain an ongoingprocess as well. Many issues still remain unaddressed and certain segments such as coal bedmethane and shale have seen much talk and little action. Positive attitudes must be translated as soon as possible into action on the ground.