The oil and gas sector is expected to witness significant growth in the next few years on the back of rising demand and favourable government policies. The Covid-19 pandemic adversely affected the growth trajectory of the sector. However, the sector has been recovering rapidly and is expected to attract major investments in the coming years. The government’s focus on increasing the share of natural gas in the country’s energy basket has boosted consumption and established the segment as a major hub for investments. On the regulatory front, the government has introduced various policies over the past few years that have provided a further impetus to the sector. In an interview with Indian Infrastructure, Tarun Kapoor, secretary, Ministry of Petroleum and Natural Gas, talks about the impact of Covid-19 on the sector, the major achievements of the ministry in the past one year, the significant policies introduced by the government, its key priority areas, and the future outlook for the sector. Excerpts…
How has the oil and gas sector performed over the past one year?
Taking the last one year into consideration, sales were adversely affected during the Covid-induced lockdown and witnessed a fall of nearly 30 per cent. However, the sales volumes recovered quickly, especially petroleum sales, which are currently 2-3 per cent higher than the pre-Covid levels. The quick recovery can be attributed to the reduction in the use of public transportation. Diesel sales volumes have been recovering at a slower pace, whereas liquefied petroleum gas (LPG) sales have been growing since the onset of the pandemic. Refinery throughput had also dropped to 80-90 per cent initially but is now slowly recovering to the 100 per cent mark.
International crude oil prices have been highly volatile in the past one year. They initially witnessed a significant drop, but recovered at a much higher pace as compared to the projections. Further, the spot liquefied natural gas prices have reached very high levels in the past one year. They currently linger around the $10-$12 mark as compared to the earlier levels of $4-$5.
What have been some of the major achievements of the ministry in the past one year?
The ministry has made considerable progress in the biofuels segment in the past one year. Blending with petroleum was less than 5 per cent till last year but is now more than 8 per cent. The biogas segment has also progressed well in the past one year as letters of intent have been awarded for many plants and various plants have been commissioned.
The pace at which the pipeline infrastructure is being laid in the country is also a key achievement of the government. Various pipelines have been commissioned in the past one year, and work is progressing at a rapid pace on other pipeline projects.
Another major achievement of the ministry during the Covid-19 pandemic has been ensuring continuous supply of fuels. The field staff was able to work on the ground and ensured that no supply constraints were experienced for any type of fuel in any part of the country.
“One of the main priorities of the government is to become self-sufficient by reducing import dependence and increasing domestic production.”
What are some of the key policies and reforms introduced by the government in the past one year?
Various reforms have been introduced in the upstream segment, due to which production in the segment has witnessed a rise. Some new schemes relating to LPG have also been introduced, such as obtaining connections off the shelf without subsidy. The government has also allowed consumers to obtain supplementary LPG connections. This has benefitted a large number of people who come from villages to work in cities and are able to receive an LPG connection on their primary account.
On the policy and regulatory front, the sale of domestic gas through bidding was allowed and platforms for the same were established. Recently, it was announced that more than 10 per cent of domestic gas can be sold through the exchange platform. Meanwhile, marketing freedom has been given in certain cases of natural gas. Further, the unification of transportation tariffs has been a major reform and various other measures are being taken to increase overall efficiency in operations.
What are the government’s priority areas in the sector for the next two to three years?
One of the main priorities of the government is to become self-sufficient by reducing the import dependence and increasing domestic production. The shift towards biofuels and renewable sources has been identified as a major factor in reducing import dependency. Increasing the share of natural gas in the energy basket is another focus area for the government, due to which the use of compressed natural gas and piped natural gas is being promoted. Further, the government is working towards increasing the refining capacity in order to meet future growth in demand.
What role is technology expected to play in the sector in the post-Covid era?
Technology already plays a major role in the sector. Going forward, the government aims to achieve higher efficiencies in refineries by leveraging advanced technological tools. The government is also trying to move into green hydrogen and newer areas filled with technological advancements. As far as the use of technology in the downstream segment is concerned, there are systems in place to ensure that there is no perforation, no adulteration, and the whole system is sealed. Further, monitoring tools are being introduced in the sector by leveraging advanced technologies such as sensors.
“Since the government is pushing for an increase in natural gas in the country’s energy basket, the segment is expected to become a major hub for investments.”
What is the outlook for the sector for the next few years? What segments are expected to offer the maximum opportunities?
Over the next few years, considerable growth is projected for the sector despite the promotion of renewable sources. It has also been projected that in the coming years, the oil and gas market in India will witness the highest growth globally.
Since the government is pushing for an increase in natural gas in the country’s energy basket, the segment is expected to become a major hub for investments. Other areas that are expected to offer opportunities in the coming years include biofuels and storage infrastructure. The government is coming up with the second phase of strategic petroleum reserves to boost storage creation. Further, in order to ensure seamless services, digitalisation is being promoted, which will offer opportunities to information technology companies.