Towards Energy Security: Indian E&P at a turning point

The demand for oil and gas in India currently exceeds the supply by a huge margin. To bridge this gap between demand and supply, India has resorted to importing oil and gas. To this end, India imports nearly 85 per cent of its crude oil, which is converted into petrol and diesel, and imports roughly half of its natural gas, which is converted into com­pres­sed natural gas (CNG) and piped natural gas (PNG) for use in automobiles, domestically and in industries. To reduce the dependence on imports, the government is unveiling the latest upstream plans by offering more blocks for oil and natural gas exploration. The Indian ex­ploration and production (E&P) segment is currently at a turning point, with many policies and programmes in place and fresh investments coming in. New initiatives and increased production of oil and gas in the country are helping to achieve self-reliance and energy security in the country.

Production and import trends

The total production of crude oil in India for 2022-23 (provisional) was 29.2 million tonnes (mt). This was a slight decline from that of the pre­vious year (29.7 mt). Moreover, during 2022-23, crude oil imports witnessed an in­increase, reaching $157.6 billion from $120.7 billion in 2021-22. Crude oil imports, however, decreased by 1.1 per cent during April-June 2023 as compared to the corresponding period of the previous year. The total crude oil pro­ce­ssed during June 2023 was registered at 21.5 mt, where public sector undertakings/jo­int venture refiners processed 14.9 mt and private refiners processed 6.6 mt. Similarly, in June 2023, the total indigenous crude oil pro­cessed was 2.2 mt and the total imported crude oil processed was 19.3 mt by all Indian refineries. As compared to the net import bill for oil and gas for June 2022 of $13 billion, the net import bill for June 2023 was $9.5 billion.

The gross production of natural gas for 2021-22 stood at 34,024 mmscm, while the provisional total for 2022-23 stands at 34,450 mmscm, recording an annual growth of 1.25 per cent. The cumulative gross production of natural gas of 8,564 mmscm for 2023-24 (till June 2023) was higher by a mere 0.12 per cent as compared to that in the corresponding period of 2022-23. For the month of June 2023, the production stood at 2,910 mmscm, a slight increase from 2,813 mmscm in June 2022.

During 2022-23, Oil India Limited (OIL) registered a growth of around 6 per cent, while Oil and Natural Gas Corporation (ONGC) registe­red a slight degrowth of 0.54 per cent as com­pared to that in 2021-22. OIL is planning to expand its drilling activity by 50 per cent in 2023, by increasing exploration to new areas and implementing advanced oil recovery methods in matured fields to significantly increase their output. It plans to drill more than 70 ex­ploration and development wells in the current as well as in the next fiscal year.

Treading on similar lines, ONGC is also un­dertaking various steps to enhance the exploration activities. Recently, it has made two ma­jor oil and gas discoveries in the Arabian Sea blocks, off the Mumbai coast. ONGC has won these in the first and third Open Acreage Licen­sing Policy (OALP) auction rounds. These findings will strengthen India’s energy security, re­du­ce dependence on imports and drive economic growth and environmental sustainability.

Government policies in place

The government has implemented an array of measures to promote investments in E&P as well as for setting up the transmission and distribution infrastructure to expand the domestic production. The establishment of OALP and the Hydrocarbon Exploration and Licensing Policy (HELP) has been a breakthrough. These regulations offer a uniform licensing framework that covers all hydrocarbons and enables exploration companies to submit their own areas or blocks for bidding.

The Ministry of Petroleum and Natural Gas launched the OALP bid round VIII in July 2022, offering 10 blocks for international competitive bidding. This round is expected to further add over 36,000 square (sq) km of acreage and take the cumulative exploration acreage under OALP to over 242,000 sq km. As per the latest updates, the government received 13 bids for this exploration licensing round. Major oil companies such as ONGC, OIL, Reliance, Vedanta and Sun Petrochemicals have submitted bids for these 10 blocks. For successful bidders, the government is expected to offer advantages su­ch as lower royalty rates, a revenue-sharing model, a unified licensing system, no oil cess and freedom in marketing and pricing. The government is also expecting that with the opening up of more acreage for exploration, the oil import bill of more than $150 billion will come down. Furthermore, the government has open­ed 99 per cent of the Exclusive Economic Zone for hydrocarbon exploration and development. Expression of interest (EoI) for eight blocks, encompassing an acreage of around 0.04 million sq km, has also been invited for bidding.

Another policy that is bringing radical change in the oil and gas sector is HELP. The objective of the policy is to boost the production of oil and gas in the Indian sedimentary basin. It proposes changes in terms of moving to a revenue-sharing regime, the introduction of a single licence and a shift to open acreage licensing. Ever since its promulgation, seven rounds of OALP have been successfully concluded and 134 E&P blocks have been awarded, comprising an area of over 207,000 sq km, spread across 19 sedimentary basins.

Focus on oil exploration

Boosting exploration and production is a major focus for the government to reduce import depe­ndence. The government targets to produce 25 per cent of its crude oil demand do­mestically by 2030. To become energy independent, the cou­ntry needs to focus on creating self-sufficiency in terms of exploration, storage, transportation, retailing of energy, insurance and other midstream and downstream activities. Increased exploration and domestic production will help shield the country from the effects of geopolitical situations that affect energy supply.

Increasing use of digital technologies

The E&P sector is facing numerous challenges such as drying wells, pipeline leakages, declining production, new reserves in difficult terrains including deep sea explorations, old technologies, etc. Amidst the inherent challenges of oil and gas exploration, India still struggles with addressing the everlasting macro geopolitical risks impacting energy security and equity. One of the biggest challenges that the sector faces is ageing and mature wells, which have reduced production.

To overcome these challenges and harness the potential of the sector, digitalisation across the value chain needs to be the key. The use of technologies such as artificial intelligence, machine learning, data analytics, cloud computing and robotic automation are aiding the digitalisation of the sector. These technologies are helping companies explore complex geologies of hydrocarbon reservoirs and also helping in effective placement of wells, managing long-term hydrocarbon production and discovering new deposits. These technologies are also helping in managing and monitoring reservoirs and producing significant oil and gas from ageing and mature fields. Besides data on drilling activities and new basin discoveries, digitalisation is also helping in plug leakages, customer relationship management, enterprise resource planning and document management systems.

The way forward

According to the Ministry of Petroleum and Natural Gas, India is expected to witness an investment of $58 billion in the E&P of oil and gas resources in 2023. Several global energy players such as Chevron Corp, ExxonMobil and Total Energies have shown a keen interest to invest in the Indian E&P sector. Moreover, the government is also targeting to increase the geographical area under E&P to 0.5 million sq km (15 per cent) by 2025. The focus needs to be on accelerating exploration and geophysical studies, reducing capital expenditure to survive in low price oil scenarios, enhancing production with state-of-the-art technologies while also enhancing the health, safety and security of the workers. The oil prices are volatile in nature and thus, India should have an efficient production and cost mechanism in place. Finally, the focus of E&P players should always be to foster collaboration among all stakeholders to optimise development and production solutions. India is embarking on an ambitious energy transformation path that would lead the nation to achieve the net-zero carbon target by 2070. It is, therefore, crucial that the accessibility and cost of energy remain intact.

Naina Gulati