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HMEL to Start Bathinda Cracker By March 2022
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Press Release [FREE Access]
Petro Intelligence Ľ Hardeep Puri Needs To Put The House In Order

By R. Sasankan

Two years ago, Prime Minister Narendra Modi threw down a challenge to the domestic petroleum industry when he set a target for them to attain: reduce oil imports by 10 per cent by 2025. The Prime Minister cannot be expected to go too much into the nitty- gritty of the issues involved. The obvious question: Can industry respond with a credible solution?

Since then, almost everyone involved in the upstream industry has been tossing a range of options to achieve what increasingly looks like an impossible target without great success. A part of the problem is compounded by the fact that the Indian hydrocarbon sector has failed to come up with a new find that can in part mirror the oil gush from Bombay High. Crude oil production in the country has stubbornly refused to pick even though there have been a few discoveries in the Kirishna-Godavari deep offshore basin by Oil and Natural Gas Corporation and the Reliance Industries-BP consortium.

The government continues to look for that mythical whopper of an oilfield -- and seems to believe that this can be achieved only if foreign players are persuaded to join the hunt, either as partners of domestic producers or by farming out some fields to them through auctions.

The foreign companies are not overly enthusiastic about India because they do not see any indications of substantial, commercially exploitable recoverable reserves from either the new or existing fields. Most of the fields with ONGC and Oil India are ageing and almost as old senior citizens which means they have been juiced for years. Bombay High, the largest and best known field whose reservoir was damaged long ago, has limited years of productive life. It has been in operation for close to half a century.

ONGC’s discoveries in the deep water KG-D5, which are being brought into production in phases, are not large enough to accommodate the aspirations of a foreign partner. ONGC had hired quite a few foreign consultants and technical experts in developing this field as it is venturing into deep waters for the first time. This is understandable. ONGC should be admired for doing it without going in for a formal partnership.

ONGC's decision to go it alone is admirable and amounts to an assertion that it would prefer to rely on its in-house talent. Foreign investors can be roped in to help boost production only if the domestic companies lack the right technology. Neither ONGC nor Oil India is known to have complicated oilfields. The rate of recovery may differ from field to field and enhanced production techniques are so common in the upstream industry that the very idea of seeking foreign partners amounts to an insult of India’s upstream brains trust.

I started reporting on the oil industry during my days with The Economic Times in the 1980s. I do not claim to have any deep knowledge of the problems that domestic E&P companies face. But one thing is absolutely clear: like Shakespeare’s King Lear, ONGC and Oil India are "more sinned against than sinning".

The subject is vast and cannot be covered in one column. Any nuanced debate will automatically have to cover a myriad aspects before we can understand the contours of the problem fully. But I would like to look at just one issue which I think has played havoc with the functioning of the state-owned oil companies.

In its infancy, ONGC was fortunate enough to have an honest and wise leadership. They were totally committed to the task that had been given to them: hunt for oil. The political leadership of that time was also geared to facilitate the achievement of that objective. K.D. Malviya, the petroleum minister at that time, was bold enough to take quick and drastic decisions. It was under such a leadership that ONGC discovered quite a few oil and gas fields including Bombay High and South Bassein. Malviya brought in Russian experts who generously helped ONGC. They helped identify prospects at Bombay High and other fields in the western region.

All these discoveries were from blocks that the government had granted on a nomination basis. The problems really began when it decided to go in for exploration acreage rounds on the basis of competitive bidding. India does not have prolific hydrocarbon reserves and, therefore, oil and gas discoveries are not possible without intense drilling. The government launched the New Exploration Licensing Policy (NELP) in 1999 and held nine rounds since. No international oil major stepped forward to bid. To avoid a political embarrassment and save these rounds from collapse, the government forced ONGC and Oil India to bid and take the blocks that received no bids.

This marks the beginning of a disastrous phase in the life of these companies. Being PSUs, they could not resist. Equally, they could not surrender these blocks without carrying out a minimum work program. As feared, ONGC and Oil India drilled a spate of dry wells. As a result, ONGC gained the unsavoury reputation of drilling the largest number of dry holes among national oil companies.

The NELP ended in 2010 and, a few years later, the government switched to the Open Acreage Licensing Policy (OALP) which is slightly better. However, the prospectivity of sedimentary basins remains unchanged. No foreign company turned up to bid in the OALP rounds either. We are back to square one -- and the government cannot resist the temptation of forcing ONGC and Oil India to bail it out and keep the OALP alive.

I have touched on only one factor responsible for the poor health of the domestic E&P companies. I deliberately quoted King Lear as his sentence eloquently sums up the plight of these companies. The style of operation of the ministry of petroleum and natural gas has to change. If that happens, things will automatically improve in the upstream sector.

The current petroleum minister, Hardeep Singh Puri, has a clean image and a refreshing work ethic. Some of his predecessors have often fallen to the allure of kickbacks in the petroleum sector, weakening their connect with the oil companies. The ministry has got a very competent secretary in Tarun Puri who is relatively new to the petroleum sector.

Puri should take a fresh look at the functioning of these PSUs without being influenced by the perception of his predecessors. Prescriptions should flow only after properly diagnosing the problem. Sadly, this has not happened till date.



To download the latest issue 'Volume 28 Issue 12 - September 25, 2021', click here
Petro Intelligence [FREE Access]
Hardeep Puri Needs To Put The House In Order
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Effective Regulator Needed Before Privatising BPCL
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BPCL Selloff: Foreign Equity Players May Be Fronting For The Big Boys
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When Competition Comes A Cropper
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Foreign Investment
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Overseas Investment
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OVL-OIL Exploratory Drilling In Bangladesh
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Gas Scene
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Dip In Capacity Utilisation of LNG Terminals
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Sector-Wise Consumption Of Natural Gas
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Domestic Natural Gas Scene in August 2021
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Sector-wise Consumption Of Natural Gas in July 2021
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Domestic Natural Gas Scene In July 2021
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Natural Gas Price Trends: Global And Domestic
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Sectoral Consumption of Natural Gas In June 2021
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Domestic Natural Gas Scene: June 2021
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Sector-Wise, Month-Wise Demand & Consumption of Natural Gas
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Growth In Import Dependency Of Natural Gas Halted
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Natural Gas Price: Global and Domestic
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Sector-Wise Consumption Of Natural Gas In May 2021
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Natural Gas Price Trends : Global And Domestic
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Sector-wise Consumption Of R-LNG, Domestic Gas Since FY 2018-19
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Data Section
Monthly Upstream Data
Monthly Downstream Data
Historical database
Data Archives
Special Database
Global Rig Count Up
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Consumption Of Petroleum Products Registers Impressive Growth In August
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Indian Crude Basket Price In September 2021
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Ethanol Blending Programme
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Product-wise Production and Consumption of Petroleum Products during Apr-Aug 2020 and Apr-Aug 2021
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Gross Refining Margins (GRM) of refineries
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Big Increase In Petroleum Products Import, Marginal Rise In Export In August
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Crude Oil Import Up In August, OPECís Share Declines
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Percentage share of Domestic / Imported Crude Oil processed in PSU/JV and Private Refineries
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Quantity And Value Of Indian Crude Oil Imports (FY 2017-18 to FY 2020-21)
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Specific Energy Consumption Of PSU Refineries
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Weightage of crude oil, natural gas and petroleum products in Wholesale Price Index (WPI)
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Share Of Imported Crude Drops In Oil Processing
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High Sulphur & Low Sulphur crude oil processing
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Profit After Tax (PAT) Of Oil Companies
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Indiaís Rig Count Marginally Up In July
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The Rise And Fall Of Indiaís Petroleum Products Export
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Global Oil Demand Is Poised To Rise
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Global Rig Count Up
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Tenders [FREE Access]
ONGC
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