Policy
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Alternative Energy / Fuel
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NRL’s Expansion Cost Escalates
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Market Watch
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Companies
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ONGC To Invest Up To ₹60 billion In OPaL Via CCDs
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Saudi Aramco Sign Feedstock And Marketing MoU With ONGC
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NTPC Ties Up With IndianOil For Renewable Energy
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Press Release [FREE Access]
Petro Intelligence » 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 16 - November 25, 2021', click here
Petro Intelligence [FREE Access]
BPCL Selloff Fans Adani’s Ambitions
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How India’s Oil Exploration Was “Rigged”
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Fighting The Rot Within
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Hardeep Puri Needs To Put The House In Order
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Foreign Investment
Trafigura To Exit Nayara Energy
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Cairn To Partner With Halliburton For Shale Exploration
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Cairn Announces Partnership With Baker Hughes
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Overseas Investment
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Gas Scene
Sector-Wise Consumption of Natural Gas In October 2021
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Domestic Natural Gas Scene In October 2021
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Sector-Wise Consumption Of Natural Gas
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Expanding Natural Gas Infrastructure
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Domestic Natural Gas Scene in September 2021
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Natural Gas Price Trends: Global And Domestic
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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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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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Sector-wise Consumption Of R-LNG, Domestic Gas Since FY 2018-19
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Natural Gas: India’s Increasing Import Dependency
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CGD Becomes An Attractive Business In India
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Data Section
Monthly Upstream Data
Monthly Downstream Data
Historical database
Data Archives
Special Database
Petroleum Products Import Up 28%, Exports Up 37.9% In October
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Growth, Degrowth In Sales of Passenger Vehicles, Two Wheelers
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Industry Consumption Trend Analysis April - October 2021
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Crude Oil Impot Up In October, OPEC Share Down
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Share Of Domestic Crude Down In Total Processing, HS Crude Share Up In October
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Consumption Of Petroleum Products Up 0.8 % In October 2021
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Power supplied and deficit for October 2021
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Plant Fuel & Loss
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Production vis a vis Consumption Of Petroleum Products
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Total Distillates Production In Crude Processing Of All Refineries in India
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Oil Import - Volume And Value
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Specific Energy Consumption Of PSU Refineries
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Oil Demand in 2022 To Average 100.8mb/d, says OPEC Report
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Distillate Yield Of PSU Refineries
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Price movements in Indian Basket in October 2021
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Petroleum Products Consumption Trend Analysis 2021-22
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Power supplied and deficit for September 2021
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Import, Export Of Petroleum Products Increase in September 2021
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4% Decline In Crude Oil Import From OPEC, Total Import Up By 16%
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Analysis of crude oil processed by refineries in September
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Self-Sufficiency In Petroleum Products
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Sales Of Passenger Cars, Utility Vehicles,Two Wheelers Register De-growth In September
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Product-Wise petroleum products consumption in September 2021
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