By R. Sasankan

“New Delhi: Under-investment in the Oil & Gas sector could hamper India's progress, Arun Kumar Singh, Chairman and CEO of state-owned Oil and Natural Gas Corp (ONGC), has warned. National Oil Companies around the world are facing increasing pressure to take credible steps towards energy transition, away from fossil fuels. While the world is passionately focusing on renewable energy as a measure to combat climate change, ignoring the traditional fossil fuel industry could stall economic growth and hamper societal development… The speed of the global transition away from fossil fuels is "very disorderly and not meeting expectations at various levels — political, resource allocation, and technological. If the transition is not affordable, it won't happen, Singh added.’’

Arun Kumar Singh’s views carry a lot of weight and will certainly matter when India grapples with issues thrown up by the pressures of embracing a climate-friendly approach to energy use and the economic compulsions of sticking to fossil fuels for as long as it possibly can.

The most recent projections from the US Energy Information Administration’s reference case supports Singh statement. In the reference case, India will remain dependent on fossil fuels to the extent of almost 70% in 2050. Several energy experts are also of the view that with current technologies, the share of fossil fuel in the energy mix is unlikely to fall below 50 per cent even in a scenario that encourages the most aggressive transition to renewables.

As a country battling a major energy deficit that meets close to 87 per cent of its crude oil requirements through imports, India should aggressively pursue efforts to maximise fossil fuel production. Where should the efforts focus on: in India, or elsewhere? Mr Singh chose not to elaborate on this, which is understandable. It is a delicate issue and he is relatively new to the job.

Singh has no upstream experience. He has been a downstream man all along and retired as chief executive of India’s second largest oil marketing company. The selection committee and Prime Minister Narendra Modi have displayed extraordinary courage by naming

Mr Singh as the Chief Executive of ONGC. They have clearly departed from the process followed until now. IOC’s Subir Raha headed ONGC but he was not a retired executive. Mr Singh’s appointment is clearly a very calculated move. If he can deliver on the country’s expectations, ONGC can be reignited into the powerhouse that it once was.

In the 1980s when the government adopted the accelerated production plan from Bombay High field, domestic crude production rose to a level that met 80 per cent of the country’s energy needs. This came as a huge relief as the country was going through an extremely difficult balance of payments situation. Oil import was the single largest item of foreign exchange outgo.

As a journalist covering the country’s oil sector for The Economic Times back in those days, I had the privilege to interact closely with the top executives of both ONGC and Oil India. I was well positioned to observe how the professional character of ONGC started to suffer with the rise in the exploration and production activities at Bombay High.

The government wanted domestic production to go up but the oil fields should not have been flogged that it impaired their lives. At that time, India used to knock on the doors of the IMF for funds to overcome its acute balance of payments crisis. ONGC leadership fell in line with the wishes of the political leadership and stepped up production from the Bombay High beyond the permissible limit which resulted in high gas oil ratio that wrecked the field’s reservoir. Millions of dollars have been spent on hiring consultants but the damage obviously could not be fully rectified as the reservoir was damaged.

The biggest weakness in ONGC was that personal likes and dislikes influenced appointments to anior positions when it ought to have stressed on professional competence. ONGC did not have a production expert in charge of production even during the accelerated production plan. S.K. Manglik was the first production man to be in charge of production and that too in the late 1980s.

Since then, matters have not changed much at ONGC. Exploration continues to be an area that is riddled by corruption. The system of kickbacks in hiring and purchasing of rigs continue. Crooked deals have been struck even for the purchase of chemicals and mud required for drilling activities. This is one of the reasons why ONGC has earned the unfortunate reputation for being among the top in drilling dry wells in the world. One reason for this is that there is a vested interest in drilling even dry wells.

Most of the domestic sedimentary basins have been explored. Experts say India lacks hydrocarbon reserves in sufficient quantities to justify the hectic drilling schedule. Why, they ask, doesn’t India shift focus to other countries where it can bid for prospective concessions? Drilling operations at domestic should be carried out only after highly prospective areas are identified by eminent geologists. It would be a good idea to involve Russian experts. After all, they helped India identify Bombay High and other fields on the western offshore. Russian geologists understand Indian basins better than others. A more practical option is to buy oil fields that are up for grabs in many countries. ONGC can also intensify its overseas exploration activities.

Mr Singh obviously has to pull ONGC out of a deepening crisis. In the interim, drilling at the Godavari fields will step up production. But this is only a short-term solution. We cannot lose sight of the fact that no commercial field has been discovered in the past 30 years. The situation calls for a clear strategy.

Perhaps, Mr Singh is the person who can bail out the upstream major. Fingers crossed.