THE Ukrainian crisis has shone the spotlight on energy. Normally, the issue is mentioned only in passing during any discussion of the economy as it is a truism that India relies heavily on imports for its oil and gas needs. Reliance on overseas purchases has grown over the years. There was a time in the heyday of the 1980s, after the Bombay High offshore oil fields
had been discovered that India was able to meet 70% of its needs from domestic sources. The situation has now reversed. Currently, the country has to import around 85% of its crude oil and natural gas consumption.
The conflict in a distant European country has highlighted this vulnerability of the economy. Global crude prices recently peaked at $130 a barrel, but are now hovering around $101. For a country that expected to spend around $75 a barrel to buy oil this year, the surge came as an unpleasant surprise. But every crisis can turn into a learning opportunity. Now is the time to examine the country’s energy options in the medium to long term and to make course corrections to ensure that such problems do not recur more often. Although it is not possible to become atmanirbhar or fully self-sufficient, it should be possible to reduce the current state of being almost completely dependent on external sources for fossil fuels.
The first issue to consider is the efforts to find more oil and gas in the country. In the past, at least some oil majors like Chevron have participated in bidding for onshore and offshore blocks. But in recent years, the numerous calls for tenders have elicited responses only from private companies, such as Vedanta and Reliance, or state oil companies, the ONGC and Oil India Limited. It is clear that better conditions must be offered, especially since the geological prospectivity for hydrocarbons is better in several other countries. And one of the benefits of offering improved terms right now is that oil exploration activity tends to increase during periods of high prices, as it makes operations more financially feasible. Exploration is a risky and capital-intensive business, which is why adequate returns are essential.
A second area of focus must be overseas oilfield investments. Whether these will ultimately generate returns in terms of actual supplies has to be considered in the long term. India has invested in several countries including the United Arab Emirates, South Sudan, Azerbaijan and Russia. Production in these countries fell from a peak of almost 25 million tonnes in 2018-19 to around 22 million tonnes in 2020-21, largely due to reduced commitments to the oil cartel, l ‘OPEC more. In the modified scenario, this country only needs to invest in the future in countries from which it can obtain steady and uninterrupted supplies of oil.
In the specific case of Russia, the short-term issue has obviously become more complex due to the severe sanctions. But just as with defense supplies, the availability of crude oil is a strategic requirement that cannot be held hostage by Western nations. An appropriate strategy should be developed to ensure that sanctions can be circumvented in terms of payments as well as physical supplies. Coincidentally, the whole set of relations with Russia in the oil sector was only expanded last year in September. New agreements were concluded by the IOC and the ONGC with the State company Gazprom during the visit of the Minister of Petroleum Hardeep Puri. This was in addition to India’s existing $16 billion investment in oil and gas assets in the Far East and Siberia. Analysts even argued at the time that India needed to reduce its dependence on West Asian oil by channeling more oil from Russia via the shorter East Asia sea route. Is.
And finally, the long-term aspect of switching from fossil fuels to renewables must be given greater urgency. Although the country has reached its declared targets for renewable energy capacities faster than expected, the timeframe must now be even shorter. This must be seen in the context that even the oil companies have realized that their long-term existence is threatened by the need to reduce carbon emissions over the next few decades. Oil majors like Shell Oil are investing in wind, solar, electric vehicle charging and hydrogen, with the aim of ensuring their relevance in the future. BP has even pledged to reduce its production by 40% over the next decade and to increase its investments in renewable energy tenfold over the next few years.
Launching the National Hydrogen Mission last year was an idea whose time had come, but much will depend on the rapid implementation of plans to produce five million tons of green hydrogen by 2030. Likewise, The pressure on manufacturers to supply electric vehicles to the market needs to be further accelerated with a chain of charging stations operating across the country. Solar and wind power capacity is growing, but the truth is that nothing is yet close to replacing fossil fuels in industry and transportation.
There is therefore a short-term need to ensure that hydrocarbon production increases in the country by giving enough incentives to the oil majors to seriously consider oil and gas exploration here. Along with this, there is a need to ensure that the investments made so far in foreign oil fields are not only expanded, but yield returns at a time when crude oil prices are reaching multi-year highs.
The long-term outlook, however, demands that India look to a future with reduced dependence on fossil fuels. Not only is it in the interest of the environment and the planet, but also in its own interest to move away from a heavy reliance on imported oil and gas. The current crisis is the moment to review long-term hydrocarbon policy, with the aim of breaking out of the existing deep dependence on world oil markets.