Oil and Gas industry undertakes projects which are accompanied by huge financial risk, uncertainty and legal hassles. This is the most important sector as it satisfies the world’s energy needs. However, the industry only faces criticism and hurdles in exchange for its great contribution.
Challenges faced by the sector in India
When it comes to importing oil and gas, India ranks third. Just behind the United States and China. Reports suggest that India imported 3.8 million barrels of crude oil everyday between April 2013 and April 2014. Currently, most of India’s oil needs are met by Iraq, but the country is looking forward to arrange it from multiple sources due to ongoing conflicts in Iraq.
State owned oil and gas companies like ONGC and Oil India limited are market leaders in the country. However, they are facing touch competition in oil exploration and production from private players like Reliance, Essar, Adani, etc.
The sector came in bad light for the first time in February 2014. Delhi’s former chief minister and Aam Admi Party’s chief Arvind Kejriwal asked Delhi police to register FIR against the then Oil Minister Veerappa Moily, and industrialist Mukesh Ambani in connection with Gas price fixing. Aap’s chief had claimed that several Union Ministers were acting in favor of Mukesh Ambani’s Reliance Industries Limited. He had also said that Reliance is asking the government to pay $8 for the amount of gas which is sold for just $2 in Bangladesh.
Arvind Kejriwal still suggests that oil and gas companies are responsible for inflation caused due to increasing fuel prices in the country. He also suggests that there is lot of discrepancy in records with regard to the amount of gas extracted by RIL from KGD6 block. Corruption, allegations, and lack of political leadership to handle the sector has caused considerable amount of damage to oil and gas industry’s image in India.
Narendra Modi government might get rid of UPA’s pricing policy
Manmohan Singh led UPA government’s gas pricing policy was based on Rangarajan panel’s suggestions. However, some experts recently pointed out that this formula calculated gas price based on price of LNG in Japan, which is considered to be one of the costliest in the world due to complicated oil indexed agreements. Even Japan is planning to get rid of these contracts.
The central government is expected to take key decisions regarding oil and gas pricing, and subsidies for the same, within next three months. It aims to take decision in such a way that it will be win-win situation for both, oil companies and the common man who is fighting inflation since last few years.
According to figures released by America’s Cambridge Energy Research Associates, India is home to around 64 trillion cubic feet of unexplored gas at various locations. This gas can be extracted, and supplied into houses and production units to trigger country’s growth.
Companies like Carin India, Reliance Industries, ONGC and BP Plc are involved in deep sea hydrocarbon exploration. These companies have various ongoing projects in Sri Lanka and India. Industry analysts believe that companies are feeling positive about Narendra Modi’s government and are sure that his government will make things easy for oil and gas sector. They also want the Modi government to bring more clarity in regulations and policies for the sector, so that they can explore new opportunities and contribute towards country’s growth.
Power projects might prove to be good news for Oil and Gas sector
Sources which closely monitor steps taken by Ministry of Power and Ministry of Petroleum and Natural Gas suggest that Narendra Modi government is planning to set up several power plants. It is considering setting up gas based power generation projects in states like- Madhya Pradesh, Odisha and Uttar Pradesh. While it plans to set up thermal power plants in states like Andhra Pradesh, Chhattisgarh, West Bengal, Jharkhand and Bihar which produce coal.
What experts feel about Indian Market?
GE Oil and Gas’s Chief Executive and President, Lorenzo Simonelli recently interacted with media persons and shared his opinion about Indian oil and gas sector.
According to Lorenzo Simonelli, demand for oil and gas in India will keep on increasing due to country’s rising energy needs. He also highlighted the point that oil and gas majors like Carin, ONGC and Reliance have lined up plans for huge investments in-order to increase oil and gas production in the country.
Lorenzo Simonelli also suggested that the Indian government should take steps to encourage development and put more light on pricing and other policies to improve the sector.
Positive signals from Modi Government
Petroleum Minister Dharmendra Pradhan recently interacted with media persons from various countries during World Petroleum Congress’s ministerial session which was held in Moscow on June 17th. He assured everyone that Narendra Modi government aims to come up with fair, transparent and predictable policies to attract foreign investment in Indian oil and gas sector. He also said that the government will take possible steps to increase domestic oil and gas production. The government will also focus on creating uniform license for companies involved in producing various forms of hydrocarbons.
Initiatives taken by various countries to develop the sector
Several countries have established government departments to work on research and development in oil and gas sector. In February this year, the Scottish Government announced funding worth 10.6 million pounds towards setting up new OGIC- Oil and Gas Innovation Centre. This establishment aims to bring private sector and academic partners together, in-order to focus on innovation and day to day issues faced by oil and gas sector. OGIC consists of researchers from twelve Scottish universities and executives from 2300 oil and gas companies.
Month of June also saw the launch of NSRI- National Subsea Research Initiative in the United Kingdom. This organization will focus on improving UK’s oil and gas industry with research and development initiatives.
Unfortunately, Indian education system, or even the government does not emphasize much on R & D in oil and gas sector. Currently, Dehradun based University of Petroleum and Energy Studies is considered as the only private University which offers PHD, post graduate and undergraduate courses in energy and petroleum. This University aims to create professionals who can serve India’s rapidly growing oil and gas Industry.
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