Expert calls for steps to boost oil and gas output

Metis Business Solutions (Metis BSPL) is a leading analytical highlights, information and marketing intelligence provider for power and coal sector.

S Ravishankar, Director – Energy Practice, Metis BSPL, feels that the government must introduce a long term plan to step up domestic oil and gas production by promoting deep water technologies, enhancing production from existing blocks, expediting the discovery to production cycle and tapping the unconventional resources.

"Moving towards high level of imports in oil currently and gas and coal in near future can put a big burden on the country. Therefore, a thrust on increasing the domestic production is the need of the hour".

Following is the excerpts of the interview:

Exploration in several oil and gas blocks (auctioned under NELP) are held because of lack of defence clearance. Even the latest meeting of CCI on the issue is considered to be a damp squib. How serious is the situation and what is your suggestion for the government to fast-track approval process?
Defence and other clearances have become a serious issue in the Indian oil and gas sector. The primary reason is due to disconnect between the central and state level agencies as well as between central agencies. A single window clearance is an idea which has been talked about for a long time but without much of head way. Another issue is: different procedures adopted by different state governments for certain clearances.

Government of India is now contemplating the idea of organising prior clearances before the blocks come for bidding so that the bidders need not go through the long winded process of multiple clearances. This idea of the government is given shape. DGH which is the overall incharge of bidding, should be a nodal point to coordinate the process. Involvement of a central agency right from the beginning will expedite the process rather than making the bidders go to multiple agencies for clearances. This problem is serious and needs to be immediately addressed.

Do you agree with the timeline given by the Rangarajan Committee to shift to market-based pricing of natural gas? Do you agree with the formula proposed by the panel on pricing of natural gas?
The policy and formula proposed by the panel is an important step towards a market based pricing. While the panel’s proposal of revenue sharing system of bidding in NELP, in the lines of the Production Linked Payment of CBM (PLP) is a welcome step. On the gas pricing front, shifting from a domestic price discovery mechanism to a complex international price linked methodology in a short span of 3 years can have a major impact on the user industry. The long term business planning of the user industry may get affected. This issue needs to be addressed and the views of all stakeholders needs to be taken before a decision is arrived at.

Refining capacity in the country has risen considerably in the last few years. Do you expect this to reduce refining margins of Indian refiners?
India faces an issue of increasing import of crude at international prices and expanding capacity of refineries in India. While this will lead to a competitive product market in India and put pressure on refining margins, the fact to be looked at is : India is still not a free competitive market as far as the end petroleum products are concerned and therefore the pressure on margins can impact the refinery sector. The movement of Indian market from a subsidy driven platform to a market driven platform over the next few years would be the aspect which would be closely watched.

Natural gas consumption in India is set to rise manifold. Is it possible for the Indian subcontinent to develop a natural gas trading hub on the lines of Henry Hub in US and the National Balancing Point in the UK?
We have still not reached that stage. Developing a Hub on the lines of Henry Hub or NBP would require a well organised trading platforms, well networked gas supply infrastructure and a movement towards market driven structures for supply as well as pricing. An Asian Hub to cater to the major markets in Asia is a more likely event in the current scenario and that would help the region develop a platform and indexation of their own.

Cairn India is unable to raise its production from Rajasthan block as government does not allow exploration from the delineated block after the discovery considering that it is beyond the scope of the contract. Does it sound too bureaucratic and too rigid and discourage private investment?
More generally, in Indian context, a clear policy guideline is what would put these issues in perspective, whether it is exploration issues, marketing freedom, pricing freedom etc. Clarity of policy is what would give a positive signal to the industry and encourage private and foreign investment.

India severely lacks deepwater technologies for exploration of oil and gas blocks. Do you feel we can reduce oil import if we explore the country’s deepwater blocks using cutting edge technologies?
There is no doubt that India has to put a long term plan to step up domestic production which would include deep water technologies, enhancing production from existing blocks, expediting the discovery to production cycle and tapping the unconventional resources. Moving towards high level of imports in oil currently and gas and coal in near future can put a big burden on the country. Therefore, a thrust on increasing the domestic production is the need of the hour.

Many projects are being executed for setting up LNG regassification terminals. How far they would address natural gas shortage in the country?
Giving the current scenario of natural gas domestic shortage in the country, LNG is and would continue to be an important option for the country. Many LNG regassification projects would get implemented in the near future and enhanced supply would drive the demand in the future. A national network of pipelines, uniform taxation policy and robust marketing platform would enable such development.

What is your suggestion to government for promoting unconventional energy like shale gas, coal bed methanetc?
Expediting Shale Gas Policy, clarity on mining and CBM areas, emphasizing development of pipeline network to enable monetization of CBM, Conducting survey and developing quality geological data are some of the steps government can take , in order to attract more investments and expedite the unconventional sectoral development.

Disclaimer : The views expressed are that of the author and not of the company he represents.