Crude Reality

CRUDE REALITY: ( BUSINESS TODAY 26 SEPT 2013 EDITION)

India's oil and gas explorations face fresh hurdles. While New Delhi has never been able to attract top multinational energy giants to drill in its territory, it is now scaring away even the few foreign players which did venture here.

The main reason is the delay in granting approvals for exploration activities. Italian exploration major Eni SpA, Australia's Santos, and the UK-based Foresight Group are among those looking to exit. Exploration work is stuck also at blocks awarded to the Australian company, BHP Billiton Petroleum, and Canada's GeoGlobal Resources. In fact, bureaucratic delay was the reason Norway's Statoil ASA and Brazil's Petroleo Brasileiro SA both cited when, in 2010, they pulled out of a venture with state-run Oil and Natural Gas Corporation to develop a block in the Krishna-Godavari basin, off India's east coast.

These companies came to India after winning blocks auctioned under the New Exploration Licensing Policy (NELP), which ended state monopoly in oil and gas exploration. The policy was decided upon in 1997/98 to boost local exploration and production work, and also attract foreign players.

Increasing local output is essential as India imports nearly 80 per cent of its crude oil needs. In 2011/12, India spent $140 billion (Rs 7.26 trillion; one trillion equals 100,000 crore) on oil imports, up 40 per cent from the previous year. The country produced 177 million metric tonnes of crude oil during the 11th Plan period of 2007-12, missing the Plan target by 14 per cent. Output of natural gas in the same period was 216.6 billion cubic meters, 16 per cent short of what was hoped for.

NELP has not been very successful in attracting foreign direct investment (FDI) into the oil and gas sector. FDI inflows into the sector from April 2000 until July 2012 were only $5.14 billion, shows latest data from the Department of Industrial Policy and Promotion. This is just three per cent of the...