India Desperate for New Oil and Gas Fields
Before 2015 concluded its first quarter, state-owned oil and gas companies were suffering from a subsidy burden that forced them to share a proportion of oil marketing firms’ revenue losses that stemmed from selling petroleum products at subsidised rates. Though private companies were exempt from this obligation, the falling crude oil price has been taxing, with a handful of firms ready for disinvestment.
But the good news is that the oil ministry announced that they would alleviate the burden shouldered by Oil and Natural Gas Corporation (ONGC) and Oil India by relinquishing their liability to cover losses, should the crude oil price fall below $60 per barrel. This sets the two oil companies for better profit margins.
Despite the subsidy relief, the industry hasn’t done nearly enough to rally against the volatility of oil. Unlike other nations like Saudi Arabia and Iraq that have sustained oil operations and are in the process of repairing compressor stations in the midst of a commodoties crisis, India heavily relies on its imports to power the country. The nation currently imports 77 percent of its oil and Prime Minister Narendra Modi has set a target for the industry to cut them down by 10 percent before 2022, though easier said than done as speculations indicate that extraction at Bombay High–the country’s largest oil field–could be ending soon. In addition to that, no major oil discoveries have been made in the last decade.
In response to the depleting oil reserves, the government has loosened its regulations on exploration projects, first by adding a policy that increases flexibility in ending or extending exploration and development. The second policy put in place dictates that firms have the choice to develop discoveries at their own risk or conduct the prescribed tests. Prior to the new regulations, explorative efforts from ONGC and others haven’t reached development stages due to the previous standards in testing commercial viability.
However, without the approval of the Directorate General of Hydrocarbons (DGH), discoveries will not be acknowledged by the government. Reliance Industry Ltd. found a few oil fields back in 2007 and declared them commercially viable in 2010, but they are yet to be tested by DGH.