India’s quest for synergy in energy

Ever since the decontrol of the prices of petrol first and diesel later, oil marketing companies have been given the elbow-room to adjust selling price of petrol and diesel on import parity cost to leave them with some leeway to help upstream (production) companies to invest more in exploration and production so that domestic supply of oil and natural gas could also gather traction.

This is particularly important because persistently lower oil prices might reduce exploration and production spending and heighten risk for offshore oil companies. Energy analysts argue that if the government is able to keep in leash any abrupt upsurge in oil consumption close on the heels of its drastic price fall in the global market for the past several months by fostering diversified sources for energy, it can also build a strategic reserve for energy security in the event of future spike in crude prices which are likely given the geopolitical stark realities in West Asia and non-OPEC producers such as Russia.

Already, the Government of India, through Indian Strategic Petroleum Reserves Ltd (ISPRL), is setting up strategic crude oil reserves with storage capacity of 5.33 million tonnes at Visakhapatnam, Mangaluru and Padur. ISPRL through Engineers India Ltd, has prepared a detailed feasibility study for construction of additional 12.5 million tones of strategic crude oil storage in Phase II at Bikaner, Rajkot, Chandikhol and Padur. Using the extant soft global crude prices, the construction of oil storage caverns need to be fast-tracked so that storage capacity is suffice for securing energy security. As they say the best time to fix the roof is when sun shines and so is the best time to build supply stocks is now and here when imported crude price is cruising downhill for a few more months.

Since the country had been spending precious foreign exchange of the massive order of 160 billion dollars annually on oil imports, the soft crude price now prevailing in the global market would enable India to save at least $50 billion in a year, provided there is no massive import volume to cater to the insatiable appetite for oil by domestic users, individuals as well as industry. This is also an opportune time for upstream oil companies to aggressively step up production of oil and gas. It is no wonder that Secretary, Ministry of Petroleum and Natural Gas, Saurabh Chandra, told a partnership summit that the government is working on a renewed bid to promote exploration activities in the country’s oil and gas sector. He said in the last couple of months, the government has taken several steps to augment “activities in exploration including a reassessment of the hydrocarbon potentials in the country, putting in place a plan to survey all sedimentary basins at a cost of Rs 6000 crore and framing a transparent extension policy for the pre-NELP (New Exploration Licensing Policy) fields”.

Alongside, using the drastic cut in oil import bill due to the decline in crude oil prices, the country should seize the opportunity to step up generation of renewable energy as this promises to stem, if not stop the massive drain on foreign exchange reserves entailed in the import of oil, gas and coal.

The current installed renewable capacity will need to go and grow manifold for the country to move to 15 per cent of energy by 2020. As the initial cost of funding these unconventional sources of energy such as solar, wind, water and biomass are quite expensive with their sale price for users pegged quite high, efforts need to be stepped up by the authorities of the Ministry of Non-Conventional & Renewable Sources of Energy to redouble the gains from this source of unpolluted energy for ecological balance and to keep India’s eco system undefiled by noxious fuels.

By: G Srinivasan