Oil minister Dharmendra Pradhan’s visit to the US to showcase and drum up investment opportunities in India could not have come at a more opportune time. A look at the investment data across private and public sector companies shows a steady decline in exploration and production (E&P) which does not augur well for the country which aims to reduce its oil imports by 10% by 2022 and halve it by 2030.
For the state-owned firms put together, the investment fell by around 8.6% from R35,524.81 crore in financial year 2013-14 to R32,464.23 crore in financial year 2015-16, according to data provided by the ministry of petroleum and natural gas in response to a Parliament question.
The most striking feature has been the sharp decline in investments made by GAIL (India) which fell from R239.11 crore in 2013-14 to R68.23 crore in financial year 2014-15 and subsequently to R25.33 crore in financial year 2015-16.
Another major decline was in investments made by Hindustan Petroleum Corporation Ltd (HPCL) which fell almost 89% between financial year 2013-14 and financial year 2015-16. The actual investment by HPCL fell from R197.27 crore to R22.13 during the period.
Investments made by Oil and Natural Gas Corporation, which contributes around 90% of the total investments in the E&P segment, too fell by more than 9% from R32,469.54 crore in financial year 2013-14 to R29,501.91 crore during financial year 2015-16.
Private investment in the sector has also been continuously declining since FY09 till FY16, barring FY15 when it spiked.
From the highs of as much as around R30,000 crore in FY09, the investments have fallen below R5,000 crore.
The private sector explorers include Cairn India, Reliance Industries and BP.
These investment levels are much beyond the required around R60,000 crore to be made every year to move towards energy security, according to industry estimates.
However, in the coming financial year a spike in investments can be expected as the National Democratic Alliance government in February 2017 approved awarding 31 contract areas under the discovered small fields policy which will complement the country’s domestic fuel production and help in achieving energy security. The fields are expected to to yield 40 million tonnes of oil and 22 billion cubic metre of gas over a period of 15 years.
Winners of the contracts include state-owned firms as well first-time explorers such as Bharat PetroResources, Indian Oil Corporation, Sun Petrochemicals, Adani Welspun Exploration, Hindustan Oil Exploration Company, South Asia Consultancy and Nippon Power.
India also plans to launch the Hydrocarbon Exploration and Licensing Policy under revenue-sharing contract which may further increase investments in the coming years, as reported by FE.