With 11-year low oil price forcing oil and gas producers to cut spending, Prime Minister Narendra Modi today brainstormed with global experts on ways to attract investments and raise domestic production.
Modi, in a two-hour long meeting with experts including BP Group chief executive Bob Dudley and International Energy Agency (IEA) Executive Director Fatih Birol, discussed steps needed to give fillip to domestic oil and gas sector where no major discovery has been brought to production in the last five years.
The underlying theme was how to attract investment in oil and gas exploration and production (E&P) and raise domestic production, sources privy to the deliberations said.
The experts, who also included Royal Dutch Shell Director (Projects & Technology) Harry Brekelmans and Pulitzer award- winning American author Daniel Yergin, detailed regulatory faultlines as well as need for steps like freeing of natural gas prices to boost domestic investments.
At around USD 37 a barrel, crude oil prices are well below the cost of production, forcing oil companies to cut spending, sell assets, shed jobs and delay projects.
Sources said Modi also discussed ways of raising share of natural gas in the energy basket from 11 per cent to at least 20 per cent by end of the decade so as to cut carbon emission and provide a cleaner fuel to power the economy.
The government’s move to give market-linked price for gas produced from fields auctioned in future also figured at the meeting with a demand being made that the same dispensation should be extended to current discoveries as well, they said.
State-owned Oil and Natural Gas Corp (ONGC) and BP along with its partner Reliance Industries are sitting on about two dozen gas discoveries as the current rate of USD 4.24 per million British thermal unit is economically unviable for them to produce.
The price arrived at using a formula based on rates prevalent in gas-surplus economies like the US, Canada and Russia, is about half the rate at which India imports gas (LNG).
“The interaction also included Union Ministers (for Finance) Arun Jaitley, (Power & Coal) Piyush Goyal and (Oil) Dharmendra Pradhan, Vice-Chairman of NITI Aayog Arvind Panagariya, besides top officials from the Government and NITI Aayog,” an official statement said here.
The discussions focused on “subjects such as increasing the share of gas in India’s energy mix, fresh investment in oil and gas exploration in India, regulatory frameworks, international acquisition of oil and gas assets, emerging areas such as shale gas and coal-bed methane, and the oil and gas sector related possibilities of Make in India”, it said.
Modi emphasised on the need for taking a fresh look at the sector, to bring in investment, technological upgradation, and development of human resource.
He sought expert opinion to revive country’s oil and gas sector that has seen a rapid decline since 2009.
Former oil secretaries Vijay Kelkar and Vivek Rae were also present at the meeting.
Dudley, in his previous meeting with Modi in July last year, pitched for “appropriate pricing” of gas for complex and capital intensive deep sea projects like KG-D6.
BP, which had in 2011 bought 30 per cent stake in RIL’s 21 oil and gas blocks including KG-D6 for USD 7.2 billion, is working on reviving the sagging output from eastern offshore KG-D6 fields.
But most companies have been unhappy at the new gas pricing formula fixed by the BJP-government in October 2014.
The industry has also been seeking an early decision on the premium that the government promised to give for future gas discoveries.
Also discussed at today’s meeting were opportunities and challenges facing the sector, the source said.