An important plank of India's energy security policy is to build up a portfolio of international oil and gas assets. The government recognises that hydrocarbons are tradeables and can be purchased on the open market. But given the volatility of the international petroleum market, they do not want to rely on arm’s length transactions only. They believe that equity ownership offers greater security. They have therefore encouraged public and private sector companies to compete for equity oil and gas production overseas. These companies have hitherto achieved commendable results. But looking ahead, they are likely to face stronger competition. The Chinese, for one, are pulling out all the stops to secure their energy requirements. The government must therefore tweak its institutional structure and streamline the decision-making process to enable Indian companies to respond with greater agility. It should also consider putting its own weight behind their efforts.
ONGC VIDESH (OVL), the 100% subsidiary of ONGC, has significantly broadened its international footprint. In 2001, it had a stake in one producing asset in Sudan and its equity share of oil production was 2,50,000 tonnes per annum. By 2012, it had extended its presence to 16 countries and had an interest in 32 assets. Its equity share had increased to 7.25 million tonnes. OVL has achieved these results despite three constraints.
One, as a public sector entity it does not have operational and financial autonomy. Prior to submitting a bid, it has to secure the approval of its shareholder, ONGC, the ministry of petroleum and the committee of secretaries. At times it also has to pass muster with the empowered group of ministers. The consequences of this layered and time-consuming approval process is that the bids are often leaked and OVL has difficulty meeting bid deadlines.
Two, the playing field has not always been level. The bidding process in many countries in Africa and Central Asia, where the resources are controlled by the government, is not transparent. The Chinese exploit this opacity in many ways, but often by simply sweetening their bid for an upstream asset with a "behind the scenes" commitment to invest in downstream