Prime Minister Manmohan Singh has highlighted the significance of equity oil in India’s energy security strategy as growth in domestic supplies is unable to keep pace with rising consumption. However, India’s PSUs hunting for oil and gas assets abroad are hobbled by the government’s decision-making process.
Indian oil PSUs hunting for hydrocarbon assets abroad are getting tough competition from their Chinese rivals who are backed by a sovereign fund.
?We need to make our decision-making process faster,? says Kalpana Jain, senior director, Deloitte Touche.
China’s state-owned oil companies have the backing of a sovereign fund in their global hunt for oil and gas assets. India too has mooted a similar fund to support acquisition of natural assets overseas by its oil PSUs. However, there is not much progress in this regard.
India is pursuing its equity oil strategy through OVL. A committee of secretaries (CoS) has been set up to expedite approval process for OVL’s investment proposals. However, the CoS can take up for approval only investment proposals of up to Rs 300 crore. For seeking approval for investment proposals above Rs 300 crore, OVL has to go to the CCEA, which is a complicated process. However, the Rs 300 crore is a small amount. ?Oil and gas assets cannot be acquired for Rs 300 crore,? Jain said.
?New oil and gas assets are mostly available in deep water and difficult terrain. These projects are technology and capital intensive and have long gestation period. That increases their risk profile. Since capital remains scarce, investors will think through before committing money,? she said.
?While there is a lot to be explored in the country, it would not be enough to meet the energy requirements. With the economy growing at 9-10%, India has to acquire energy assets abroad.