Greater thrust to domestic production of crude oil, boosting the refining capacity and raising the consumption of natural gas would be the top objectives of the new National Democratic Alliance (NDA) government in the hydrocarbon sector, Hardeep Singh Puri said on Tuesday after assuming charge as the Union Minister of Petroleum and Natural Gas, for the second straight term.
The minister also hinted that if the Indian basket of crude is sustained at around $70-80/barrel, the state-run oil marketing companies (OMCs) may consider cutting retail prices of auto fuels.
The government would be firm on its target of 20% ethanol blending with gasoline and work to bring gas under the goods and services tax (GST), he added.
Talking about upcoming projects in refining sector, the minister said that BPCL is in advanced stage to set up greenfield refineries while GAIL is also planning an ethane cracker unit for petrochemicals. He, however, did not divulge the site of the new unit or the capacity being planned. “BPCL’s Bina refinery is coming up and Cauvery basin refinery is also coming up by Indian Oil at Chennai,” he said.
While retail prices of diesel and petrol are deregulated, the state-run OMCs are perceived to pay heed to the inflation dynamics and other political-economy factors, while taking their pricing decisions. Puri’s comments on the OMCs’ next move assumes significance in this context. Deflation in ‘fuel and light’ is likely to deepen in May, to -5.2% as against -4.2% in April, and the segment is seen to stay deflationary in the near-term owing to high base effects, and low energy prices.
“Several things decide the price of crude oil including the cost of transportation and insurance. The cost of transportation and insurance has the ability to spiral up, if there is disturbance in the Red Sea or elsewhere,” Puri said.
The price of West Texas Intermediate crude oil touched $77 per barrel on Tuesday while Brent hovered around $81-$82 per barrel despite the Organisation of Petroleum Exporting Countries’ decision to continue the voluntary cuts of 2.2 million barrels per day (bpd) till September 2024.
In March, the state-run oil marketing companies had cut the retail prices of petrol and diesel by Rs 2 per litre. Analysts see OMCs resuming the daily revision of fuel prices now that the elections are over.
Puri said that India is among the few nations in the world where fuel prices have declined post the outbreak of conflict between Russia and Ukraine.
Moreover, under his new term as the oil minister, the focus would be on boosting oil and gas exploration and production, green hydrogen, and increasing the consumption of gas in the country to achieve a gas-based economy, he said
He said that Oil and Natural Gas Corp is expected to reach the peak production of 45,000 barrels per day of crude oil from its KG 98/2 block soon, which will aid in domestic output.
Earlier in an investor call, the company had said that it expects its oil production from the KG-98/2 block to increase to 20,000 barrels per day in the third quarter of the current fiscal year 2024-25 and then subsequently reach its peak production of 45,000 barrels per day in Q4FY25. It also expects the KG block to produce 10 million metric standard cubic metres per day (mmscmd) of gas, its peak capacity, by the end of FY25.
The ministry will also conduct the ninth and tenth bidding round under Open Acreage Licensing Programme in the coming few weeks, Puri said.
While focusing on increasing domestic production, the government is also gearing up to increase the domestic refining capacity.
BPCL currently operates refineries at Mumbai, Kochi in Kerala, and Bina in Madhya Pradesh. Last year, Prime Minister Narendra Modi had laid the foundation stone of BPCL’s petrochemical complex and refinery expansion wherein capacity of Bina Refinery would be enhanced to 11 million tonnes per annum (MTPA) in the next five years.
BPCL aims to expand its refining capacity to 45 million tonnes per annum by FY29, the company’s top management had said in an analyst call earlier. To achieve the same, it has earmarked Rs 75,000 crore for refineries and petchem projects of the total capex target of Rs 1.7 trillion over the next five years.