Oil crises are here to stay, particularly in India. The playbook is now familiar. Crude oil price goes up and so do fuel prices and there is a standardised template for passing on the blame. But logically one would say that to reduce the impact of these crises, we need to be less import dependent. For this, we need to understand this sector better and must have the right policy environment to ensure this happens within a time frame.
This is where Richa Mishra, author of Unfilled Barrels, begins her book and takes us through the critical issues associated with the upstream process of oil exploration and production. The E&P story has been very uneven over the years and she credits KD Malaviya for having led this initiative. He was the first petroleum minister who also drove the government to make investments in this sector. This sector is quite unique, that while there are no physical entry barriers, given its nature, it has few players.
Being a journalist, the style is distinct and the narrative is thorough. There are several excerpts from various reports, with the Vijay Kelkar Report providing several insights. She has interviewed some of the big names in this sector, ranging from heads of companies to ministers to write a firsthand account of the problems, challenges and successes of this industry. The chapters are distinct, starting with the so-called pioneer in this field, KD Malaviya, right through the travails of the Reliance family and the developments of the KG Basin to the controversies relating to Cairn Energy and its final exit from India.
The author traces the evolution of this industry with ONGC being the pioneer and a monopoly for a long time. The exploration process is fraught with high risk and cost because of the high probability of the effort not yielding anything significant and plans being abandoned. ONGC had its share of grievances that certain fields it explored, such as the Panna-Mukta and Ravva fields, were taken away by the government without adequate compensation.
The decision to permit private players as per the NELP (national exploration licensing policy) and subsequently HELP (hydrocarbon exploration licensing policy) were landmarks in the policy framework that have sought to bring about transparency in the allotment process.
The author argues that the process to award oil and gas blocks has been very fair, objective and transparent since the days of NELP, as there has not been a single case of any loser ever having complained. The ministry of petroleum and natural gas can take pride in creation of the bidding system, as global awards of oil and gas blocks have always been controversial.
In India, too, the award of coal blocks and telecom licences has seen multiple controversies. Reliance, for instance, entered the upstream sector by successfully bidding for deep water blocks. This changed the equations in the sector and the rules of the game forever.
However, the history of involvement of the private sector has been quite turbulent, just as is the case with any natural resource where conflict between the government and players tend to surface, often leading to long-drawn litigation and high cost of operations. The rather infamous fight between the two brothers of the Reliance Group had led to government officials taking sides, which made the situation quite messy. With government intervention and litigation the oil industry tended to get politicised.
While one could be taken aback by these rather long episodes that came in the way of development of the sector, it could be argued that they were lessons learnt about the industry the hard way given its criticality and the experiments in blending private sector participation in a predominantly government sector that dealt with a public resource.
The author also takes us through the micro challenges of executing projects, as building any pipeline involves the familiar problems of traversing a large area of land and getting the acquiescence of landowners.
At times it worked very well, but often local political leaders can create obstacles which finally go into litigation. Often when private players are involved, there would be a tendency for rivals to instigate people to protest that would help in providing a pushback. Therefore, the entire evolution has been quite fascinating and quite different from other sectors, though industries like telecom have had their share of controversies.
Will the country ever be self-sufficient in oil and gas? The author does not think so, and while the move to renewables is good from the point of view of diverting demand over a long period of time, augmenting supply is still a challenge and we would continue to be major importers of oil in future.
Unfilled Barrels is a very informative book that strikes a balance between providing details as per official documents to views provided by different stakeholders that makes it quite enriching. It does answer several questions that we have in our mind on the possibility of India becoming less reliant on imports. Governments in the past have been finding ways to have a fair and transparent system for allotting fields, but it is still work in progress. Breaking this code will.
Unfilled Barrels: India’s Oil Story
Pp 200, Rs 699
(Madan Sabnavis is chief economist, Bank of Baroda)