As global crude prices continue to be high and volatile, India must make determined efforts to increase the levels of relative self-sufficiency. There is a need to boost domestic production that has been steadily declining. With a high import dependence of 86%, the country has been diversifying its supplies, including relying on discounted crude from Russia that reached the highest levels in February. The imperative of greater energy security entails stepping up indigenous oil production over the medium-term by incentivising domestic producers and global giants for exploration and production (E&P). In this regard, the good news is that the policy regime seeks to encourage more offshore exploration with plans to double the current net area being explored for oil and gas to 500,000 sq km by 2025 by reducing the prohibited or no-go areas in India’s exclusive economic zones by 99% and incentivising the discovery of potential basins like in the Andamans, Kutch-Saurashtra, and Mahanadi at the government’s cost. Other reforms include royalty discounts, zero-revenue and windfall revenue sharing and speeded up environment approvals. According to a report by the consultancy group Wood and Mackenzie, there is also alignment and agreement between the Prime Minister’s Office and the Director General of Hydrocarbons on these objectives. India is now a licensing “wild card” for prospectors as the “balance of risk/reward” is sufficiently tempting to bring in the big players.
While the policy establishment is excited by the interest shown by ExxonMobil, Chevron, and TotalEnergies, little is known about their commitments, although TotalEnergies has inked a deal with the Adani Group for green hydrogen production. Whether ExxonMobil and Chevron are investors or just providers of technological services is far from clear. The fact is that the interest of global oil majors in exploring for oil has so far been constrained by the challenging investment environment including concerns regarding arbitration and compensation in case of expropriation. Foreign direct investment inflows in petroleum and natural gas account for only 1.3% of total inflows from April 2000 to September 2022. ExxonMobil and Chevron have signed MoUs with the state-owned giant Oil and Natural Gas Corporation (ONGC) for joint and individual technical studies to enable E&P in deep waters off the east and west coasts. Exxon’s study is expected to end by March and Chevron’s by December.
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While more FDI in petroleum and natural gas is expected, the moves by domestic majors to step up exploration are to be welcomed. ONGC plans to spend $4 billion to increase exploration from FY22 to FY25. So, too, does the Vedanta