The slippery slope of oil exploration

Poor policy design and unpredictable fiscal terms have discouraged investment by global majors, keeping India heavily import-dependent

- S DINAKAR

Successive Indian governments have formulated policsumers of energy at the expense of producers. The current dispensation is no different. Motorists have taken comfort in frozen pump prices and gas price caps but producers face high taxes, and restrictions on pricing freedom.

The government is focused on revenue generation rather than production maximisation. But protecting the interests of consumers, and imposing high costs on upstream operators, may work in nations with copious oil reserves and relatively negligible domestic demand, such as Saudi Arabia, Qatar or Russia. Not so in case of energy-deprived countries like India - it only makes the nation increasingly dependent on foreign oil and gas, weakening energy security.

Check out these numbers. Domestic production of crude oil has declined 23 per cent to an estimated 29 million tonnes last fiscal from nearly 38 million tonnes or 763,000 barrels a day (b/d) in 201314, according to oil ministry data.

India's oil product demand rose over 40 per cent during the period, driven by higher GDP, subsidies and lower-than-market prices of transport and cooking fuels.

Crude output in February dipped to a low of 575,000 b/d. To put it in perspective, domestic production met 24 per cent of our oil demand back in 2014. Today that figure has shrunk to 13 per cent. Staterun explorers lack the heft, finance and expertise of oil majors to arrest declines from ageing fields, and for deep-water developments.

The impact on energy security is glaring. India's dependency on imported crude as a percentage of consumption was at an all-time high of 89.2 per cent in February against 84 per cent in 2020-21, and 77 per cent in 2014, government data shows. This is despite Prime Minister Narendra Modi's call in early 2016 to reduce crude imports by 10 per cent by 2022.