Instead of delaying decisions on matters such as development of the known oil and gas finds, can the government give a directive that, on such high cost import, there should be no need to obtain additional approvals
 
The oil industry is at the cross roads unable to take the next step, plagued by government delays in a rudderless policy followed by the government. Even where certain rules are already in place, the main players are advised to wait, follow and seek clearances!
 
Take the case of Reliance Industries (RIL), where the production of gas from the D-6 block has come down to 30 million metric standard cubic metres per day (mmscmd) from 80 mmscmd projected?  It must be noted, earlier, the Director General of Hydrocarbons (DGGH) had rejected the commerciality of three gas finds of D-25-30-31 but with the delayed approval, RIL, BP and Niko will be able to go ahead with their proposed investment of some $1 billion in their fields. It will be a few months more before we would come to know the actual potential.
 
In the case of ONGC, most of its production now comes from old fields and that of Bombay High offshore. But for its recent discovery in the Krishna Godavari (KG) block, which is the deepest gas find in the country, it has, fortunately found a Japanese partner, who has not been identified yet, publicly. Though ONGC has the necessary approvals from the petroleum ministry, it is still awaiting certain clearances from the ministry of defence. The DGH has put an estimate of 2.315 trillion cubic feet of gas, which differs from a higher estimate made by ONGC.
 
Based on our past experience, it is better to underestimate the potential and find a larger capacity later, than vice versa, as it apparently happened in the case of RIL, in terms of actual output!
 
As for Cairn India, which has been taken over by Vedanta Resources, chairman Anil Agarwal had to resort to seeking prime minister, Dr Manmohan Singh’s intervention to raise its output from the current level of 175,000 barrels per day (bpd) to 300,000 bpd or about 15 million tonnes per annum, amounting to 35% of India’s crude oil output. Currently, the 175,000 bpd saves Rs11,000 crore which would have been otherwise spent in importing foreign crude from other sources.
 
This assistance from the PM was sought some two months ago. No news yet!
 
Although the Production Sharing Contract has provisions that allow Cairn to carry on exploration in its development area, it has been asked to obtain certain approvals, thus delaying the work at site. There are some 25 oil and gas finds in the area. Two months ago, Mr Agarwal took up the issue with the prime minister for expeditious assistance, but presumably, the issue of Coalgate has become a stumbling block!
 
In the meantime, Rahul Dhir, the MD and CEO of Cairn India announced his intention to leave by end of August, and has been replaced by P Elango as its interim CEO.
 
In one of his meets with the press, Mr Dhir had announced that he was looking forward to rewarding the shareholders with a special dividend, as no dividend had been given till that time.  However, with his exit, it is now uncertain when the dividend will actually be given to the patient shareholders?
 
Assuming a positive response is received from the petroleum ministry, for Cairn to proceed with the work and secure production capacity of 300,000 bpd, it would still need concurrence from ONGC and generate funds for further investments. One wonders if there is a rights issue, or, Mr Agarwal will start with a bang and issue a bonus.
 
Once this development begins it needs to either export the excess crude over the 175,000 bpd or make it available to existing buyers like Reliance, Essar or IOC?  It won’t be a surprise, if, in the long run, Anil Agarwal decides that a Cairn Refinery would just serve as well?
 
As for the government, instead of delaying decisions on such matters as development of the known oil and gas finds, they ought to give an open directive that, on such high cost import items like crude, gas, etc, there should be no need to obtain additional approvals.
 
Besides, the government must wake up and realize that the shortfall, due to Reliance, must be made up by others in the field; and time is the essence of contract with the people at large.

(AK Ramdas has worked with the Engineering Export Promotion Council of the ministry of commerce and was associated with various committees of the Council. His international career took him to places like Beirut, Kuwait and Dubai at a time when these were small trading outposts; and later to the US. He can be contacted at [email protected].)