Boost to energy security

India, which imports 80 per cent of its oil in requirement, has at last woken up to the reality and embarked upon a plan to attract investment of up to $1 trillion in the oil sector to bring about much-needed energy security.

This includes investment opportunities of $300 billion in the hydrocarbon sector over the next 10 years to keep pace with India's energy demand. Indicating this, petroleum minister Dhramendra Pradhan said at the recently held India Energy Forum organised by CERA Week that an exchange platform is also being set up to have market-driven prices for natural gas.

Saudi Arabia's Aramco has proposed to set up mega refinery in Maharashtra's west coast and the investment could go up to $300 billion, including for the creation of necessary infrastructure there. This is in addition to $300 billion investment in hydrocarbon sector.

NITI Aayog CEO Amitabh Kant said India's oil sector could attract an overall investment of $1 trillion in the next five years, which some analysts felt was overambitious.

The proposed gas platform will provide marketing mechanism for the gas segment. The primary idea is to put some component of domestic gas and imported LNG on this new platform. The pooling mechanism of gas is to be replaced by a transparent exchange.

The existing formula for gas pooling for various sectors would exist even after operationalisation of the exchange as there are some priority sectors, but gradually India will move towards market-driven gas price. The government is planning to set up an internal think tank to advise on regular basis on ministerial work primarily on technology and on the target set by the Prime Minister on how to reduce (oil) import dependence by 10 per cent.

Yet another key initiative taken by the government with regard to energy security is its strategic petroleum reserves programme. The government now proposes to set up additional crude oil reserves facilities in public-private partnership mode.

India is the third largest consumer of energy and also the third largest importer of crude oil in the world. With the Indian economy growing rapidly, energy demand is forecast to grow more than any other country in the next two decades.

India has a very large requirement of petroleum fuels. Demand for petroleum products has been increasing at a CAGR of 5.5 per cent from 2013 to 2017. Domestic production will be unable to meet the ever-increasing demand of petroleum fuels and petrochemicals and India will continue to depend on imports for foreseeable future. Now India imports nearly $140 billion worth of crude annually and this can only go up year after year due to increasing demand, higher prices and rupee depreciation.

In the last one year, India faced severe headwinds due to rising oil prices. Since October 2017, crude prices have gone up 50 per cent in dollar terms and 70 per cent in rupee terms. To mitigate the impact the government has proposed to create adequate strategic reserve within the country. This will not only help in avoiding supply disruption but also minimise price volatility, Pradhan said at a roadshow for allotting new oil blocks recently. This involved an investment of Rs 11,000 crore.

The government has already formed the Indian Strategic Petroleum Reserves Limited (ISPRL), an SPV to improve strategic reserve by an additional 6.5 MMT, providing an extra 12 days of supply. Chandikhol in Odisha and Padur in Karnataka have been selected as locations for these two SPRs. Indian refiners maintain 65 days of crude storage, and when added to the storage planned and achieved by ISPRL, crude storage increases to 87 days. This is very close to the storage of 90 days mandated by IEA for member countries. At present India has three underground storage facilities in Mangalore, Visakhapatnam, and Pudur.

Apart from oil, the government is working on another front to enhance energy security. India is now working on International Solar Alliance, a cooperation among 60 solar rich countries. Set up at the initiative of India, ISA has the potential to replace OPEC. Prime Minister Narendra Modi said recently ISA can become a key block of the supplier of energy.

With falling prices of solar, it is possible to create "One World, One Sun, One Grid". China is the largest manufacturer of solar photovoltaic modules, besides having the world's largest solar generating capacity. India proposes 100 Gw of solar power generation and has an ambitious plan to harness all sources of available energy -solar, wind, hydro, coal, oil, gas, nuclear and biofuels.

India is also pushing in a big way bio-fuel and a National Bio Fuel policy launched recently. The government propose to mix at least 10 per cent biofuel that is ethanol on petrol and diesel. Recently a test flight was flown with a blend 25 per cent of biofuel and 75 per cent ATF in August this year. A scheme to promote compressed biogas in a big way is being considered in several parts of the country.

Emphasis has been given to provide a big push towards harnessing biofuel with the launch of National Bio Fuel Policy of 2018. This will contribute to PM's commitment of doubling the farmer's income by 2022. Expansion of the gas grid continues in the east, north-east and southern parts of the country and several LNG regasification terminals are coming up. In the last two years, national oil companies have made significant acquisitions in some of the world-class producing blocks in Russia, the UAE, and Oman

Overall the picture is not all that gloomy on the energy front, even though at the moment the surging domestic fuel prices have been making big holes in the pockets of the common man in the face of high global crude oil prices and free fall of rupee. One only hopes it remains a temporary phenomenon and prices fall and stabilise at lower levels in the next few months.

(The views are strictly personal)