India Plans To Unlock USD 40bln In Oil & Gas

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India has decided to ease oil and gas exploration and production rules through reforms in order to encourage foreign investment in the petroleum sector. New Delhi believes that the proposed move will help reduce its heavy dependence on imported energy.

The Narendra Modi government recently announced that it would try to attract USD 25 billion foreign investment in energy sector in the next 10-15 years. Addressing a press conference a couple of days ago, Indian Minister of State for Petroleum and Natural Gas Dharmendra Pradhan said that the government’s new Hydrocarbon Exploration and Licensing Policy (HELP) would definitely reduce the South Asian country’s dependence on imported energy. At the same time, according to the minister, India will try to increase domestic gas production to meet the growing demand. Meanwhile, Pradhan expressed serious concerns about falling output, saying that it was a challenge for India to resolve the problem. “Forty billion dollars of hydrocarbons will be unlocked for production through this policy reform. To realise this amount, we are expecting investment of more than USD 25 billion in the next two to three years,” he told the media.

As per the new policy, private companies will have to get a licence from the government for new exploration and production of all hydrocarbons. Although they will enjoy “marketing and pricing freedom”, the government will fix gas price on the basis of landed price of alternative fuels.

By adopting the new oil and gas policy, India has made clear that it is slowly moving towards a gas-based economy. India, the third-largest energy consumer in the world with low per capita usage, has experienced a 17% fall in domestic gas production in the last two years. The scenario has prompted the government to go for sweeping reforms.

Earlier, India had planned to monetise unexploited gas reserves of around 6.75 trillion cubic feet (worth more than USD 28 billion) from existing and future discoveries. However, the government failed to make a final decision in this regard due to various reasons.

Indian businesses and industry experts have welcomed the government’s announcement. At the same time, they warned the Modi administration, saying that the recent collapse of the oil price would make the job difficult. “In the current context, it’s not going to excite people,” stressed Arvind Mahajan, head (Energy and Infrastructure) of KPMG in India. The senior official of the global network of professional firms providing Audit, Tax and Advisory services further argued that it would have had more impact, if India made such a move a couple of years ago. “The market environment to invest in oil and gas is not good,” Mahajan told the press.

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