India is making a concerted effort to lower its reliance on imported crudes with the government focused on boosting domestic production, promoting renewables and improving the refining process, at a time of increasing demand.
Highlighting the growing importance of energy security, Indian Prime Minister Narendra Modi told delegates as much at an energy conference in early December.
"We need to increase our domestic oil and gas production and reduce import dependence. I have set a target to reduce import dependence by 10% by [fiscal] 2022," Modi told the Petrotech conference in New Delhi, referring to crude oil. "This will have to be achieved during a period of increasing oil consumption."
India is witnessing double-digit growth in oil product demand on the back of sustained GDP growth and rising disposable incomes.
The country imported 197.5 million mt (4.33 million b/d) of crude oil in the first 11 months of 2016, up 10.5% year on year. India's refinery throughput has risen 7.4% year on year to 4.88 million b/d.
For a country dependent on imports for 80% of its crude oil needs, India's oil import bill is subject to wild swings linked to movements in international prices, which in turn has repercussions on the country's current account balance and overall economy.
Lower crude oil prices over the past couple of years have supported rising demand and helped the government generate revenues from additional taxes imposed on oil products.
But as crude oil starts to rise again, India is hoping it can absorb part of that shock by boosting domestic production.
"Higher oil prices will risk this growth trajectory and deprive the underprivileged sections of society from access to energy," Petroleum Minister Dharmendra Pradhan told the same conference.
FIVE-POINT PLAN
Pradhan has a five-point plan to help India achieve a 10% reduction in crude oil imports by 2021-22 -- namely, raising domestic oil and gas production, improving energy efficiency, promoting alternative fuels and renewables, demand substitution and improvements in the refining process.
India's oil products demand has risen 9% year on year to 176.36 million mt, or 4.1 million b/d, driven by double-digit growth in gasoline, LPG, jet fuel and fuel oil, according to data from the oil ministry's Petroleum Planning and Analysis Cell.
The IEA expects India's oil demand to average 4.3 million b/d in 2016. It expects demand to rise by 280,000 b/d in 2017, closely followed by China.
Pradhan said that while hydrocarbons would remain as an important source of energy, the share of renewables is expected to rise. "We are also moving ahead on cleaner coal technologies and nuclear energy areas." NEW POLICY
To revive the upstream sector, the Indian government in March unveiled a new exploration policy -- the Hydrocarbon Exploration Licensing Policy, or HELP -- aimed at attracting investment in a sector that has seen little progress since Reliance's KG-D6 deepwater gas discovery in early 2000.
HELP replaces the decades old New Exploration Licensing Policy.
Under HELP, India has moved to an open acreage system, wherein companies will be able to visit the National Data Repository on a continuous basis, evaluate the data and define the acreage they want to bid for.
Under the new policy, a uniform licensing system will cover all hydrocarbons -- conventional and unconventional -- under a single license and policy framework.
All blocks will be governed by a revenue sharing model where the government gets a share of revenue from the moment production begins on a block.
This is a move away from the old cost recovery model where a contractor was allowed to fully recover costs before sharing revenue with the government.
The new policy also allows contractors pricing freedom for new gas production from deep, ultra-deep water and high pressure-high temperature areas.
According to government estimates, various elements of the new policy will help monetize reserves to the tune of 6.75 Tcf of gas, 15.7 million mt (115 million barrels) of oil and another 20.6 million mt of oil equivalent gas. RECENT BIDDING ROUND DRAWS INTEREST
India recently concluded its bidding round for discovered small fields, which attracted considerable interest with 134 bids submitted for 34 contract areas from 42 companies, including five foreign companies.
This has raised hopes that India will be able to boost domestic production in the coming years.
"We are happy that the results of recently concluded discovered small fields bidding round have been very encouraging. India is one of the very few places where long-term viable investment in all streams of the oil and gas sector can be planned," Pradhan said.
According to the Directorate General of Hydrocarbons, India's sedimentary basins hold an estimated 205 billion barrels of oil and oil equivalent gas, out of which only 82 billion barrels had been so far established, highlighting the unexplored potential.
India is also stepping up efforts towards increasing the share of gas in the energy mix from 6% to 15% over the coming years, according to government officials.
"Natural Gas is the next generation fossil fuel -- cheaper and less polluting," Modi told the conference. "We have given priority to move towards a gas-based economy. Efforts must be made to increase natural gas production while also creating import infrastructure to meet the growing domestic demand."
India's gas demand posted a modest 2.86% year-on-year rise to 46.62 billion cu m in fiscal year 2015-16 (April-March), according to PPAC data.
Gas demand peaked at 58.93 Bcm in 2010-11 and has since been declining because of lack of availability.
India's domestic gas production was 31.14 Bcm in 2015-16, down 40% from its peak of 51.23 Bcm in 2010-11.
