The Modi government would have easily preferred populism over fiscal prudence. It could have drastically reduced petrol and diesel prices by over Rs 11 per litre to gain instant popularity. But, it prefers increasing excise duties while simultaneously reducing retail prices of petrol and diesel. Certainly, this is in the national interest for a country that imports 80% of its crude oil requirement. Global oil prices are unpredictable. Today, it is moving down towards $20 a barrel. The trend may also reverse in no time and it may soar again. We saw this trend in 2008 when crude oil prices touched $147 a barrel in July that year. Finance Minister Arun Jaitely’s excise duty hikes will build a cushion to save the country in such difficult days. Besides, abnormally low fuel prices will encourage consumerism and damage the environment by spurring automobiles sales. This will increase pollution and encourage wastage of scarce energy resources. It is good to use this windfall gain in meeting our revenue deficit rather than encouraging consumerism.
– Rajeev Jayaswal
(Also published in Amar Ujala, Jan 18, 2016, http://epaper.amarujala.com/dl/20160118/11.html?format=pdf)

Recently, international oil prices collapsed to a 12-year low and squeezed returns of global energy firms. Most of them have scaled down their exploration activities. But, India’s biggest explorer Oil & Natural Gas Corporation (ONGC) looks at it as an opportunity. Prices will bounce back to a reasonable level, hence this is the time to rationalise cost, increase efficiency and build assets says ONGC Chairman & Managing Director Dinesh Kumar Sarraf to Rajeev Jayaswal of Amar Ujala in an exclusive interview. Excerpts:

Q: The fall in global crude oil prices are likely to continue for a longer period. Goldman Sachs had said that prices might drop to even $20 per barrel. Are you a worried?

Ans: Because ONGC is a public sector company, therefore, we see it differently. We see it from the perspective of our country’s economy. We are heavily dependent on imported crude. Hence, it is good that crude oil prices are low. The situation is not worse even from ONGC perspective. The company does not have to bear subsidy burden at all because of low crude oil prices, which is an upside. Our net realisation of $45 (per barrel) has dropped to about $35, a loss of about $10 per barrel revenue. However, losses are high in value added products.

Q. Aren’t you worried?

Ans: Like any company, we are concerned, but not worried. It is better to take a contrarian view to win over it. In difficult time like this we become more innovative and cost conscious. We have reduced our expenses though optimisation and also due o falling cost of services, which is about 40-50% down. Prices will not remain at this level for ever. Meanwhile, we will imbibe the DNA of working with optimum resources so that when prices go up, this culture will remain with us.

Q: When do you think prices will bounce back and what will be the optimum price?

Ans: No one can predict oil prices in definite terms. Optimum is a relative term. For some $200 (per barrel) or even more could be optimum. Ideally, there should be a balance. It should be at the level were oil producers have incentive to produce more and the price should not pinch to consumers. In the Indian context and from the point of view of ONGC, a level between $60-70 per barrel is ideal.

Q: A fall in global crude oil prices would also present opportunities to acquire oil and gas assets abroad. Are you planning to announce some acquisitions in near future?

Ans: We are working in that direction. We are in talks in various countries including Russia. But, acquisitions do not take place on monthly basis. Acquisitions involve lengthy negotiations.

Q: ONGC had accused that Reliance Industries had drawn its gas from its Krishna-Godavari basin blocks. The expert report is also ready. Do you see any amicable solution to this problem?

Ans: The court has asked the government to resolve this matter. The government has appointed a committee. The matter is under its consideration. We will present our views in front of the committee and abide by its decision.

Q: What is the status of discoveries in the Krishna-Godavari basin block where gas has migrated from your field to Reliance’s field? Are these discoveries still viable?

Ans: Only one cluster of discoveries is affected. Other clusters are intact. Development plans have been submitted for cluster II-A, which is gas and II-B, which is oil. We expect approvals by next month. Yes, at the current gas price, these discoveries are not viable.

Q: Have you asked the government for raising gas price to make these discoveries feasible?

Ans: Yes. Without that it will be impossible to develop these discoveries. Gas prices are expected to be further below than the current price of $4.20 per unit when it will be revised in April 2016.

Q: Dehradun is the headquarters of ONGC. Do you plan to shift it to New Delhi?

Ans: Never. It is ONGC headquarters and will remain that way. In fact, we recently constructed a green building in Dehradun. We often have important conferences there. I’m visiting Dehradun on Jan 15-16 for an all India conference. It is a peaceful place that inspires our technical persons and scientists. It is the birth place of ONGC. We consider it as ‘Dev Bhumi’ and we are sentimentally attached with it.

(Also published in Amar Ujala http://epaper.amarujala.com/dl/20160111/11.html?format=pdf)

BP Group Chief Executive Bob Dudley, Royal Dutch Shell’s Director (Projects & Technology) Harry Brekelmans, International Energy Agency (IEA) Executive Director Fatih Birol and Pulitzer prize-winning American author Daniel Yergin are visiting India today on a special invite by Prime Minister Narendra Modi. PM wants their expert opinion to revive country’s oil and gas sector that saw a rapid decline since 2009.

Indian energy experts such as former petroleum secretaries Vijay Kelkar and Vivek Rae will also be present in the morning meeting, government and industry sources said. The meeting is expected to continue till lunch. NITI Aayog Vice Chairman & Economist Arvind Panagariya, Finance Minister Arun Jaitely and Petroleum Minister Dharmendra Pradhan will also participate in the deliberation. It is expected that NITI Aayog will coordinate the government’s effort to revitalise India’s energy sector. PM Modi is the chairman of the Aayog.

According to sources, Dudley has agreed to attend the meeting on Prime Minister’s personal invitation. BP is the only multinational energy giant to invest in exploration and production of oil and gas in India. In 2011, it invested about $7.2 billion to pick up 30% stake in 23 oil and gas blocks held by Reliance Industries. This also included Reliance’s oil and gas producing fields in KG-D6. Soon after projects of Reliance and BP hit the general policy paralysis that prevailed in the petroleum ministry at that time. Several energy firms including BP and RIL gradually reduced their investment plans in India’s oil and gas sector. As a result, currently RIL and BP hold only four blocks in India that include controversial KG-D6.

Energy experts said that other energy firms such as Cairn India, Eni, Hardy Oil and Gujarat State Petroleum Corporation had also faced several hurdles during the same period. This not only hampered India’s oil and gas exploration but also dissuaded energy companies from investing in Indian sedimentary basin. Due to lack of investors’ interest India could not invite auction for its oil and gas blocks since 2011. The ninth round (Nelp-IX) was unveiled more than five years ago in London when Murli Deora was the oil minister.

(Also published in Amar Ujala, Jan 5, 2016 http://epaper.amarujala.com/dl/20160105/11.html?format=pdf)