Energy Shock

The devastating fire at ONGC8217;s Mumbai High has, once again, brought India8217;s oil security to the forefront. Given that accidents ar...

The devastating fire at ONGC8217;s Mumbai High has, once again, brought India8217;s oil security to the forefront. Given that accidents are a fact of life in the entire hydrocarbon chain, what is being done to ensure that oil security remains a top priority?

Despite a period of respite between the crude being processed and the products hitting the market, the Mumbai High fire will hit production, though for a period of three to four weeks. The loss is equivalent to 14 per cent of our domestic production of crude.

Says Sanjay Kaul, director of the Indian School of Petroleum, 8216;8216;For a country which imports 70 per cent of its crude oil requirements, any loss hurts.8217;8217; Here8217;s a look at the major issues.

Oil equities abroad: Though it has been the major thrust area for Petroleum Minister Mani Shankar Aiyar, he has only the LNG deal with Iran to show for it. Of course, there is a feeling within the oil sector that the oil diplomacy will deliver in the long run. As IOC CMD S Behuria says, 8216;8216;Long-term strategies need to be evolved. There is no short-cut solutions on the issue of oil security.8217;8217;

But the turf war between the oil and external affairs ministries is not helping matters. Be it the Indo-Pak-Iran pipeline or the Myanmar-Bangladesh-India pipeline, projects are not moving on the fast track8212;and the differences in positions between the two ministries is a crucial reason.

Gas in the neighbouring countries of Iran, Bangladesh, Myanmar is enough to see India through for some time. As a senior official in HPCL points out, 8220;While it makes sense for us to pursue equities in Caspian region and other countries, the thrust should be to reach the gas available with the neighbours8221;.

Strategic reserves: The issue of building up a strategic reserve to meet contingencies and also to handle the issue of price volatility in the international market has been only on paper for long. Though India plans to build a strategic reserve of 5 million tonnes there is a recommendation that this should be hiked to 10 million tonnes, the project is stuck on the issue of funding.

Story continues below this ad

Says Behuria, 8220;Strategic reserve is not taking off mainly on the issue of funding of the project.8221; However, globally, there are enough examples of strategic reserves have taken off and various modes of financing are available. 8220;We can take up the cases of these countries and evolve a financing model,8221; says Kaul.

Internal security: The recent finds of GSPC, Cairn and Reliance have shown that assets within the country are plenty and need to be tapped.

8220;Upstream firms need to stress more on R038;D to tap the potential oil and gas. But if pricing policies force them to use reserves for sharing under-recoveries of the marketing firms, investing in R038;D and other activities goes down,8217;8217; says a senior HPCL official.

Finally, on renewables, The search for alternative sources of energy can hardly be overstressed. However, the bio-diesel project is yet to take off as the two ministries, agriculture and rural development, continue to be a loggerheads as to who should be the nodal ministry.

Story continues below this ad

In short, India8217;s energy security can8217;t be ignored.