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Journalism of Courage
The policy oven will be working overtime for the oil and gas sector in 2005. With inflation worries always a factor, the government will face an uphill task in trying to gradually switch over from a price-controlled mechanism to a market-linked pricing system.
Tough, as international crude oil prices are expected to rule high at around $35-$45 per barrel.
Says S. Behuria, CMD, BPCL: “Demand is going up and political uncertainity in Iraq, Venezuela and Nigeria will continue — prices are expected to rule high, though with less volatility.” Adds ONGC’s Subir Raha, ‘‘Uncertainities will also lead to a hike in freight rates, which will push up prices further.’’
So the government will have to evolve a pricing mechanism that will protect consumers from high prices without eating into margins of oil firms.
While duty rationalisation on both crude and petroleum products is expected in Budget 2005, the oil firms are also hopeful of clarity in sharing of under-recoveries on LPG and kerosene.
Of course, a regulator for the sector needs to be in place quickly, as 2005 will see private players — including Reliance, Essar and Shell — pushing hard to expanding their retail networks.
The government will also firm up a view on the restructuring of the oil PSUs with the Committee set up by the petroleum ministry expected to give in its recommendations during the year.
The industry also expects some movement on setting up of the strategic reserves.
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IN THE BARREL
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• International oil prices expected at $35-$45 per barrel, but volatility to reduce |
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The government is also expected to attempt reducing the country’s dependence on imports of crude by launching the fifth round of NELP in January.
To top it all, the government’s recent efforts to secure oil equity abroad might just pay off. OVL is going to be the key player here. Says Subir Raha: ‘‘Foreign service has been very pro-active, and next year we expect some developments in Vietnam, Sudan. Remember, we also have a $5-billion investment committment.’’
Refinery capacity in the country is expected to go up by 11.1 mmt during the year from the present 127.37 mmt per annum.
On the gas front, major policy initiatives expected during the year include gas pricing and pipeline policies.
As Gail Chairman and Managing Director Proshanto Banerjee puts it, “Gail expects a nodal agency and strongly favours building the National Gas Grid.’’
Gas, which most point to as the fuel of the future, is clearly going to attract a whole lot of attention.
