For energy security, way forward is not public or private, but both

Finding cost links two variables: Expenditure on exploration and the size of the discovery. But once exploration is complete, investment decisions are based on the discovery’s size, expected future capex and opex, and anticipated revenues. Past exploration costs matter for calculating finding costs, but not necessarily for deciding whether to develop a discovery. Finding costs can even be effectively infinite where exploration fails; such sunk costs do not determine future investment decisions, though they remain relevant for assessing exploration performance and under cost-recovery regimes, where operators can recover eligible costs.

Privatising an entity such as ONGC would mean more than transferring ownership of one company; it would dismantle an ecosystem of institutions and strategic assets built around it. ONGC holds about an eighth of Petronet LNG and a seventh of IOC. The government would also lose OTPC, the Northeast’s only large gas-based power producer, which serves an important strategic role in regional power supply. Two lesser-known jewels — Dahej SEZ and Mangalore SEZ, among the country’s best-performing SEZs, with which the author was associated as their first company secretary — would also pass out of public ownership. These entities operate at arm’s length from government, but remain available as strategic levers in a crisis. Privatisation would therefore weaken the government’s influence over roughly 40 MMtoe of domestic oil and gas production — far outweighing the proposed strategic reserve capacity.

Strategic reserves and domestic production serve different but complementary purposes. A cavern stores a fixed volume and must be refilled, often at prevailing market prices. Strategic reserves may generate revenue, but their primary purpose is insurance against supply disruptions. A producing field serves a different, longer-term function: It reduces India’s import requirement every year over the field’s life and provides additional resilience during disruptions. As a major energy importer, India could also require long-term suppliers to maintain strategic stocks earmarked for Indian markets, either in their home countries or at suitable overseas locations. This could be a soft obligation or a contractual condition for long-term offtake agreements. Such an arrangement could reduce the cost of building storage capacity in India while strengthening supply resilience and providing greater certainty during global energy disruptions.

India’s oil and gas exploration was constrained less by geology or technology and more by limited access to prospective areas. That constraint has now eased substantially, with 99 per cent of the offshore no-go areas cleared and nearly 1 million sq km opened for exploration. Seismic surveys can identify prospects that may yield discoveries over several years, while advances in technology can improve recovery from existing fields. Where specialised expertise is needed, PSUs such as ONGC can partner with global firms, as demonstrated by its 2025 Mumbai High technical services agreement reportedly helping moderate production decline.

The column’s own diagnosis goes against its remedy. If geopolitics can disrupt maritime routes, weaponise chokepoints and sharply reduce shipping through the Bab el-Mandeb, energy security cannot be left entirely to market incentives. State-owned producers give governments strategic room to act — maintaining output despite weak prices, redirecting supplies or absorbing temporary losses. In such an uncertain world, sovereign capacity is not a liability but an asset.

Renewable energy and domestic fuel alternatives must be central to India’s energy security strategy. Ethanol blending, which has reached 20 per cent well ahead of the 2030 target, has already displaced 310 lakh tonnes of imported crude, saved over Rs 1.90 lakh crore in foreign exchange, transferred more than Rs 1.6 lakh crore to farmers and avoided over 930 lakh tonnes of CO2 emissions. Unlike strategic storage, which provides a buffer against disruption, domestic blending reduces dependence on imported barrels altogether. These initiatives can underpin a more secure, low-emission energy transition, provided they are expanded through careful planning, stakeholder coordination and calibrated implementation.

India must pursue a two-pronged strategy: Strengthen domestic production while expanding strategic reserves. This makes it essential to reinforce proven producers such as ONGC and OIL, rather than privatise them in ways that could dilute their strategic focus. However, even under optimistic scenarios, India will remain dependent on imported energy for years and must build adequate storage capacity to withstand prolonged disruptions. The government need not interfere in day-to-day operations, but it must retain the instruments needed to guide the energy value chain in the national interest. The way forward is not either public or private, but both: Back institutions that have delivered over decades while creating space for new players in exploration, production and storage. The recent crisis only underscores this dual imperative: Strengthen strategic institutions and build reserves capable of absorbing shocks larger or longer than those India has faced before.

The writer is former chairman and managing director, ONGC