Continued policy support has strongly contributed to the growth of the oil and gas sector. Upstream initiatives have improved domestic production in the past few years. Meanwhile, the city gas distribution (CGD) network has expanded rapidly owing to the recent bidding rounds and authorisations. Digitalisation has become central to the sector’s operations, with the industry deploying technological solutions for asset maintenance, leak detection, etc. Against this backdrop, Ranajit Banerjee, Advisor, Energy and Infrastructure discussed the sector’s growth, key challenges, notable policy measures, and future trends…
How has the oil and gas sector evolved over the past few years? What have been the key sector milestones?
The most significant development in the gas sector has been the proliferation of transmission pipelines and CGD licences. The establishment of a market mechanism has also been noteworthy, although it is fairly small, relatively speaking. However, the heavy hand of regulation and administrative price determination for a large chunk of domestic players have played spoilsport.
What are the biggest challenges that the sector faces today?
The gas sector has the twin problems of limited domestic production and huge import dependence. Domestic gas production remains stagnant and imported gas is highly cyclical. The sector is between a rock and a hard place. Further, open access to pipes exists only on paper.
What are your views on the initiatives being taken to reduce the country’s import dependence?
While the Hydrocarbon Exploration and Licensing Policy and Discovered Small Fields policies were targeted to give a boost to domestic exploration and production (E&P), they have not yielded any visible material success in oil and gas production so far. There is a huge regulatory overhang and a significant lack of dispute resolution initiatives. National oil companies’ (NOCs) production growth has also been unremarkable. Moreover, foreign capital and technology flow has not happened. The problems are technical as well as contractual. The windfall tax has sounded a warning bell for foreign investors to cover political risks. While we have improved access to acreages, there is still a need to assure capital against political risks related to contract frustrations.
E&P NOCs have been trying to induct technology partners for their strategic operations. But there is very little success to announce. The E&P space thus does not present a promising picture. A major influx of investments and technology into offshore acreages in the next couple of years is our only hope for a turnaround in the sector.