The story of India's failure to drill its own oil in 9 charts

Even as global crude oil prices and Indian retail fuel prices continue their journey skywards, the Indian government and 
respective state governments seem to be following a wait and watch policy on tax cuts to moderate spiraling petrol and diesel prices. That whenever OPEC pulls the harness, India feels the pressure is well known. India’s dependence on global crude oil is also a testament to the sorry state of affairs its own energy exploration industry finds itself in. The New Exploration and Licensing Policy (NELP) adopted by the government in 1997 has done little to strengthen India’s energy security by ramping up domestic production, find new oil reserves and operationalize more oil wells and blocks. The Modi administration introduced the Hydrocarbon Exploration and Licensing Policy (HELP) on October 15, 2015 – the birth date of former Indian President APJ Abdul Kalam. The policy that aims to ease things for those involved in oil exploration in India eliminates the need to pay oil cess, 100 per cent participation by foreign companies in exploration, single license for conventional and non-conventional hydrocarbon exploration and eliminating restrictions on exploration activity during the contract period for an energy company. Business Standard analysed the exploration and discovery of oil in India over the last decade and what emerges is a story of massive failures and unimpressive achievements in securing the country’s energy security. The story of the sorry state of India’s oil exploration can be told in the following nine charts.

Chart 1: How much oil does India really have?

India’s reserves of crude oil have more or less remained the same over the years. Various phases of NELP have helped in increasing in-place crude oil reserves but over the last few years, these reserves have fluctuated while India’s recoverable reserves quite naturally have fallen consistently.

Chart 2: How much oil does India really produce?

While India has consistently followed the principle of strategic exploitation of energy resources with the aim of future conservation, its domestic production has virtually stagnated over the years as is evidenced by the charts below.
Chart 3: Who produces how much of India’s oil?

While foreign energy companies like Cairn, British Petroleum, Shell and Focus along with Indian energy majors like Reliance and Essar have partaken in oil exploration, a bulk of the oil is still produced by state owned Oil & Natural Gas Corporation of India (ONGC). As is evidenced by the chart below, ONGC, Oil India Limited and private companies have failed to augment their production over the years.

Chart 4: India’s increasing ‘dry well’ problem

While many companies drill for oil, the number of dry wells over the years has increased substantially. Even though the number of oil wells have increased along with the meterage of these wells over the years, these new oil wells have failed to improve India’s domestic crude oil production

Chart 5: How many new oil wells does India dig?

Given India’s crude oil reserves and the many companies involved in exploration, it is surprising that the number of new wells dug every year has come down substantially. This decline is noticeable in case of both development and exploratory wells across all oil bearing basins in India

Chart 6: Oil drilling contracts: A tale of relinquishments

The enthusiasm for doling out new contracts under various phases of NELP has also shown wide fluctuations. But the most visible characteristic of these contracts have been the sheer number of contracts that have been relinquished because the companies with these contracts failed to find any oil

Chart 7: Billions of dollars of unfulfilled promises

While there has been a great deal of enthusiasm among corporates and state energy companies in the initial years of exploration, this eagerness has drastically waned over the years. Infact in 1999, the actual investment was much more than the promised investment. A decade later the actual investment dipped to zero as evidenced by the charts below

Chart 8: A bird's eye view of India's oil dependency

A look at the chart below shows that crude oil imports in India account for an astounding 87 per cent of the oil produced in its refineries. India's crude oil imports dwarfs its own domestic consumption.

Chart 9: Net result: India at the mercy of OPEC

The net result of the sorry state of exploration and development in India is that the country has become heavily dependent on crude oil. The below chart shows that global crude oil prices have helped in containing the oil bill in recent years but this chart may look different in the times to come.

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