• Import dependence rises as crude oil & gas output declines

    Crude oil and gas output has declined in the first quarter of the current fiscal year, further increasing India’s dependence on imports to meet its energy needs.

    Crude oil output fell 6.8% to 8.2 million metric tonnes (MMT) while gas slipped 0.5% to 8.03 billion cubic meters (BCM) in the first quarter from a year earlier. This raised India’s import dependence in oil to 85.2% from 83.8% in the yearago quarter. In gas, it increased to 50.4% from 48.7%.

    Crude oil output in April-June shrank 4.74% from a year earlier for ONGC and 6.8% for Oil India. For private operators, the fall was sharper at 6.8%. Natural gas production rose 3.7% and 1.5% at ONGC and Oil India respectively during the quarter but this was more than offset by declines at private operators such as Reliance Industries and Vedanta where output slipped 18%.

    India has struggled to raise its oil and gas output for years. Policy reforms and initiatives by explorers in recent years have had little impact on output, leaving the country dependent on foreign suppliers and vulnerable to the geopolitics of the international oil market. Dependence on oil imports hurts local currency and affects the trade balance.

    India will likely spend Rs 800,000 crore on oil imports in 2019-20, as per an oil ministry’s estimate that assumes an oil price of $66/barrel and average exchange rate for Rs 71 against the dollar. In early 2015, Prime Minister Narendra Modi had set a target of cutting oil import dependence by 10% from 77% then. But imports have increased as output in ageing fields is falling and there are no major discoveries.

    The less-than-projected output from fields, operational difficulties, delay in drilling new fields and less offtake by consumers in some regions together contributed to production decline in the April-June quarter, according to the monthly production report from the oil ministry.

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