Petroleum minister Dharmendra Pradhan said last week that the government will auction un-monetised large oil and gas fields of state-run Oil and Natural Gas Corporation (ONGC) and Oil India Ltd. (OIL) to increase the country’s hydrocarbon production, which has been declining for several years.
“Resources don’t belong to a company. They belong to the nation and the government. They cannot lie with a company indefinitely. If someone does not monetise these resources, new enterprises will have to be brought in (to do so),” Pradhan said during the launch of the third round of auctions for discovered small fields.
What prompted the minister to take a tough stand? Moneycontrol looks into how ONGC and OIL have performed in terms of production over the years.
How India fared in hydrocarbon production?
According to data from the ministry of petroleum and natural gas, domestic crude oil production dipped 20 percent to 30.5 million tonnes (MT) in 2020-21 from 38.1 MT in 2011-12. Even in 1998-99, the earliest year for which data is available, output was 32.8 MT, 7 percent higher than in 2020-21.
Gross production of natural gas slipped 40 percent to 28,670 million metric standard cubic meters (MMSCM) in 2020-21 from 47,555 MMSCM in 2011-12.
While the dismal show in 2020-21 may have been due to the pandemic, crude production was down at 32.2 MT and natural gas at 31,184 MMSCM in 2019-20.
Why is production declining?
A major reason for the declining trend in output is the aging of the fields operated by the public sector undertakings. The companies have also failed to bring large new fields into production.
In addition, India’s hydrocarbon basins are underexplored. Of the 26 sedimentary basins in India covering an area of 3.4 million square km, only nine have been explored.
Another major impediment is the lack of data on potential reserves for undertaking exploration. Based on the latest data, India has in-place resources of about 41.872 billion tonnes of oil equivalent in the 26 sedimentary basins.
How have ONGC and OIL performed?
Crude oil production by ONGC and OIL declined 14 percent to 22 MT in 2020-21 from 25.6 MT in 2011-12. This was a decline of 26 percent from 29.7 MT in 1998-99. ONGC’s output alone declined 28 percent to 19.1 MT in 2020-21 from 26.5 MT in 1998-99.
OIL’s crude production was little changed at 2.9 MT in 2020-21 from 3.3 MT in 1998-99.
Natural gas production by the two companies dropped 6 percent in the past 10 years as demand fell during the pandemic.
According to a plan by the ministry, the government wants ONGC to sell its stake in maturing fields such as Panna-Mukta, Ratna and the R-Series off the Mumbai coast and onshore fields like Gandhar in Gujarat to private companies.
To bring in more technical expertise, it has asked ONGC to tie up with global explorers for the KG-DWN-98/2 block in the Bay of Bengal, where a major increase in output is expected this year or early next year.
For India, natural gas production seems to bring in a glimmer of hope amid this dismal performance. According to government estimates, natural gas production is expected to double to 71.92 billion cubic meters in the next couple of years. A major reason for this would be the new fields in KG basin and those from the first round of the Open Acreage Licensing Policy, which may start in 2025.
The dismal production numbers by the PSUs led the government to look at monetising idle and non-monetised resources, prompting the minister to say that a “chalti ka naam gaadi” (something that is barely working) attitude will not work.