Govt taking strenuous steps to scale up oil exploration, production: Oil Minister Puri

Union Minister Hardeep Singh Puri

India’s energy story is unfolding, with unprecedented dynamism and the country is taking strenuous steps to increase exploration and production of crude oil and gas, Union Minister of Petroleum and Natural Gas Hardeep Singh Puri said.

In an interview with Moneycontrol’s Rachita Prasad on the sidelines of ‘India Energy Week 2023’, which started on February 6 and concludes on February 8 at Bengaluru, the minister spoke about India’s fuel sourcing strategy, losses made by oil marketing companies (OMCs) and the scrapping plans of divesting state-owned BPCL.

In a first, the minister also clarified on the Union Budget announcement of an allocation of Rs 35,000 crore for energy transition and energy security, which was speculated to include a compensation of Rs 30,000 crore given to OMCs.

Edited excerpts:

Your ministry has worked hard on India Energy Week. Looking at the turnout, what has been the most exciting part about this week?

Two things. One is that, for an event like this, and that too for the first-time staging of an event like this, a lot of planning, thought, and conceptualisation have gone into it. And you can see the result. You have ministers from 35 countries, and representatives from 50 countries.

There is no big oil and gas company in the world whose CEO or somebody very senior is not here. There are 6,500 exhibitors. But I don't think that's because of only good planning or logistical efforts. It's also because of what India is today. India is the place where the energy story is unfolding with a dynamism, which is unprecedented. What do I mean by that? One is increasing demand.

Our demand today is three times the global growth. We are consuming 5 million barrels of oil in a day. In India, 60 million people go to petrol pumps every day.

If your economy continues to grow at 6.5-7 percent, I don't see why it wouldn't. Your requirement of energy in the coming months and years will increase. In fact, estimates have said that, between 2020 and 2040, whatever growth takes place in the world, 25 percent will come from India.

You have studies which say, by 2040 or thereabouts, India should be a $26 to $27 trillion economy. So I submit to you, if at $3.5 trillion GDP, you are consuming this amount of energy, what if your GDP goes up eight or nine times – to $26 to $27 trillion?

So there'll be demand. But this is not only a country where consumption is going. It's also a country which is making strenuous, comprehensive and bold efforts to increase the area under exploration and production. The Prime Minister has said that out of the 3.5 million sq km of sedimentary basin, we have released 1 million, which used to be a no-go area for exploration and production.

Here is our story on biofuel transition. In 2014, we had only 1.4 percent blending. Today, we are able to achieve 10 percent, five months ahead of schedule.

We brought forward our target for 20 percent blending of ethanol from 2030 to 2025. We were supposed to release E20 blended fuel as a pilot project in April. The Prime Minister did it on Feb 6.

So India is a place where things are happening. Therefore, I'm not surprised that you've got this fantastic turnout. It has truly caught people's fancy. You have noise, you have all the buzz. And I can tell you that this will be an annual event.

PM said, quoting IEA, that energy demand will be highest globally in India in coming years. He spoke about increasing India's has exploration and production. This is something that has been a sore spot for India for a very long time. What are we doing differently?

I don't think it has been a sore spot. I think there has been neglect before the BJP government, especially before Mr Modi's government came in. I mean, if you look at the previous 10 years, they didn't do anything. So you have a situation where -- from 1947 to, let's say, to 2014 -- you've got exploration and production of the available sedimentary basin of 6 percent or so. Why?

Well, there was a point of view, which has been articulated to me shamelessly. It was like, "why do you want E&P? You can very easily import it." I have a different point of view. I would say, "Yes, if prices are very low, import is an option." But you know, energy is a strategic requirement. Suppose somebody cuts off your supply, what will you do?

That's why any country, which is a large consumer, also needs a strategic reserve. That's why we are also talking in terms of increasing the size of our strategic reserve.

When the crisis situation was on, you know what we did? As a consuming country, we put some stock into the market. We only released, I think, 1.5 million barrels. But the US and other countries released larger amounts. The point I'm making to you is that energy, and I don't want this to sound like a cliché, is literally the lifeline of an economy.

If you're a mature country, as India is, we are slowly but surely ensuring that the transition takes place. You're stepping on compressed biogas, green hydrogen, and second and third generation biofuels. Now, what is the value of an event like this? This is the first event, and we'll make it an annual event. Next year, it’s Goa. And instead of planning, let's say, to visit X or Y, you can go to India Energy Week and meet all of them under one roof. Plus, it's an interesting place.

I've travelled all over the world. It was quite an extravaganza. So visitors come. They're exposed to Indian culture, they imbibe a little bit of the place. And I think Indian cities set themselves up as fantastic venues.

One aspect where your government moved very swiftly was in buying discounted Russian crude oil when it was available. Now, since gas prices have softened, is it a good time to get into long-term contracts to procure more gas globally? What is your stance?

You know, I'm a guy who always puts in a counter-narrative. When you say prices are going to go down, prices will come up also. You have to deal with particular phases. I mean, at the height of the pandemic, the price of oil went down to $19.56 per barrel. Then, when economic recovery took place, it went up to $120. It's at $80 to $82 today.

How long will gas prices remain high? I mean, if you listen to the producers, they will say, "You know, they're going to be high till eternity." I'm not so sure. Yes, prices are high. There are issues of access. We need to work on supplies. But do you need to sign really long-term agreements? Or are you better off watching how the prices move going ahead?

Or maybe, as you should, I think, have a long-term agreement linked to the price of oil. You can have a long-term agreement and you can have a safeguard there.

Is there a plan in place for that?

Yeah, we have arrangements. I think we already have arrangements with Qatar, the US, etc. We're looking at all these things very carefully. So far, we've got our decisions right.

You've been interacting with energy ministers from across the world who have come here. You also had a meeting with OPEC representatives. What are the discussions looking like? What is their outlook on crude prices?

I'm not into all this crystal-ball gazing. I have a very simple, somewhat simplistic, if I may say so, approach. In whose interest is it for oil prices to go sky-high? Certainly, it cannot be in the interest of the producing countries. Because if you peg oil at a point where it's exceptionally high, you are fuelling inflationary tendencies.

If you fuel those inflationary tendencies, after the stimulus packages, etc., with high oil prices plus high interest rates, what will happen? Even if a recession is not to take place, it will take place. So I think sensible people sit down and say, "All right, you want a good return on your oil, but you don't want the good return in such a way that an unintended consequence is that the acceleration to green energy becomes that much faster." That is what has happened. We have never told any producing country to please sell reasonably.

We don't do that. It's your sovereign asset. It's your sovereign right to sell. But there is a consequence, both intended and unintended, of all your actions. Unintended consequence could be the global economy, which is already, I spoke yesterday about a deceleration for the third time in a decade, down to 1.7 percent.

If the price goes high, you go into recession. And the capital ‘R’ word is not good for anyone. It's not good for the economic recovery of developing countries as well. So I don't think it's in anybody's interest to allow that to happen. In fact, whatever they say about, you know, not enough investment etc…, all that is good. But we have to look at it in terms of navigating through the real world.

The Union Budget has earmarked for your ministry Rs 35,000 crore towards energy transition and energy security. There is a lot of curiosity on what is going to happen on this. In fact, we asked the FM and she said that it is more for petroleum and petroleum products, and that the ministry will plan it. Give us some sense on what it is.

Some of it is there already. Out of that Rs 35,000 crore, I think Rs 5,000 crore is earmarked to augment the Strategic Petroleum Reserve. The other one, I think yes, the finance minister is right. It is capital expenditure. It is also, in a way, an infusion into oil companies and green energy transition because they have been taking a beating on so many things. At the end of the day, it's kind of money availability, but it is capital expenditure in green energy transition.

The Rs 30,000 crore you're talking about, is it compensation to OMCs?

I wouldn't call it compensation. What happened on gas compensation is that they lost Rs 28,000 crore. We gave them Rs 22,000 crore. This is more capital expenditure and infusion. I mean, if you're running a business, like Indian Oil. on a good day, Indian Oil makes a lot of money. Then when prices hold, they will have under-recoveries on both petrol and diesel. On petrol, there is no under-recovery now. There is still under-recovery on diesel.
But you know, money goes into one pocket for capital expenditure, and they're doing a lot of green transition. I mean, they're moving into green hydrogen in a big way. Whether they spend it here or there, doesn't matter.

Just for clarification, the Rs 30,000 crore that was announced earlier to be given to the OMCs… is it the same amount?

No, this is a separate budgetary allocation. But don't look at that. Also look at the Rs 19,700 crore in the cabinet decision on, what's it called, catalyser production for PLI. Also, look at other things in the budget. There is a 5 percent compressed biogas blending mandate. So there's a lot of things. It is a green budget.

One question that has been on everybody's mind. You were the force behind Air India divestment and BPCL was something…

A: No, BPCL is not on the table. After our last experience, let me tell you, very frankly, BPCL has rendered a human service. BPCL, IOCL and HPCL. Just imagine, we have 77,000 pumps in the country. Out of them, 22,000 are in the private sector. In the private sector, some pumps were not selling at the cushion rate. So now, nobody is talking about BPCL anymore.

In your ministry, are there any other divestment opportunities you would be exploring?

And a very strategic one. So just now we are concentrating on green energy transition.

You have been a strong supporter of the OMCs and you've been talking about the losses they have made, and you have said, time and again, that we have to take care of them. Now, with…

You know, the OMCs raise money from the market. They are answerable to the taxpayers. You know why they're doing well or the profits are coming in again? Because the signal to the market is that the government… when a minister speaks, the government is backing them up. We must not let them sink. We are doing what we have to, to support them.

Since there are under-recoveries in diesel, as you mentioned, is there a possibility of any further financial support?

No, if prices remain like this, even diesel under-recoveries will stop. It doesn't matter, you make money out of one pocket and the other one doesn't matter. I meet them every day, and they whine and rightly so. After a while, they also understand that I have a job to do. I can't go to the Finance Minister with request for compensation every time. Look at the increase in the capital expenditure budget, overall. I mean Rs 10 lakh crore, you know what that means? A 33.3 percent increase in capital expenditure. Oil companies gain from that also. I mean, cement will gain, steel will gain, transporters will gain. India's consumption is way beyond pre-COVID level. So, you know, this is the game, and if you're a good corporate citizen, and you have a not so good day, you make a whopping profit the next day. So that's the spirit in which it's done.