For India’s energy sector, the past year held promise, thanks to a commendable fall in electricity shortage, a global recognition for the country’s focus on renewables, a grand plan to shore up the finances of
state-run utilities and a sharp fall in the cost its oil import basket
to the lowest level since 2014.
At the same time, there were some misses
as well, notably on the oil exploration front which still awaits the
new policy for auction of oil and gas blocks and the announcing of the
premium to be paid on natural gas for all new discoveries in difficult
deep-sea areas.
The government, late in the year, did
manage to circulate a consultation paper inviting comments, about easing
doing business in exploration that proposed to free domestic natural
gas pricing and replace the existing production sharing contract by the
revenue-sharing model for all future hydrocarbon acreage auctions.
The price of domestic natural gas fell
this year on applying the NDA government’s new formula for calculation,
and was cut 18 percent, from $4.66 per unit to $3.82 per unit, for six
months starting October 1.
What defined India’s petroleum sector in
2015 was the plunge in global crude oil prices driven by a supply glut
that saw the Indian basket of crude oils fall by over 60 percent from
levels of well over $100 a barrel to less than $35. While this reduced
foreign exchange outflow and improved the country’s current account
deficit position, producers piled up major inventory losses.
In the second half of the fiscal, the
government approved auction of 69 small and marginal oil and gas fields
on a new revenue sharing model, where bidders will quote the revenue
they will share with the government at both low and high ends of the
price and production band. The new revenue sharing model will replace
the controversial production sharing contracts (PSCs) – by which oil and
gas blocks are awarded to those firms which show they will do maximum
work on a block – that has governed bidding under the earlier nine New
Exploration Licensing Policy rounds.
Domestic gas producers continued the
wait for a decision pending from the year before. While approving a new
gas pricing formula in October 2014, the government had decided that new
gas discoveries in deep-water, ultra-deep sea or high-temperature and
high-pressure areas will be given a premium over and above the approved
price.
The year also saw Reliance Industries,
which had made four consecutive gas discoveries with close to 500
billion cubic feet of in-place reserves, surrendering its Krishna
Godavari basin gas discovery block, KG-D3, owing to operational
restrictions placed by the defence ministry.
Moving to the wider energio scenario,
the country’s electricity shortage also fell to its lowest level ever
from 8.5 percent in 2011 to 2.4 percent in October, while the peak
shortage dipped to 3.2 percent from 10.6percent, as per official data.
The focus, nonetheless, was in the renewable energy space.
At the beginning of 2015, the Government
has up-scaled by more than double the targets set for renewables at 175
GW by 2022 — which includes 100 GW from solar, 60 GW from wind, 10 GW
from bio-power and 5 GW from small hydro-power.
“India is graduating from megawatts to
gigawatts in renewable energy production,” Prime Minister NarendraModi
said. India also made a commitment that 40 percent of its cumulative
capacity will be from non-fossil fuel based resources by 2030 if it gets
low cost technology and international financing.
At the UN climate change talks in Paris
last month, Modi launched an alliance of 120-odd nations to tap solar
energy better and asked the rich nations to shoulder their
responsibilities in protecting the environment, with funding and
transfer of clean technology to poor and emerging economies without
further delay.
Oil continued to slide, stepping up
pressure on India to acquire assets abroad and build its strategic
petroleum reserves at home.
The year closed with India signing major
deals last week with its time-tested ally Russia, where the former
returned after six years for a slew of oil deals worth around $2-3
billion. Rosneft, the world’s largest publicly-traded oil company,
formalised sale of 15 percent stake in its subsidiary Vankorneft to ONGC
Videsh (OVL) for $1.3 billion. The deal gives OVL access to
Rosneft’sVanko, Russia’s largest onshore field developed in the past 25
years. This was followed by agreements for giving OVL partnerships in
other onshore fields.
In December, the government allowed Oil
and Natural Gas Corp. (ONGC) to convert Rs.5,000crore of existing loans
to its overseas arm OVL, into equity in order to expand the exploration
and production business abroad, including by acquisition of oil and gas
assets. The company is currently running 36 projects in 17 countries and
has 13 producing blocks.
The year closed also closed with the
realising of a major milestone for the wider region by starting
construction of the long delayed 1,735 km-long gas pipeline from
Turkmenistan through Afghanistan and Pakistan to India (TAPI).
Along with India’s Vice President Hamid
Ansari, others present at the ground-breaking ceremony earlier this
month in Mary in Turkmenstan were Turkmen President
GurbangulyBerdimuhamedow, Afghanistan President Ashraf Ghani and
Pakistani Prime Minister Nawaz Sharif.
Highlights:
* Global crude oil prices plunge from well over $100 to below $35
* Nod for auction of small and marginal oil and gas fields on a new revenue sharing model
* Government proposes replacing production sharing contract by the revenue-sharing model for future hydrocarbon acreage auctions
* Electricity shortage falls to lowest level, from 8.5 percent in 2011 to 2.4 percent in October
* Target for renewable energy production more than doubled at 175 GW by 2022
* Modi launches “solar alliance” of 120 nations to tap solar energy better
* ONGC signs oil deals potentially worth around $2-3 billion with Russia’s Rosneft
* Construction started in December of
the long delayed TAPI gas pipeline from Turkmenistan through Afghanistan
and Pakistan to India.
