A recent report by the International Energy Association predicts that the US, currently a net importer of oil, is likely to turn self-sufficient in a little over two decades from now—a position it lost in the 1950s. In the process, it could well surpass Saudi Arabia and Russia as a producer of oil.
This outlook is testimony to the success of the US energy policy in the domestic arena. For it has fostered technology and capital into unconventional means of striking oil and gas when conventional means have failed. Fracking, a technology that uses high pressure to break oil-bearing rocks, has virtually spread across several states in the US. Though it is a high-cost venture that produces little more than homeopathic doses compared with the drilling efforts in deep waters, it is leading the US to the verge of self-sufficiency. High oil prices are now driving investors to look at directing these efforts to extract oil from rocks, which is a more expensive affair than gas.
But this is hardly about market performance and pricing. Consumers enjoy gas at less than one-fourth of import costs, since exports are virtually banned; only one terminal is allowed to sell outside the country, with several waiting for permission. Hence, the low price of natural gas.
The lessons for India are many. In the late 1970s, the country had sharply closed in on the supply gap with the Bombay High find. Since then, we haven’t had a big oil strike and the supply gap is only widening. The results of the New Exploration Licensing Policy, which was introduced at the turn of the century, have been dismal.
These developments failed to catalyse investor interest, especially from the global oil companies. What is needed now is an open pricing exploration policy that offers a generous, yet stable regime and allows ONGC to bid aggressively only on an accountable basis. India needs help on this count to discover and exploit “harder finds” in geologically challenging terrains. It has plenty of experience in plain vanilla drilling and exploration techniques. Now it needs something else. Only this will take it in the direction of self-sufficiency.
What should India do to improve the chances of hydrocarbon discovery?