Barmer, Rajasthan: India’s biggest oil find in decades is now on stream but the country, with its growing economy, will still be one of the hungriest consumers of foreign crude, analysts say.
Prime minister Manmohan Singh turned on the tap at the weekend to start crude gushing from the UK exploration company Cairn Energy Plc’s oil field in western Rajasthan.
Energy security: Prime Minister Manmohan Singh inaugurating Cairn India’s oilfields in Barmer, Rajasthan, on Saturday. Vijay Verma / PTI
“We dedicate this oil to the nation,” declared Rahul Dhir, head of Cairn’s India unit, at the ceremony that underscored the importance India attaches to energy security to drive economic growth.
Cairn surprised the world in 2004 with the discovery of the Barmer field in an area written off by Anglo-Dutch firm Royal Dutch Shell Plc.
The field contains some 3.5 billion barrels of oil, of which it is technically feasible to recover at least 1 billion barrels.
Edinburgh, UK-based Cairn expects the discovery, which lifted it from relative obscurity into the FTSE 100 Index of UK’s top firms, to raise India’s oil output by at least 20% based on current production.
The oil fields will cut India’s oil import bill by 7%, or $6.8 billion (Rs33,252 crore).
But the increased production, expected to come fully on stream in 2011, will come nowhere near to plugging the crude supply gap, analysts say.
“As India’s economy grows, the country is only going to need more oil,” said Deepak Pareek, energy analyst at Angel Broking Ltd. “The Cairn find is a step in the right direction but as demand keeps growing we need to make more similar discoveries to make us more self-sufficient.”
Asia’s third largest economy of nearly 1.2 billion people already imports 70% of its oil needs and experts believe that figure will hit 90% by 2030.
Already among the world’s top 10 oil importers, India is expected to become the world’s fourth largest by 2025, US government data show.
India’s fuel thirst has shot up as rising incomes have spurred industrial demand.
Oil now makes up 31% of India’s energy consumption while coal supplies over 50%. Natural gas furnishes about 8% of India’s energy needs.
The country’s economic expansion has slipped back to around 6% due to the worldwide slump, but the government hopes to steer the country back to its previous 9% growth trajectory as soon as the global economy picks up.
India has made energy security one of its national priorities, as it is unwilling for the country’s economic prospects to be dependent on the vagaries of the foreign crude market and sometimes unstable political regions.
It presented its recent landmark nuclear deal with the US. which ended its atomic pariah status and gave it access to civilian technology, as a step towards that goal.
It is also seeking to develop other energy sources such as wind and solar power and has become one of the world’s most aggressive seekers of foreign oil and gas properties.
Experts say it will take years for alternate energy forms to have any significant role in supplying India’s fuel needs.
The government has been staging roadshows internationally to seek bids for the right to look for oil and natural gas in parts of the country as it plans India’s largest ever auction of 70 exploration blocks.
Interest has been keen, with those attending including firms such as Exxon Mobil Corp. and ConocoPhillips Co. of the US, UK’s BP Plc and BG Group Plc, and France’s Total SA, junior petroleum minister Jitin Prasada said last week.
Prasada said there had been a change in perception about the possibilities of discoveries in India after recent large finds by Cairn, Reliance Industries Ltd and state-run Oil and Natural Gas Corp. Ltd. “All of these explorations are required, but on their own none of these efforts can plug the huge gap that India has in terms of oil consumption,” said Kumar Manish, associate director at global consultancy KPMG.