OVL unlikely to meet energy sourcing targets

OVL unlikely to meet energy sourcing targets

New Delhi: The overseas arm of state-owned Oil and Natural Gas Corp. Ltd, ONGC Videsh Ltd, or OVL, says it may not be able to meet its target of acquiring 60 million tonnes per annum, or mtpa, of equity in overseas assets by 2025, raising concerns on India’s energy security.

“This target, which is also our mission statement, looks very very challenging," said a senior OVL executive who asked not to be named. With crude oil prices averaging $140 (Rs6,049 crore) per barrel and showing no sign of cooling, achieving the target looks unlikely, he said.

India—world’s fifth largest energy consumer—imports 75% of its requirements and accounts for some 3.5% of global consumption. It uses about 112mt of petroleum products a year.

India’s petroleum consumption is expected to rise to 135mtpa by 2012, according to International Energy Agency. It will become the world’s third largest oil importer after the US and China before 2025, with its energy demands expected to more than double by 2030, the agency estimates.

With global prices of crude oil on an upswing, developing economies such as India and China are racing to acquire equity stakes in hydrocarbon blocks overseas. India has on many occasions lost out on acquisitions to China in Kazakhstan, Nigeria, Angola and Myanmar.

“Gaining control of resources has become a higher priority among developing nations. As the industry progresses further into the current cycle of resource nationalism, most have restraints which limit ownership of hydrocarbons to state-owned enterprises, said Deepak Mahurkar, associate director, oil and gas industry practice, PricewaterhouseCoopers.

“While some of the access-restricting groups have begun to allow limited access, others are moving in the opposite direction, further reducing private sector opportunities. Thus, OVL is the best company that can help India achieve energy security by leveraging inter governmental relationships which the private sector can’t."

OVL has participated in 38 projects in 18 countries and produced 8.8mt of oil equivalent in 2007-08.

“Our consumption of oil has been on the increase. Till the mid of 1980s, we had been self-sufficient to the extent of 70% in oil. Today, we are importing around 75% of our oil requirements," oil minister Murli Deora said at the recent ministerial session of the 19th World Petroleum Congress held in Madrid, Spain.

This is not for the first time that an Indian public-sector utility said it will be unable to meet its targets of acquiring equity stakes in hydrocarbon assets overseas. Mint had reported on 19 February that state-owned oil refining and marketing firm Indian Oil Corp. Ltd will not be able to meet a 2012 target of sourcing 2mtpa of crude from its overseas fields.

India’s oil imports between April and December 2007 were worth $54.4 billion, 23.7% higher than imports over the same period in 2006.