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In an attempt to work out a compromise between Assam and Nagaland to restart production from Oil and Natural Gas Corp.’s (ONGC) wells, the Union government is exploring parking the royalty from the oil wells in an escrow account till a border dispute between the states gets resolved, said two government officials aware of the development.

Since June, the border dispute has stopped the state-owned explorer from drilling and exploration activities in the area claimed by both states. This comes against the backdrop of festering tension between Assam and Meghalaya that resulted in clashes and deaths.

In response to Mint’s query, an ONGC spokesperson in an emailed response said, “Three wells are impacted due to the above-referred stoppage of ONGC activities." “The three wells are Khoraghat#10z, Khoraghat#48 and Nambar#05," the spokesperson said in the emailed response and added, “ONGC is actively pursuing the matter with the government of Assam for an early resolution."

India’s oil and gas production fell by 5.22% and 8.06%, respectively, in the year ended 31 March. Crude oil production continued to falter in July, with output down 3.22% from a year earlier.

However, according to the monthly production report released by the oil ministry, there was an 18.4% increase in gas production in July.

“We will get it sorted out. The question is who gets the royalty from these wells that are being questioned. We are working on getting this resolved. We are saying put the royalty in some account, but let the production begin. Something on the line of an escrow kind of an account till the Union government takes a decision. The states have not said yes. States have problems because of border disputes," said a Union government official, one of the two people cited above, requesting anonymity.

Queries emailed to the spokesperson of the Union petroleum and natural gas ministry on Thursday remained unanswered till press time. Mint couldn’t contact the spokespersons for Assam and Nagaland governments.

“There is an ongoing dispute at the border between Assam and Nagaland. Assam says it is my area. Nagaland says the people there are Naga-speaking, and it is their area. Assam claims it as their land. Because of these differences, there is no production happening there," said the senior Union government official, one of the two people cited above.

The production has stopped due to protests by local villagers, said the second person, who also did not want to be named.

With India’s domestic energy production being low, energy security is an important focus area for the government, as was articulated by Prime Minister Narendra Modi in his Independence Day speech on 15 August.

“India has to make a resolution to make India energy independent before the completion of 100 years of independence," Modi said in his speech.

India spent $101.4 billion on crude oil imports in 2019-20 and $111.9 billion in 2018-19. It is a key refining hub in Asia, with an installed capacity of more than 249.36 million tonnes per annum (mtpa) through 23 refineries.

Diversifying India’s energy basket with crude oil supplies from non-Opec sources is part of India’ energy security efforts. India is also tapping new sources such as Guyana. Following the covid outbreak, prices for the Indian basket of crude had plunged to $19.90 in April last year during the first wave before recovering to $73.54 a barrel in July, data from the Petroleum Planning and Analysis Cell showed.

India spends around 12 lakh crore annually on energy imports.

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