Prime Minister Narendra Modi
in his inauguration speech at the Petrotech
Summit on Monday emphasised the need for reasonably priced energy. "Energy is a key driver of economic growth. Sustainable, stable and reasonably priced energy is essential for the fruits of economic development to reach the bottom of the pyramid. Hydrocarbons will remain the most important source of energy for many years to come," said PM Modi in his speech at the event.
Union petroleum minister Dharmendra Pradhan
followed a similar theme on oil
pricing. "It is a coincidence that we are meeting immediately after the Opec
(Organization of the Petroleum Exporting Countries) decision in India, which is a major oil-consuming economy. I want to submit before this august gathering that for the sustainability of the oil
markets, we must strike a balance of interest between producers and consumers," he said. He added the fall in oil
prices in the past two years came as a timely relief for Indian economy and consumers.
In the past two years, India, too, has steadily increased various duties related to petroleum products including excise duty. Lower oil
prices allowed the country to increase these. However, a reversal in trend may require a reversal in the duties to ensure energy prices continue to remain reasonable in the domestic market.
"Consumption of petroleum products is price-sensitive as there is a genuine issue of affordability for a sizeable population in India and other developing countries. Hence, while deciding the pricing aspect of crude oil, it should be factored in that the security of supply must, in turn, be matched by the security of demand," Pradhan added.
However, Mohammed Sanusi Barkindo, general-secretary at Opec, warned of implications over lower oil
prices. “From past examples, low prices have achieved only one thing – they cut down investment."
In a report, Boston Consulting Group has said there is an opportunity for countries such as India in a low oil
price cycle. “In the current oil
price decline, Indian oil
companies could leverage their financial strength to selectively invest in resources where foreign upstream players are financially squeezed. The key driver for these investments would be to ensure India’s energy security for the future. The investment strategy should focus on acquiring assets that offer minimal risk at a good price — ideally, producing assets that are distressed.”
Pradhan pegged India's investment needs at $600 billion across the hydrocarbon value chain up to 2030.
In his speech, PM Modi further said India's economy was expected to grow five-fold by 2040 and demand from transport infrastructure including commercial vehicles and the aviation market was also likely to drive demand for energy manifold.
Modi reiterated the country's targets to reduce dependence on imports of oil
by 10 per cent by 2022. “This will have to be achieved during a period of increasing oil
consumption," Modi added. Pradhan said based on the government's assessment, the ministry was on track to achieving these targets.
Modi said the newly formulated Hydrocarbon Exploration and Production Policy would help address the present investor concerns in the oil
industry. The PM also emphasised on increasing foreign -domestic partnerships in the country. "I hope that our oil
sector companies will take the opportunity to tie up with their foreign counterparts to explore for more equity oil.
In October, a Rosneft-led consortium had agreed to pick a majority stake in Essar Oil
for its refinery and related assets at an enterprise value of $12.9 billion.