Impact Of Increasing Crude Oil Prices On Indian Industries.

1566 words - 6 pages

Impact of increasing crude OIL prise on Indian industries.India is an energy importing country, primarily of oil and soon of gas. Its imports are growing while its domestic production lags behind the fast pace of demand growth. The Indian government is conscious of the need to diversify its sources of supply and also to boost domestic supply of primary energy as well as final products (LPG, kerosene, natural gas, lubes, etc.). On the exploration and production front, developments are slow. They reflect in part the state of India's oil and gas reserves: mature fields, limited reserves or costly new developments. The response on the front of products is better and India's refining capacity is growing rapidly. Similarly, public and private companies are investing large amounts in the development of LNG terminals in order to be the first able to capture part of the Indian gas market.This has a number of implications:1. India's energy security is at stake and the country could play a leading role among developing countriesto set up emergency preparedness mechanisms.2. The need for reforms in the oil sector is all the more pressing to improve resource allocation forinvestments and rationalise consumption. In the gas sector, and in particular in the LNG sector, a gaspolicy is yet to be defined, facilitating firms' investments.3. Last but not least, a growing consumption of oil and gas translates into larger CO2 emissions. ThoughIndia's emissions per capita are among the lowest in the world, total Indian emissions are already largeand growing rapidly, in particular from the consumption of oil and gas, but also from coal combustion5.Power production from gas could provide a lower emission production trend than from coal, providingSufficient investments are available to be carried out.OilOil accounts for about 30% of India's total energy consumption. The majority of India's roughly 5.4 billion barrels in oil reserves are located in the Mumbai High, Upper Assam, Cambay, Krishna-Godavari, and Cauvery basins. The offshore Mumbai High field is by far India's largest producing field, with current output of around 260,000 barrels per day (bbl/d). India's average oil production level (total liquids) for 2003 was 819,000 bbl/d, of which 660,000 bbl/d was crude oil. India had net oil imports of over 1.4 million bbl/d in 2003. Future oil consumption in India is expected to grow rapidly, to 2.8 million bbl/d by 2010, from 2.2 million bbl/d in 2003. India is attempting to limit its dependence on oil imports somewhat by expanding domestic exploration and production. To this end, the Indian government is pursuing the New Exploration Licensing Policy (NELP), first announced in 1997, which permits foreign involvement in exploration, an activity long restricted to Indian state-owned firms. While the initial response to the 1999 tender was disappointing, with no bids received from the major multinational oil companies (causing an extension of the deadline for submission of...

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