Wednesday, 7 September 2011


We are moving through very interesting times as far as India’s Energy scene is concerned. In the last few years, after the Indian economy was unshackled from some of the restraints (the period called ‘economic liberalization’), our spectacular GDP growth has been globally noticed. To fuel this fast growing economy, India needs to secure its Energy needs, both indigenously and through imports. The most exciting of the indigenous discoveries have been offshore.

To keep pace with India’s growing energy needs, the government in 1997 came up with NELP (New Exploration Licensing Policy). For over four decades after independence, offshore exploration was dependent upon nomination by GoI mainly to ONGC. In the pre NELP period (from 1990 to 1996), India had just 28 offshore blocks with 29 oil fields. However, NELP saw a sudden surge in Offshore Development Area (ODA). From 12 companies engaged in the year 2000, India now has some 82 companies engaged in E&P (Exploration and Production). Licenses have been given for 263 blocks, with 200 blocks being operational, and 10 under production. With NELP IX, blocks will move as far away as Andamans and Mumbai Deepwater.

The Directorate General of Hydrocarbons (DGH) was established in 1993 under the administrative control of Ministry of Petroleum & Natural Gas through a Government of India Resolution. Objectives of DGH are to promote sound management of the oil and natural gas resources having a balanced regard for environment, safety, technological and economic aspects of the petroleum activity. The latest DGH data shows that India’s offshore production now accounts for 2,16,000 BPD of oil and 65 MMSCMD of Natural Gas. These account for 28% and 48% respectively of India’s total indigenous production. So, therein lies the importance of offshore E&P. At a glance, the data for 2010-11 shows:

Crude Oil
Natural Gas
Domestic Demand
Self Sufficiency
Mind boggling? Well, not really unless you think of the next 20 years. Today, US oil consumption is 1/4th of the world consumption. India’s is only 3% and China’s 8%. India’s oil consumption growth in 2006-07 was around 3.5%, much lower than that of China. India today is the fifth largest consumer of energy in the world, but accounting for 3.7 percent of the world’s consumption. Per Capita primary energy consumption is still fairly low in the country (520 kilograms of oil equivalent, which is less than a third of the world average), with large disparities in the energy consumption pattern.
To sustain its slated GDP growth, its total primary energy demand is expected to almost double by 2030. Its primary commercial energy consumption in 2004 stood at 375.8 mtoe (million tones of energy equivalent) and involved coal, oil, gas, and electricity generated from nuclear, hydroelectric, and renewable sources.  India’s commercial energy consumption is expected to more than double to 812 mtoe in 2030.

India’s indigenous production is unlikely to keep pace with the growing consumption and it is estimated that by 2030 India would be importing 87% of its demand. This, coupled with the increasing share of offshore production in overall indigenous production would stipulate that almost the entire Energy scene would shift to sea; that is import or offshore production.

Together with this come challenges of securing India’s Energy needs. Protection of SLOCs is already well known. However, with the Somali pirates moving away from Somalia and increasingly coming closer to India’s West coast, the task of securing these SLOCs, even in peace time, is becoming more trying. The Indian Navy has had some success in the last two years against the pirates. It has promulgated BMP (Best Management Practices) if vessels are confronted with pirates. However, as is probably natural, our countrymen remember the so called failures more than the successes. This is even more so since the IN is also responsible for Coastal Security. So, in the last two months, the media and nation went to town demanding reasons for Navy’s failure to detect drifting MV Wisdom and MV Pavit that finally ran aground off Mumbai.

 As far as ODA is concerned, just one incident brings to mind the amount of damage that can be caused by a vessel hell bent on doing damage. On 27 Jul 2005, MSV Sagar Suraksha accidently collided with oil rig BH-N. Eleven people died and another twelve went missing. The economic damage caused was approx Rupees 2000 Crores. It is estimated that the replacement cost of India’s offshore assets is in excess of Rupees 200,000 Crores. We have a FODAG, Flag Officer Offshore Defence Advisory Group, responsible for coordinating the security of these assets. But, the scene has lately shifted from war time and near war time scenarios to terrorist attacks. In addition to surface attacks through dhows and fishing craft, we are now faced with a new underwater threat through JeM trained saboteurs.

We have a VATMS (Vessel and Air Traffic Management (or Monitoring) System for the ODA in the West. Efforts are in hand to have one for ever increasing assets on the Eastern seaboard. However, the fact that the Navy cannot be everywhere to protect these growing assets throws newer challenges in cooperative security. These are multifold for Indian seaboards since despite 26/11 and urgent need for the same, our fishing activity is still unregulated. Who knows that in the garb of fishermen we may have the terrorists deliberately trying to do damage to the offshore assets? We have to become more serious about both coastal security and security of offshore assets. The Somali pirates have, off late, reached our western coast, at least. We have to quickly have an effective security scheme in place, lest we should be surprised again. The sooner we start being serious about it the better it is for us. For the last two years, for example, we have read newspaper reports of 23 fast patrol boats to be acquired by ONGC for manning by Navy personnel for patrolling the ODA. It is understood that these are still more than a year away to become reality.

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