India should buy overseas oil and gas assets aggressively - Mr Pradhan
Mr Dharmendra Pradhan, Oil Minister of India, said that with global oil prices halving, India should aggressively scout for acquisition of oil and gas assets abroad, create strategic reserves and step up domestic exploration.
He said that opportunities emerging from low oil prices were discussed at a meeting called by Prime Minister Narendra Modi with business leaders, bankers and bureaucrats yesterday against the backdrop of global economic turmoil.
Mr Pradhan said that aggressive overseas acquisitions, building strategic oil reserves, stepping up domestic exploration and tying up supplies on favourable terms were some of the suggestions that came up at the meeting.
India, which is 80% dependent on imports to meet its oil needs, is a direct beneficiary of oil prices slumping from USD 115 per barrel to under USD 50 in last one year. Besides cutting its oil import bill, lower oil prices have also helped cool inflation and cut government's subsidy bill.
He said that "It was felt at the meeting that low oil prices present an opportunity which India must capitalise on."
Participants at the meeting suggested that India aggressively buy oil and gas fields abroad as low oil prices has not just brought down valuation of assets but also led to distress in some others that had borrowed huge funds when oil rates were high.
State-owned Oil and Natural Gas Corporation last week agreed to buy 15% stake in Russia's second biggest oil field of Vankor from Rosneft for USD 1.268 billion as Moscow looked to cut risks in low oil price regime.
Mr Pradhan said that participants also felt that India should use the low oil prices to stockpile oil at near complete underground strategic storages at Visakhapatnam in Andhra Pradesh and Mangalore and Padur in Karnataka. Also the capacity should be raised from 5.33 million tonne to guard against crude price shocks and supply disruption.
He said that India, world's fourth largest oil consumer, should also tie-up supplies from producers in Middle-East, Africa and Latin America on favourable terms.
Low oil prices have also led to slump in cost of associated services like drilling rigs, which should be taken advantage of for increasing domestic exploration and production activities, he said adding more wells should be drilled to find new reserves.
Mr Pradhan said that "We received constructive suggestions, which the government is working on."
Mr Modi at yesterday's meeting urged Indian industry to take risks and make investments for the good of the nation.
The meeting took place amid China's slowdown threatening to drag down global growth and investor concerns over the possibility of the US Fed raising interest rates. Indian stocks and currency are among the worst hit in Asia since China devalued the yuan last month.
India, which had in January to March overtaken China to become the world's fastest-growing major economy, saw its GDP slow to 7% in the April-June quarter. The growth rate puts it on par with China as the world's fastest-growing major economy.
Mr Modi had last year set a target of cutting India's oil import dependence by 10% to 67% by 2022. The target was set keeping in mind the 77% import reliance in 2013 to 2014. Import dependence has since risen to 80%.
For cutting import dependence, experts suggested boosting E&P activity, removing discrepancies in taxes and duties, streamlining the approval and clearance process, building gas pipeline infrastructure, a road map for transition to market-determined gas pricing and strengthening state-owned enterprises.
Mr Mukesh Ambani, Chairman of Reliance Industries, TATA Group head Mr Cyrus P Mistry, Aditya Birla Group head Mr Kumar Mangalam Birla, Mr Sunil Bharti Mittal of Bharti Airtel and ITC chief Mr Y C Deveshwar were among the industry leaders who attended the meeting at Prime Minister's residence yesterday to brainstorm on various issues and opportunities arising out of global economic challenges.
Besides Mr Pradhan, Mr Arun Jaitley, Finance Minister, Mr Raghuram Rajan, Reserve Bank Governor, Road Transport and Highway Minister Mr Nitin Gadkari and Mr Piyush Goyal, Power Minister, joined the over 3 hour long brainstorming.
State-owned gas utility GAIL India Chairman Mr B C Tripathi and BHEL chief B Prasad Rao too were among those present at the meeting.
Government officials present the meeting included Mr Ratan P Watal, Finance Secretary, Ms Rita Teaotia, Commerce Secretary, Mr Shaktikanta Das, Economic Affairs Secretary and Mr Arvind Subramanian, Chief Economic Advisor, as well as Niti Aayog vice chairman Mr Arvind Panagriya.
Source : PTI