'We are still very small compared to the global majors'

Petroleum secretary S C Tripathi speaks to Hardnews on the proposed India-Iran pipeline and the future of India's energy sector

Archana Kapoor & Trina Joshi Delhi

Much noise has been made over the proposed Iran-Pakistan-India gas pipeline, which can bring to India about 60 million cubic metres of gas a day. Petroleum Secretary S C Tripathi tells Hardnews that this may not necessarily be the "peace pipeline" it has been hyped to be in the media: the talks are still on a one-to-one basis, as India finalises the deal with Iran and Iran speaks to Pakistan on the transit logistics. Tripathi also believes that although the Indian energy sector is way behind that of the global majors, it is growing rapidly and can take on international competition on their own terms. With India's economy growing at a phenomenal rate, the demand for energy will also grow, prompting Oil and Natural Gas Commission (ONGC) to look both inward and outward.

Excerpts from the interview:

There is much excitement in the oil and gas sector, as India is picking up new oil and gas fields abroad. Does this mean we have reached the limits of our own production?

No, it does not. But, our requirement of energy sources and resources is growing very fast. Our average consumption rate right now is one-fifth of the world's average. Our energy intensity per unit of economic output is two times the world's average. So, our energy intensity is high and our average level of consumption is low. Our demand will keep growing in the next 20 or 30 years at a rate faster than most countries. Right now, we are importing between 70-75 per cent of our oil requirement. It is expected that in the next 10 years or so, this import intensity might increase to 85 per cent. We are doing our best to explore and develop oil fuels and gas fuels in India, but we are not Saudi Arabia or Iran. We have plenty of water resources but we do not have enough oil resources. Therefore, we are making efforts to go outside India and find these resources. Now, our companies have developed the financial and technological strengths to go outside India and compete on equal terms.

What about oil fields like Bombay High? What are the prognosticated reserves?

Bombay High was one of the major discoveries made in the past 30 years. Right now, through new and improved technological mechanisms, we are trying to enhance and increase oil recovery so that we can continue extracting oil and gas from those fields for another 10 or 15 years or so. But, theoretically, we cannot extract more than 45 to 50 per cent, and that is a level we are trying to reach in the case of Bombay High. But Bombay High has its own limitations. We need to look at other fields as well.

Recently, there were reports about the ONGC exercising the walk-in option to pick up stakes in Aishwarya and other fields operated by Cairns in Rajasthan at an expected loss of Rs 1,440 crore. What was the thinking behind this decision, when we seem to be following a strategy to offset our needs and demands by buying or having joint ventures in Sudan, Ecuador and Siberia?

The ONGC has taken participatory interests in some blocks explored by Cairns Energy, such as in Cambay Offshore, Cambay Basin and the Krishna Godawari Basin. In the Rajasthan fields, the ONGC was already a licensee and Cairns was a participatory competitor. So, the ONGC has its obligations of royalty and cess. The cess will be divided between two parties in proportion to the amount of crude they share. So, there is no harm in the ONGC joining anybody in India, or even outside. If there are some specialist companies who have created a niche in the exploration sector, and they have been able to successfully do exploration work somewhere, then there is no harm in the ONGC joining them.

There is great excitement about the anticipated Indo-Iranian pipeline project. This has been called the "peace pipeline". Now, another pipeline is planned from Turkmenistan through Afghanistan, Pakistan and India. Have the government's fears on the security aspect been met?

We do not have any pre-feasibility report for the Turkmenistan-Afghanistan-Pakistan pipeline. But, in the case of the Iran-Pakistan-India pipeline, the basic parameters have been made available to us. Therefore, at the moment, this ministry is working more on the Iran-Pakistan-India pipeline than on the Turkmenistan-Pakistan-India pipeline. There are two parallel discussions going on, one between Iran and India and the other between Iran and Pakistan. How the gas will be transported through Pakistan is being discussed between Iran and Pakistan. What quantity of gas comes to India, at what price and with what arrangements of stability and security will be discussed between India and Iran.

Will the India-Pakistan relationship determine the future of the pipeline?

We are on a one-to-one basis. Pakistan can deal with Iran. We will deal with only Iran. Eventually, when everything is put in place, if a trilateral meeting or any understanding is required, then we will look at it.

What are the cost implications?

We are looking at the cost for our consumers. We are interested in the fruit, not the trees. There are a number of parties who have the capability, capacity, technological know-how and resources to put together these things. There are international norms which will guide construction costs, technology and transit.

Besides investing in downstream industry, what will be the cost implications for India?

We are looking at more than 60 million cubic metres a day. One million cubic metres is equivalent to about 200 megawatts of power. 200 megawatts of power requires nearly Rs 800 crore. So, Rs 800 crore into 60 million cubic centimetres will be equal to Rs 48,000 crore. That is the kind of investment we need.

India picked up a stake in Sakhalin-I in Siberia and was later positioned to pick up a stake in Yukos, along with Rosneft. What is happening there?

We are talking to Roseneft. Our aim, however, is to not merely assure supply but also to have a stake. At this point of time, we are not sure what percentage, at what price and where that stake can be completed. So, whenever they are ready, we will be ready.

In the international arena, where does India stand in the oil sector?

In India, we somehow get excited very easily. We are still very small compared to the global majors. Companies like Exxon Mobil have a market capitalisation of US$ 400-500 billion. The largest market capitalisation of the ONGC is about US$ 25 billion. Even the three largest Chinese companies have much larger market capitalisation than the ONGC. There is a long way to go.

There is a body of opinion that Indian oil public sector units (PSUs) have become bigger not because of their performance but due to the increase in oil prices in a country which is one of the fastest growing consumers of oil and gas. Do you think that all the hype about the sterling performance by the oil sector is justified?

Well, that is for others to examine. But they are subjected to competition from the private sector within the country and from multinationals as well. There is no entry barrier for anyone, except in terms of investment for marketing. If the PSUs are able to compete in this environment, then it should be good. There is competition within, from outside, from the domestic private sector, and from imports. We invite competition and these companies are now strong enough to meet anyone on their own terms. There is no difficulty.

What do you think of the future scenario of the energy and oil sectors?

ONGC Videsh Limited (OVL) will become as large as ONGC domestic. And Indian Oil (IO) and Oil India Limited (OIL) have developed a memorandum understanding. So, I feel that IO and (OIL) will also have significant stakes outside India. Hindustan Petroleum Corporation Limited (HPCL) and Bharat Petroleum Corporation Limited will have to carve out their niche areas. They are essentially refinery and marketing companies. There may be restructuring over a period.

And there will be few multinationals. There is already a Reliance presence in a major way.

We are one of the fastest growing economies, and we will continue to grow for the next 20 to 30 years. And energy is essential for the growth of the economy. Energy resources are, therefore, important. We must access energy resources and we must make our economy energy-efficient. For this purpose, I think all the oil companies as well all other intermediaries and various sectors of the economy need to work very hard. And that is the direction we should all work towards.