FALLING GAS & OIL PRODUCTION

FALLING GAS & OIL PRODUCTION

Subject : Economy

Context : India’s crude oil and natural gas production have been falling consistently since 2011-12 with Covid-19 related delays are among the key reasons cited by producers behind lower production.

Concept :

Reasons for falling oil and gas production

• The experts have noted that most of India’s crude oil and natural gas production comes from ageing wells that have become less productive over time.
• There was no more easy oil and gas available in India and producers would have to invest in extracting oil and gas using technologically intensive means from more difficult fields such as ultra-deep water fields.
• The experts noted that the interest from foreign payers in oil and gas exploration in India had been low.
• The crude oil production in India is dominated by two major state-owned exploration and production companies, ONGC and Oil India.

Recommendation of government to increase oil and gas production

• The government has asked ONGC to boost its investments in explorations and increase tie-ups with foreign players to provide technological support in extracting oil and gas from difficult oil and gas fields.
• The government may consider providing fiscal incentives to attract foreign players to India’s upstream sector.
• The boost in oil and gas production has also been a key part of the Aatmanirbhar Bharat initiative and its goal to boost the use of natural gas in India’s primary energy mix from the current 6.2 per cent to 15 per cent by 2030.

Impact of low oil and gas production

• The low domestic production of crude oil and natural gas makes India more reliant on imports.
• It increases the India’s Current Account Deficit as well as Fiscal deficit due to heavy dependence on imports.
• The share of imports as a proportion of overall crude oil consumption in India has risen from 81.8 per cent in FY2012 to 87.6 per cent in FY2020.