India’s biggest oil find in decades is now on stream but the country, with its rapidly growing economy, will still be one of the hungriest consumers of foreign crude, analysts say.
Prime Minister Manmohan Singh turned on the tap at the weekend to start crude gushing from British exploration company Cairn Energy’s remote oil field in western Rajasthan state.
“We dedicate this oil to the nation,” declared Rahul Dhir, head of Cairn’s India unit, at the ceremony that underscored the importance the country attaches to energy security to drive economic growth.
Cairn surprised the world in 2004 with the discovery of the Barmer field in an area written off by Anglo-Dutch giant Shell.
The field contains some 3.5 billion barrels of oil of which it is technically feasible to recover at least one billion barrels.
Edinburgh-based Cairn expects the discovery, which lifted it from relative obscurity into the FTSE-100 index of Britain’s leading companies, to raise India’s oil output by at least 20 per cent based on current production.
The oil fields will cut India’s oil import bill by seven percent or 6.8 billion dollars.
But the increased production, expected to come fully on stream in 2011, will come nowhere near to plugging the crude supply gap in Asia’s third-largest economy, analysts say.
“As India’s economy grows, the country is only going to need more oil,” said Deepak Pareek, energy analyst at Angel Broking.
“The Cairn find is a step in the right direction but as demand keeps growing we need to make more similar discoveries to make us more self-sufficient.”
The nation of nearly 1.2 billion people already imports 70 per cent of its oil needs and experts believe that figure will hit 90 percent by 2030.
India’s fuel thirst has shot up as rising incomes have spurred industrial demand and more people buy energy-guzzling cars and appliances.
Economic expansion has slipped back to around six per cent due to the worldwide slump, but the government hopes to steer the country back to its previous nine percent growth trajectory as soon as the global economy picks up.
Already among the world’s top 10 oil importers, India is expected to become the world’s fourth-largest by 2025, according to US government data.
Oil now makes up 31 percent of India’s energy consumption while coal supplies over 50 percent. Natural gas furnishes about eight percent of India’s energy needs.
India’s government has made energy security one of its national priorities, as it is unwilling for the country’s economic prospects to be dependent on the vagaries of the foreign crude market and sometimes unstable political regions.
It presented its recent landmark nuclear deal with the United States, which ended its atomic pariah status and gave it access to civilian technology, as a step towards that goal.
It is also seeking to develop other energy sources such as wind and solar power and has become, along with China, one of the world’s most aggressive seekers of foreign oil and gas properties.
But experts say it will take years for alternate energy forms to have any significant role in supplying India’s fuel needs.
The government has been staging roadshows internationally to seek bids for the right to look for oil and natural gas in parts of the country as it plans India’s largest-ever auction of 70 exploration blocks.
Interest has been keen, with those attending including over two dozen global energy majors, among them Exxon Mobil and ConocoPhillips of the United States, Britain’s BP and BG group and French giant Total, junior petroleum minister Jitin Prasada said last week.
Prasada said there had been a change in perception about the possibilities of discoveries in India after recent large finds by Cairn, India’s private Reliance Group and state-run Oil and Natural Gas Corp.
Still, even if these other companies do strike oil, India’s foreign oil reliance will still remain enormous, analysts say.
“All of these explorations are required, but on their own none of these efforts can plug the huge gap that India has in terms of oil consumption,” said Kumar Manish, associate director at global consultancy KPMG.