Oil India Limited (OIL), a major Indian exploration PSU, has experienced a dip in crude oil production despite millions spent on drilling 40-45 new wells annually with the target increased to 53 this year.
From 3.88 million metric tonnes per annum (MMTPA) in the 2011-12 fiscal, OIL’s production in Assam dropped to 3.22 MMTPA in the 2015-16 fiscal.
A part of this drop is attributed to crude flow slowdown in old oil wells.
Another major reason behind India producing lesser crude from its oilfields, particularly in Assam, is locals shutting down or tampering wells as a form of protest or to demand freebies from the OIL or the government. The oil wells are also targeted for petty issues not involving the oil industry.
In the last two fiscals, OIL lost Rs 45 crore in production loss after locals turned off unmanned oil well valves or damaged machinery to stop the flow to crude collection centres.
This has translated into a substantial loss of royalty for the cash-strapped Assam government. The royalty, earlier fixed at Rs 420 per tonne, is now calculated at one-sixth of the international price of crude per barrel. A tonne is equally to 6.6 barrels.
“Flow of crude and gas is controlled. Thus it is hard to recover mature wells if stopped or tampered with, and intervention for stimulating these wells is a long-drawn process. Gas wells, likewise, are watered out beyond recovery if stopped without technical expertise,” Pramod K Sharma, OIL’s director of operations, said.
Theft of oil well machinery parts also hinder production at times, Sharma added.
Utpal Bora, OIL’s chairperson and managing director who announced a region-specific Rs 50-crore OIL start-up fund on Sunday, said the oil major was working on tamper-free technology to pump out crude from its fields.
“Because of local demands, we end up spending much more than the stipulated 2% of net profit on CSR. But time has come for the government to ensure the protection of oil wells so that production does not suffer,” Bora said.
OIL, he added, has made IIT-Guwahati the incubator of new ideas for the start-ups to take shape.