India has moved a step closer to becoming ‘Aatmanirbhar’ or self-reliant in energy production with a new oilfield discovery at the Oil and Natural Gas Corporation‘s (ONGC’s) Krishna Godavari Basin in the Bay of Bengal. This discovery will strengthen India’s crude oil and natural gas exploration, production, and supply to meet the growing domestic demand, improve supply from domestic refineries, and reduce import volume proportionately.
Announcing this discovery in a message on social media, India’s Union Minister of Petroleum and Natural Gas, Hardeep Singh Puri, stated, “I am delighted to inform all my fellow countrymen that the first oil from ONGC’s KG Basin has been extracted on Monday. The work on this project started in 2016-17 but got delayed on account of the Covid pandemic. However, out of 26 wells existing at this site, four have already become operational. We will not only have natural gas in a very short period but also a significant volume of crude oil available from this location.”
Congratulating the members involved in this discovery, Puri further said, “India’s first US$5 billion deep-water oil production site exits at 30 kilometers away from Kakinada in Andhra Pradesh. This is a strategic development that will boost India’s crude oil and gas production from domestic sources. By May or June this year, we hope to be able to produce 45,000 barrels per day (bpd) of crude oil, which will be equivalent to 7 percent of our crude oil and natural gas production.”
Initially, total expenditure on this project was estimated at US$5.07 billion with operational expenditure of US$5.12 billion and a lifespan of 16 years. The company initially planned to commence oil production from the block in November 2021, but the deadline was extended due to hurdles encountered due to the pandemic. The company aims to achieve the ambitious target oil and gas production of 40 million metric tonnes of oil and oil equivalent (MMToe) by 2040 from overseas assets, with 25 subsidiaries across 15 countries being operational.
| World’s 10 largest crude oil consumers in 2022 |
| Country | Volume (million barrels/day) | Share in the world total (%) |
| United States | 19.89 | 21 |
| China | 14.76 | 15 |
| India | 4.79 | 5 |
| Russia | 3.67 | 4 |
| Japan | 3.41 | 4 |
| Saudi Arabia | 3.35 | 3 |
| Brazil | 2.96 | 3 |
| South Korea | 2.58 | 3 |
| Canada | 2.26 | 2 |
| Germany | 2.13 | 2 |
| Total top 10 | 59.80 | 62 |
| World total | 96.66 |
Source: Energy Information Agency (EIA), United States
Note: Oil includes crude oil, all other petroleum liquids, and biofuels
ONGC started its ‘First Oil flow to Floating Storage Production and Offloading (FSPO) from Krishna Godavary Deep-Water Block 98/2 (in the Bay of Bengal) on January 7, 2024, nearing completion of Phase 2 of the project. Phase 3, leading to peak oil and gas production, is already underway and likely to be over in June 2024. The 98/2 project is likely to increase ONGC’s overall crude oil and natural gas production by 11 percent and 15 percent, respectively.
Hailing the findings, India’s Prime Minister Narendra Modi, commented, “The commencement of (crude) oil production from the ONGC project in the Krishna Godavari Basin is a remarkable step in India’s energy journey and boosts the mission for an ‘Aatmanirbhar Bharat’. It will have several benefits for our economy as well.”
Import dependencePresently, India stands as the third-largest crude oil consumer, only after the United States and China, and imports around 85 percent of its crude oil and 50 percent of its natural gas requirements to meet its growing needs. With most of the existing fields aging and extraction in these locations declining, the new oilfields discovery will certainly give a big boost to crude oil production and help achieve the target. Effectively, the new oilfield discovery will also help reduce import bills.
India’s oil import bills have increased sustainably in recent years due to the rising energy demand from the manufacturing and domestic sectors. According to reports, India’s oil import bills are estimated at US$172 billion for the financial year 2023-24, a sharp increase from US$113 billion reported in the previous year. In the financial year 2020-21, India’s oil import bills stood at US$63.5 billion, a substantial decline from US$92.7 billion reported in FY2019-20.
Data compiled by India’s Union Ministry of Petroleum and Natural Gas showed that the country’s reliance on crude oil imports surged to a record 87.3 percent of domestic consumption in FY2022-23, up from 85.5 percent in FY2021-22. The dependence on crude oil imports was 84.4 percent in 2020-21, 85 percent in 2019-20, and 83.8 percent in 2018-19.
Declining importsAccording to government data, India’s net oil and gas imports in value terms for April-October 2023 declined by nearly a fourth on a year-on-year (yoy) basis to US$68 billion due to relatively subdued prices of crude oil, natural gas, and petroleum products globally. The decline in the value of oil and gas came despite a rise in import volumes, indicating that the fall in prices was significant enough to offset the volume of growth. During the corresponding period last year, India’s oil and gas import bill was reported at US$ 90.1 billion.
The prices of crude oil, natural gas, and petroleum products remained stubbornly high last year due to supply disruptions following sanctions on Russia. Moscow’s war in Ukraine resulted in sanctions from Western countries, with their demand remaining elevated in the post-pandemic economic recovery. Average crude oil prices for the Indian basket averaged at US$102 a barrel during April-October last year, compared to US$83.44 a barrel in the corresponding period this year.
The Ministry further reported India’s crude oil import worth US$75.5 billion in the April-October 2023 period, as against US$101.2 billion reported in the same period a year ago. However, in volume terms, oil imports for the period were higher by a mere 0.6 percent to 134.4 million tonnes. In addition to the decline in prices, India also benefitted abundantly from substantial Russian discount offers.
Primarily imported in liquefied form, India’s natural gas imports declined by a substantial 30 percent to US$6.6 billion, despite a significant 13.4 percent increase in volume at 17,753 million standard cubic meters (mscm). Petroleum products imports from India declined by 18.5 percent yoy to US$13.2 billion, and petroleum products purchases slumped by 26 percent to US$27.2 billion. With refining capacity accumulating to over 250 million tonnes per annum, India continued to be a net exporter of petroleum products. The overall import dependency of India on crude oil and petroleum products stood at 87.6 percent in the April-October 2023 period.
DILIP KUMAR JHA
Editor
dilip.jha@polymerupdate.com
