75% of our oil needs are met through import, we can’t avoid price rise

Union minister of petroleum and natural gas Murli Deora has his eyes set on increasing the oil refining capacity in the country.

Union minister of petroleum and natural gas Murli Deora has his eyes set on increasing the oil refining capacity in the country. The minister envisages increasing domestic refining capacity to 241 million metric tonnes per annum (mmtpa) from the current level of 149 mmtpa in the next five years. In an interview with K K Shankar, he spoke about his plans for the sector. Excerpts:

What are the initiatives you have taken to enhance and ensure oil security in the country?

The government has awarded 162 exploration blocks under the New Exploration Licensing Policy (NELP). We have acquired oil and gas blocks or participating interest in other countries. During the 11th five year plan, overseas crude oil and natural gas production is likely to touch 7 million tonnes and 2 billion cubic meters per annum respectively. We also have plans to harness alternative sources of hydrocarbon like coal bed methane, gas hydrates and under ground coal classification.

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What are your plans to turn India into a global refining hub?

Presently the country is a net exporter of petroleum products. India exported 32.1 million metric tonnes of petroleum products worth Rs 80,000 crore last year and expects to maintain this for the next five years.

How do you see the fluctuations in the price of petroleum products?

Currently we import about three fourth of our oil requirements. International oil prices would always affect us. But it is difficult to pass on to the consumers the increase in case of sensitive petroleum products like petrol, diesel, kerosene and LPG. We have advised public sector oil marketing companies to hold the prices of household fuels. The government has been providing financial support to public sector oil marketing companies through the equitable burden sharing formula.

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The exploration and production efforts through NELP have given us very encouraging results, with gas discoveries in Cambay basin, KG offshore and Mahanadi basin. The production of natural gas is expected to double from the current level of 90 million standard cubic metres per day (mmscmd) by 2010-11. Steps have also been taken to import Liquefied Natural Gas (LNG) from Qatar, Iran, Algeria and Australia. Discussions are also underway with the Iranian government for import of gas from Iran through Iran-Pakistan-India (IPI) gas pipeline. India has agreed to join the Turkmenistan-Afghanistan-Pakistan (TAP) gas pipeline project to source gas from the Daulatabad region of Turkmenistan.

What mechanism is the government using for pricing natural gas?

At present, there are broadly two pricing regimes for gas: Administered Price Management (APM) and non-APM or free market gas. The government decides the price of APM gas. In case of non-APM or free market gas, this could also be broadly divided into two categories, namely, imported LNG and domestically produced gas from joint venture fields. While the price of LNG imported under term contracts is governed by the Sale Purchase Agreement (SPA) between the LNG seller and the buyer, the spot cargoes are purchased on mutually agreeable commercial terms. The pricing of joint venture gas is governed in terms of the Production Sharing Contract (PSC) provisions.