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Where is Moily’s prophecy of energy independence?
The UPA government hesitated to implement a gas pricing policy lest it be misunderstood as crony capitalism supporting Reliance.

The UPA II cabinet had approved the policy to double the gas price. Finally when it was ready to implement the price rise, the Election Commission stopped it. As a result, it became the first major energy sector problem that called for a solution by the newly elected NDA.

Sadly, the Modi government failed to bite the bullet even though the prime minister is familiar with gas pricing politics. But all through this period, a far more pressing problem, of dealing with India’s energy security, never came to the national agenda.

This was mostly because of the frequent misleading prophecy of India achieving energy independence by UPA’s Petroleum Minister, Veerappa Moily.

In the last 13 years, oil, gas and coal imports have been steadily rising to meet India’s energy requirements. Oil imports have almost doubled. From zero import in 2000, gas imports have increased to 17.7 billion cubic meters in 2013. Despite having the fifth largest coal reserves, India’s coal imports have increased 800 per cent.

 Let us hope that the new NDA government will be more interested in solving India’s energy crisis than showering energy sector subsidies. NDA can learn from two recent examples of two vastly different countries, New Zealand and the US, to promote their energy security.


When US and New Zealand liberalised exploration...  

In July 2014, the US government reopened the Eastern Seaboard to offshore oil and gas exploration, which will use sonic cannons to pinpoint the petroleum reserves. Such a change in policy to allow seismic work came after 30 years. Environmentalists have expressed their fear of the potential impact on marine life as a result of noise pollution. Noise generated by sonic cannons is comparable to the noise generated by jet engines, which can harm marine life consisting of whales, dolphins, turtle, etc. Before deciding the government looked at more than 120,000 comments.

Even while giving the approval, the government has imposed strict guidelines to reduce any potential harmful environmental impact like no seismic studies during the birthing or feeding seasons, presence of whale experts while undertaking seismic studies, etc.

In 2009 New Zealand decided to announce “Petroleum Action Plan” to lure oil companies. Its oil import dependence is only 30 per cent  of India’s needs. New Zealand is remote and offshore exploration is expensive. An exploration well can cost $100 million; double that in other areas. Still it has succeeded in attracting oil exploration investment. NZ did not hesitate to recruit a foreigner from Oklahoma to woo oil prospectors.

This year the NZ government has announced that they would do every thing possible to promote exploration by oil companies. In 2010, Petrobras had decided to invest about $118 million in offshore drilling. However, it faced problems when Greenpeace flotilla surrounded its drilling ship. It finally decided to leave New Zealand. Now the government has adapted a new law, which prevents such hindrances by making it a crime. The government has also passed regulations to limit the opportunities of NGOs in blocking offshore exploration in courts.

For years oil companies did not mind where they invested money irrespective of the huge political risk. However, in recent years they are having second thought.

It is interesting to observe that despite drilling two wells offshore, which did not find commercially viable amounts of reserves, Anadarko has decided to continue to look for oil and gas in New Zealand. This clearly shows the success of the government policy to attract oil companies.

When we look at the above two examples, we can see why India has not been successful even with its New Exploration Licensing Policy. Has India tapped the world class experts to develop the NELP like New Zealand?

The NELP had proposed that pricing will be based on arm’s length basis. But in reality, it has not been the case for gas sector.

The new Petroleum Minister, Dharmendra Pradhan, has announced that the NELP will be replaced with a new policy to promote “minimum government, maximum governance.” It is fine as a slogan to win election. But in real life will it allow oil companies to sell their reserves at market prices? Modi government had a chance to demonstrate that they do believe in free market by liberalising gas pricing soon after they came to power. But they failed the test.

 Let us hope that at least they will act soon and take the right decision.

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