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India plans oil giant to take on global rivals
The Centre plans to form a giant national oil company by combining other state-owned firms, according to Union Finance Minister Arun Jaitley. As part of this, the government wants to expand its foreign presence to meet growing energy requirements in the domestic market.
New Delhi: The Centre plans to form a giant national oil company by combining other state-owned firms, according to Union Finance Minister Arun Jaitley. As part of this, the government wants to expand its foreign presence to meet growing energy requirements in the domestic market.
Jaitley in his budget speech said that the country was struggling to lift its local oil production. The imports account for about 80 percent of the oil needs. Prime Minister Narendra Modi in 2015 set the goal of cutting this import dependence to 67 percent by 2020.
Jaitley said: “We propose to create an integrated public sector oil major which will be able to match the performance of international and domestic private sector oil and gas companies.”
About a dozen state-run oil and gas companies including Indian Oil Corp (IOC), Oil and Natural Gas Corp (ONGC), Hindustan Petroleum Corp (HPCL) operate in the country and overseas.
Jaitley said: “But, alone they do not have the financial power to rival global oil majors in bids for overseas exploration and production assets. Combining them will give them capacity to bear higher risks, avail economies of scale, take higher investment decisions and create more value for shareholders.”
However, it was not clear if Jaitley was talking of a plan to combine all of the state-run oil companies or just some of them. To lift the share of natural gas in the country’s overall energy mix, Jaitley also announced a cut to the import tax for liquefied natural gas (LNG) to 2.5 percent from five percent.
The minister also proposed setting up strategic oil storage facilities at two new locations, one in the eastern state of Odisha and another in the northwestern state of Rajasthan.
Jaitley said the country was hedging against energy security risks by building emergency storage sites in underground caverns in southern India to hold 36.87 million barrels of crude or about 10 days of its average daily oil demand in 2016.
