‘Oil major’ could be a game changer

‘Oil major’ could be a game changer

By SHAILENDRA TYAGI | NEW DELHI | 11 February, 2017
Energy analysts foresee a greater relevance of having energy majors.

The government’s idea to carve out bigger oil major(s) out of the 13 government-owned oil and gas enterprises is essentially aimed at boosting the international competitiveness of Indian hydrocarbon companies. The move could be a game changer for India’s oil and gas sector. “To provide more bargaining power in international negotiations for acquiring upstream (exploration) contracts, the proposed consolidation is a pragmatic step,” says Anish De, a senior oil expert at KPMG India. 

Within the domestic sphere, the operating cost of the proposed (two or three) bigger entities could be reduced by the harmonisation of logistics and supply chains. Oil and gas PSUs currently have an oligopolistic control in the domestic oil marketing space (downstream) which also means that there is a recognisable level of inefficiencies in their functioning that the proposed structure would also address. By creating a bigger public sector entity, the government is also “preparing to take on stronger competition from private players,” feels De. There is an increased possibility of stronger private sector participation, especially after de-regulation of petroleum products. The consolidated entity(ies) would create better synergies between the functioning of 13 oil and gas PSUs and would also eliminate inter-companies competition “resulting in an upfront cost savings of 10-15%”, says R.S. Sharma, head of FICCI Hydrocarbon Committee. Market volatility could be better addressed by a bigger entity. India has 18% of the world’s population, but its known hydrocarbon reserves are only 0.5%. “And since our energy needs are growing, acquiring overseas energy assets has become a necessity,” adds Sharma.

Although the form of the proposed consolidation is yet to be known, the government claims to have finalised the structure of the new oil company and is expected to announce it soon. Energy analysts foresee a greater relevance of having energy majors, especially in the fast changing nature of the energy market. 

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There is also urgent need for improving our indigenous crude oil production levels significantly. We import even now about 75% of our crude oil needs. Why? 60 Yrs not enough to give a very good a/c of ourselves in this context?When shall indigenous prodn.levels of our crude oils reach at least 50% of our requirements? This issue needs to be addressed sincerely at the very earliest.. However the present situation also warrants (i) giving far more functional autonomy to the oil PSUs and completely doing away with any necessity for them to have any clearances/permissions whatsoever from the Bureau/Dept. of Public Enterprises (ii) opening addl. No. of retail petrol pumps (iii) setting up more LPG Plants and augmenting of their existing level of handling/bottling/supply of cooking gas cylinders by adding one more shift working.(iv) importing addl.substatial No. of new empty cylinders both of steel and plastic transparent body varieties to replace equally substantial No. of defective/undesirable/poor quality of cylinders in circulation (dented circular handling rings, de-shaped bodies, rusted dirty bacteria laden steel bodies , paints peeling off quickly with no repaintings done etc. Swach Bharat campaign does not seem to encompass these rough handling of lakhs of gas cylinders onsite & offsite . Such state of affairs may also perhaps improve significantly if private sector is allowed to augment its production/ handling/distribution of filled LPG cylinders as well as import of new steel/plastic transparent cylinders at the very earliest. (v).Instead of encouraging bulk import of LPG parcels periodically, intensified efforts need to bemade for avoiding such costly huge imports by matching augmentation of its indigenous production... The LPG/Petrol /Diesel supplying companies would also do well to make periodic surprise checks to find out (a). the frequency of breaking down of airfillings points in petrol pumps and the time(weeks) taken to repair the same,(b). whether the weighing scales for gas cylinders are mostly available in working order with gas dealers in adequate reqd.quantity (c) the delivery boys carry the same as a matter of routine during door deliveries of gas cylinders (d). if there is a noticeboard display (at the gas dealers showrooms) of times schedule for transfer of subsidy amounts into consumers accounts and grievance redressal mechanism in this context.and also the process/ procedure for replacement of defective gas stove regulators when found. LPG domestic consumers must also on their part replace worne out stove tubes with new tubes which are available at a nominal cost with the gas dealers,for obvious safety reasons.

There is also urgent need for improving our indigenous crude oil production levels significantly. We import even now about 75% of our crude oil needs. Why? 60 Yrs not enough to give a very good a/c of ourselves in this context?When shall indigenous prodn.levels of our crude oils reach at least 50% of our requirements? This issue needs to be addressed sincerely at the very earliest.. However the present situation also warrants (i) giving far more functional autonomy to the oil PSUs and completely doing away with any necessity for them to have any clearances/permissions whatsoever from the Bureau/Dept. of Public Enterprises (ii) opening addl. No. of retail petrol pumps (iii) setting up more LPG Plants and augmenting of their existing level of handling/bottling/supply of cooking gas cylinders by adding one more shift working.(iv) importing addl.substatial No. of new empty cylinders both of steel and plastic transparent body varieties to replace equally substantial No. of defective/undesirable/poor quality of cylinders in circulation (dented circular handling rings, de-shaped bodies, rusted dirty bacteria laden steel bodies , paints peeling off quickly with no repaintings done etc. Swach Bharat campaign does not seem to encompass these rough handling of lakhs of gas cylinders onsite & offsite . Such state of affairs may also perhaps improve significantly if private sector is allowed to augment its production/ handling/distribution of filled LPG cylinders as well as import of new steel/plastic transparent cylinders at the very earliest. (v).Instead of encouraging bulk import of LPG parcels periodically, intensified efforts need to bemade for avoiding such costly huge imports by matching augmentation of its indigenous production... The LPG/Petrol /Diesel supplying companies would also do well to make periodic surprise checks to find out (a). the frequency of breaking down of airfillings points in petrol pumps and the time(weeks) taken to repair the same,(b). whether the weighing scales for gas cylinders are mostly available in working order with gas dealers in adequate reqd.quantity (c) the delivery boys carry the same as a matter of routine during door deliveries of gas cylinders (d). if there is a noticeboard display (at the gas dealers showrooms) of times schedule for transfer of subsidy amounts into consumers accounts and grievance redressal mechanism in this context.

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