Crude Out­put De­clines but Con­sump­tion Soars

De­mand up on fall in oil prices & rapid eco­nomic growth

The Economic Times - - Economy: Macro, Micro & More - San­jeev.Choudhary @times­group.com

New Delhi: Do­mes­tic crude oil pro­duc­tion fell for the fourth straight year in 2015-16, even as oil con­sump­tion rock­eted 11%, push­ing up In­dia’s im­port de­pen­dence.

A col­lapse in oil prices cou­pled with a rapid eco­nomic growth has helped push up oil con­sump­tion at home. More ve­hi­cle pur­chases, in­creased use of diesel for ir­ri­ga­tion due to weak mon­soon and ris­ing air traf­fic chiefly drove up con­sump­tion to 183.5 mil­lion met­ric tonne (mmt), com­pared to165.5 mmt in the pre­vi­ous year.

In com­par­i­son, In­dia pro­duced just 36.9 mmt of crude oil in 201516, lower than 37.5 mmt in the pre­vi­ous year. The country’s largest oil pro­ducer, state-run Oil and Nat­u­ral Gas Cor­po­ra­tion (ONGC), wit­nessed an out­put de­cline to 18.5 mmt from 18.6 mmt in the pre­vi­ous year. Oil pro­duc­ers have been strug­gling with age­ing fields where out­puts have been fall­ing. Their in­abil­ity to bring fresh big reser-

ves into pro­duc­tion lately has kept pro­duc­tion stag­nant.

“The big­ger prob­lem is that the ex­plo­ration ac­tiv­ity didn’t pick up in the last decade,” said Gau­rav Moda, con­sul­tant at KPMG, un­der­lin­ing the need to en­hance ex­plo­ration ac­tiv­ity in the country to be able to ac­cel­er­ate out­put in the fu­ture.

With­out which, Moda says, In­dia’s de­pen­dence on over­seas oil will only grow in fu­ture. In­dia’s im­port de­pen­dence on oil rose to 81% in 2015-16 from 78.5% in the pre­vi­ous year. Just last year, Prime Min­is­ter Naren­dra Modi had set a tar­get of bring­ing this down to 67% by 2022. The govern­ment has un­veiled new ex­plo­ration poli­cies for its oil and gas blocks lately, aim­ing to plug loop­holes in its pre­vi­ous poli­cies that en­cour­aged only limited par­tic­i­pa­tion of re­source-rich for­eign oil com­pa­nies and couldn’t dra­mat­i­cally boost the do­mes­tic out­put.

In­dia im­ported 202 mmt of crude oil in 2015-16, nearly 7% higher in vol­ume, but paid just $64 bil­lion, 43% lower due to the global oil col­lapse. Na­tru­ral gas con­sump­tion marginally rose to 52 bil­lion cu­bic me­ters, aided by 14% rise in im­ports while do­mes­tic pro­duc­tion fell 4%. Lower prices have raised con­sump­tion of gas by in­dus­try and trans­port sec­tor.

The con­sump­tion of petrol and diesel rose 14% and 7.5% re­spec­tively even though the govern­ment im­posed more taxes and didn’t pass on the en­tire ben­e­fit of crude oil plunge to the con­sumers. The con­sump­tion of avi­a­tion tur­bine fuel (ATF), which con­trib­ute about 40% of air­lines’ op­er­at­ing cost, grew 8.8% as air­lines low­ered fares and at­tracted more pas­sen­gers.

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