India's energy security has come under an alarming pressure from rising dependence on imported oil, regulatory uncertainty and opaque gas pricing policies, according to a FICCI-Ernst & Young report.
Supply issue
“Small pool of skilled manpower and poorly developed upstream infrastructure and dependence on fossil fuels are other factors impacting energy security,” says the report. It says that there is a dire need to address the supply issue through a slew of policy reforms, as well as to launch a massive awareness campaign on the demand side management, and the pricing of products, so as to incentivise investments for raising domestic production.
Oil price hike
According to the Integrated Energy Policy of the Government, the country's requirement of primary commercial energy is projected to increase from 551 million tonne of oil equivalent in current financial year to 1,823 mt of oil equivalent in 2031-32.
The increase in oil price by $10 a barrel could potentially slow the GDP growth by 0.2 per cent and may inflate the current account deficit by 0.4 per cent, the report quoted Goldman Sach's study.
Gas demand
The recent depreciation of the rupee has raised the crude oil imports costs, impacting trade deficit and domestic inflation. Notably, the import of crude oil and oil products rose from $50.3 billion in 2005-06 to $115.9 billion in 2010-11.
In the current financial year (till October 2011), oil imports touched $75 billion. The report observes that around 32 per cent of demand for gas in the country is unmet. Most of the gas production and liquefied natural gas (LNG) terminals were located in the western part of the country, adversely impacting the availability of gas in the rest of the country.
Over the next few years, the availability of gas is likely to increase on the back of incremental supplies from the KG-D6 block, as well as from the new gas fields of ONGC and Gujarat State Petroleum, coal-bed methane (CBM) and new LNG facilities. “In spite of the increase in supplies, shortages are likely to persist due to significant latent demand and overall growth in demand for gas in the country,” the report notes.