Union minister of state for petroleum and natural gas Dharmendra Pradhan said sound policy initiatives, sustained investments, regional and international cooperation will help the industry make strides in adopting new technology, finding and unlocking new supplies, and in a responsible and sustainable way be the partner in progress of all nations.
Pradhan said the hydrocarbon sector was witnessing unprecedented developments and energy sector governance, transparency and accountability is the need of the hour.
“Strategic co-operation is needed for achieving supply and market balance. We need to treat the environment as a stakeholder to achieve sustainable development,” the minister said while addressing a gathering of Ministers from Afghanistan, Bangladesh, Bhutan, Brazil, Mauritius, Nepal, Nigeria, Qatar & Sri Lanka in the first session of the conference.
Noted oil expert Daniel Yergin was also present at Petrotech 2016.
Pradhan said for the hydrocarbon industry to fully benefit from the emerging opportunities, it is important to understand the energy scenario in non-OECD Asian countries in greater detail, specifically India – which holds tremendous promise for energy demand growth in the foreseeable future.
Emphasising India as one of the biggest energy markets, Pradhan said that today India stands at an important juncture, being the fastest growing economy in the world with 7.6% GDP growth.
With 18% of the world’s population, India is the 3rd largest consumer of primary energy, after China & USA; consuming 6% of the world’s total primary energy.
“The demand for energy gets stronger as we move into the future. The government is committed to building a strong manufacturing base. We have a bonus demographic advantage with 812 million, that is 67% of our population less than 35 years of age. We are witnessing rapid urbanization and a growing middle class. This upward social mobility is changing our consumption patterns and leading to a more energy intensive lifestyle,” he added.
At present, India’s per capita consumption of primary energy is 0.62 tonnes of energy equivalent. This is just one-third of the world average of 1.91 tonnes of energy equivalent.
“Over the next 25 years, India’s per capita consumption is estimated to increase to 1.19 tonnes of energy equivalent and we would still be consuming one-half of the world’s per capita average of 2.09 tonnes of energy equivalent,” Pradhan added.
Oil and Gas accounts for 35% of India’s present energy mix. “Our current Oil & Gas demand is 229 MMT; this is estimated to grow roughly 3-fold by 2040 to 607 MMT. There is no doubt that India is entering a period of rapid growth in energy consumption,” the minister said.
On India’s responsibilities towards the environment, Pradhan said, “We understand our responsibilities and voluntarily ratified to the Paris Agreement on 2nd October 2016 and are aggressively pursuing the policy for cleaner fuels and renewables.”
“We all collectively face this challenge of meeting growing energy demand while balancing the sustainability aspect. Even countries with abundant hydrocarbons import share of their energy requirements. As long as hydrocarbons dominate the electricity and transportation systems, we all would continue to rely on the global energy trading system.”
Secondly, Pradhan said there have been fundamental shifts in way of working of oil companies. Many companies are tuned into the market forces that drive today’s global economy.
Spot markets, oil futures and commodity markets are well established. Though oil prices are much more volatile, oil price cycles are not a new phenomenon. The sector has always emerged more resilient after tough times and is rising to the challenge once again.
“While we are experiencing a strong growth in India, it comes with its own set of challenges,” the minister added.
Elaborating on these challenges, Pradhan said firstly there is a mismatch in our oil and gas resources to the growing demand and we rely heavily on crude imports and have been burdened with a current account deficit for years.
Then we anticipate an exponential growth in energy demand in our rural areas. The challenge is to provide affordable and clean fuel to people in the hinterland.
Building infrastructure to optimize the latent potential of natural gas demand and transition to a gas-based economy is another challenge.
Being a capital-intensive industry, financing projects is also a challenge.
As per the WEO 2015 outlook, India needs about US$500 billion till 2040 for expansion of infrastructure in the oil and gas sector, which is US$ 20 billion per year.
“Moving our focus towards the global scenario, we see a gradual shift from depleting, conventional reserves to unconventional sources like offshore, deep seas, at remote locations and armed with new technologies, like hydraulic fracking and horizontal drilling for heavy oil, oil sand and tight oil. These practices are more expensive and pose greater safety and environmental risks,” the minister added.
Pradhan said going forward, we must consider formulating a comprehensive approach by enagaging all the stake holders of this sector;
Working on our pricing mechanisms for equitable benefit of consumers & producers (he said he was aware that many oil producing nations are trying to address the price volatility existing in our sector) besides ensuring affordable, clean & accessible energy to the end consumer.