To cut imports, Oil India aims to raise output by over 7%: Utpal Bora

We are importing around 82 per cent of our requirement, so lower oil prices are more beneficial to the country, says Bora

State-run Oil India is expected to see a huge increase in oil and gas production by 2022. Chairman and Managing Director Utpal Bora speaks about the company's planned role in bringing down the country's crude oil imports and the future of India's exploration sector in an interview with Shine Jacob. Edited excerpts:

The Open Acreage Licensing Policy (OALP) rounds are considered to be the next big thing. What is your take on it and what are your investment plans for the areas held by Oil India?

OALP will allow us to go for more exploration. The last round of NELP (New Exploration Licensing Policy) was almost a decade back. After that we didn’t have any chances for new mining leases for exploration.

We have won nine blocks in OALP-1. Most are in close proximity to producing areas. So, there are two advantages. One is from a geological point of view, as it may be extension of the existing structure, so the potential is high. Second is evacuation of oil and gas will not be a problem, as all our infrastructure are nearby. We should be able to monetise them within 2-3 years.

OALP investment will be phase-wise. We will have survey period, then exploration drilling, appraisal drilling, field development. Some of exploration drilling will be part of our normal exploration budget and spread over 2-3 years. Our capex has been of the order of Rs 3,500-4,500 crore over the years, including overseas acquisitions.

What are the further policy changes that Oil India is looking from the next government?

Main advantage of OALP over NELP is that of having no cess, reduced royalty rates, marketing freedom for gas and it is a revenue-sharing model. We can also choose our own areas. We are happy with the incentives that the government has provided. It is a big boost for Oil India and ONGC. However, enhanced oil recovery (EOR) policy needs further review.

What is your take on the rising crude prices globally?

Our cost of production including levies was around $33 a barrel in 2018-19. We are definitely comfortable with the current oil price, but it is a big concern for the country. We are importing around 82 per cent of our requirement, so lower oil prices are more beneficial to the country.

Over the years, oil and gas production in India has seen a declining trend. What are the reasons?

You must appreciate the fact that our fields are very old. Oil India fields are 45 years old on an average. The natural reservoir decline is inevitable. The accepted rate is 8-10 per cent across the world. If you look at giant fields across the world, including Vankorneft in Russia, the decline is very high. I would say that Oil India is at least successful in maintaining the production. 

Any company can increase production only through new discoveries. If you see the history of ONGC and Oil India, at times when the production was declining, new fields were discovered. But in the past 10-15 years, no major discoveries were made by Oil India or ONGC. With OALP, we hope this problem will be solved. We go for EOR when oil fields decline. Through this we can recover 8-15 per cent additional oil. EOR from lab study to commercial rolling out takes minimum 5-6 years. We have done some lab studies and launching one pilot this year and one next year. 

In terms of gas, we are seeing huge potential. Production is around 2.9 bcm (billion cubic metres) at present. By 2021, it may go up to 3.5 bcm. There are many potential areas where the gas is stranded. 

What is the status of the country’s plans to reduce oil imports by 10 per cent by 2022?

To achieve the Prime Minister’s vision of 10 per cent energy import reduction target, Oil India has committed to increase crude oil production to 3.46 million tonnes and natural gas to 3.70 bcm, respectively, by 2021-22. The projected increase is 7.25 per cent in oil production and 30.4 per cent in gas production by the end of 2021-22 from 2015-16 levels. 

Oil India is emphasising on increased exploration and development drilling activities, reducing decline rate in already-producing, matured and developed fields (redevelopment activities). We have engaged with renowned institutions from the country and abroad. Proven technologies like hydro-fracking, gravel pack, etc. shall also be implemented on a larger scale.

A number of infrastructure projects for oil and gas handling, more particularly for enhanced gas production and transportation, are in different stages of implementation, which will enable us to achieve the targets.