Taking a cue from China, the government may consider creating a sovereign fund that will focus on acquisition of overseas oil and gas assets to strengthen the country’s energy security, Petroleum and Natural Gas Minister Murli Deora said today.
“Keeping in view requirements of energy security for the country, it has been suggested to consider the idea of creation of a sovereign fund focussed on resource acquisition,” Deora told Rajya Sabha in a written reply.
China, which has around $2.5 trillion (Rs 1,14,54,999 crore) foreign exchange reserves, gives low-interest loans to its companies to aggressively pursue acquisition of overseas energy assets.
The creation of a sovereign fund here could allow state-owned companies like Oil and Natural Gas Corp (ONGC) and Oil India Ltd to use India’s $280 billion (Rs 12.8 lakh crore) foreign exchange reserves for buying assets abroad.
“Currently, the acquisition of overseas exploration and production assets by oil public sector undertakings and funding thereof is based on commercial considerations and strategy adopted by the respective oil PSUs,” Deora said in his statement.
This practice, however, often puts the Indian companies at a disadvantage to their Chinese counterparts, as the former do not get the necessary monetary support from the government for that extra bit of aggressive bidding.
In a separate reply, Deora said India imported 131.9 million tonnes of crude oil during 2008-09, around 82 per cent of the total requirement.
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India’s domestic crude oil production has been on the decline in the past few years, as most of the producing fields have started ageing.
The country’s crude output in 2008-09 fell to 33.5 million tonnes from nearly 34 million tonnes registered during 2006-07. Deora said the government had taken several measures to accelerate domestic hydrocarbon exploration and production.
In recent years, India’s eastern offshore has emerged as a major hydrocarbon producing area with significant oil and gas discoveries by companies like Reliance Industries Ltd, ONGC and Gujarat State Petroleum Corp Ltd.
“The prognosticated resource of Krishna-Godavari Basin (in eastern offshore) is 1.13 billion tonnes,” Deora said.