Indian oil output dips amidst ageing oil fields
India may be the third largest consumer of crude oil, but it is nowhere close to even being a meaningful producer of oil. Currently, the two biggest consumers of oil viz. the US and China also have substantial oil production.
For instance, the US producers nearly 90% of its oil needs while China also producers nearly 35-40% of its oil needs. In the Indian context, the oil output is just about 10-15% of its consumption of crude. That is the challenge.
Now there is a new dimension to this challenge. To add to the problems, Indian oil production has been depleting for the last 3 years and FY22 has continued that trend of falling oil production. For the financial year ended March 2022, India’s crude oil production fell 2.67% on a YoY basis. Of course, the reason was due to ageing of ONGC wells in India.
Let us look at the numbers. Overall crude oil production at for the financial year FY22 stood at 29.69 million. That is nearly 2.63% lower than the 30.5 million tonnes produced in FY21 and sharply lower by 11.67% compared to the annual target of 33.61 million tonnes.
The largest oil producer in India, ONGC produced just about 19.45 million tonnes of crude oil during the year ended March 2022. This is 13.8% lower than target and 3.62% lower YoY.
The massive import volumes at 85% of daily crude oil demand gets worsened by the fact that the Indian Crude Oil Basket price stands at an elevated level of $107.92/bbl.
This is not only putting pressure on the trade deficit and the current account deficit but it is also putting pressure on the Indian rupee, which is evident from the INR weakening to Rs.76.5/$. This is making the oil driven trade and current account deficits more acute.
The reason for the fall in production is the ageing of the most prolific producer of crude in India, which is the ONGC Bombay High off the coast of Mumbai.
The oil production in India peaked at close to 36 million tonnes in FY18 and in the last 4 years, the crude output has seen a steady fall. Whatever has been achieved has also been done by sustaining production with the use of more advanced technology, but that may also not sustain for too long.
The challenge for the government is to focus on more oil finds and expedite production of crude from the recent discovered and developed wells. Two such are examples are the Barmer oil find in Rajasthan and the KG Basin oil field off the Andhra Coast.
The government needs to fine tune policy measures in such a way as to help maximize production from these wells so as to reduce the inordinately steep oil deficit that India is facing today.
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