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Current Affairs

Fall in India’s oil and gas production

Date: 22 April 2021 Tags: Miscellaneous

Issue

Domestic production of India’s oil fell by 5.2 per cent and natural gas by 8.1 per cent in the Financial Year 2021.

 

Background

India has a small share of domestic petroleum extraction industry which is shrinking due to increasing costs of maintenance.

 

Details

  • The major reason cited by producers behind lower production is the delays caused due to the Covid-19 pandemic.

  • Most of India’s crude oil and natural gas production is extracted from wells that have become old and their outputs have been declining.

  • India’s oil and gas field have become more difficult for extracting and producers have to find new ones that are located in deep waters.

  • These fields are difficult to reach and the cost of extraction is also high. The other feasible fields are located in inaccessible areas.

  • Major players in oil and gas extraction are government owned ONGC and Oil India. Foreign players are not interested in bidding.

  • The government has been urging ONGC to tie up with foreign companies so that it can avail the technology to extract from difficult terrain.

 

Reasons for low participation

  • The major reason cited by foreign companies is the delays in getting clearances for environment as well from regulator for development plans.

  • The cess levied on the domestically produced crude oil is high and industries have been urging to reduce it to 10 percent from existing 20 percent.

  • The government has also set up internal maximum production levels for extracting oil and gas based on climate targets that has lowered interest from industry.

 

Significance

  • Boosting domestic production of gas and oil is a major part of the government’s Aatmanirbhar Bharat initiative.

  • If our production levels do not match with consumption levels, we will be over dependent on foreign imports of the commodity.