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Panel says India must boost oil reserve, foreign oil hunt

Panel says India must boost oil reserve, foreign oil hunt
By Himangshu Watts
Mon Jul 11,12:27 PM ET

NEW DELHI (Reuters) - India should aggressively step up its hunt for foreign petroleum assets and plan a bigger strategic reserve of crude oil to increase its energy security, a panel set up by the oil ministry said on Monday.

The panel was formed last year to suggest ways to strengthen state firms in the wake of competition from China in the race for foreign oil and gas projects.

"Overseas exploration and production should be pursued aggressively by targeting at least 15 percent of crude oil imports through the equity oil route within the next two-three years," the committee said in the report obtained by Reuters.

ONGC Videsh Ltd, the overseas subsidiary of exploration firm Oil and Natural Gas Corp. leads India's hunt for stakes in foreign projects.

The company is spending $1 billion a year abroad as India's biggest oilfields decline, no large oil discovery has been reported in recent years and the government expects domestic oil demand to grow 4-5 percent a year for the next 20 years.

The panel said another state-run firm should be set up to invest in smaller projects abroad while ONGC should focus on fields which produce more than 2 million tonnes of oil a year.

It also suggested that India, which imports 70 percent of the oil it consumes, should build a strategic reserve of 10 million tonnes of crude oil.

The government has already approved building reserves of 5 million tonnes which would cover about 15 days of domestic demand, but that project has not yet been implemented.

Oil minister Mani Shankar Aiyar said the government would consider the panel's report with the "utmost seriousness".

The panel was also asked to consider the merits of merging state-run firms to help them compete with Chinese firms.

It said mergers in the global oil industry led to job cuts, which officials say would be difficult to do in India.

Indian communists, key allies of the federal coalition, have opposed any dilution of government equity in state firms saying this would lead to largescale unemployment.

"Further, in many such cases, post merger, a situation of oil monopolies was created as cartels were formed," the panel said.


LINK: http://news.yahoo.com/s/nm/20050711/india_nm/india_208942;_ylt=ArNFRd182OTQ2XMItRPubiEPLBIF;_ylu=X3o...