Govt must give stable, consistent investment regime: Cairn India

Addressing the 9th annual general meeting of company shareholders here, Cairn India Chairman Navin Agarwal cited the example of the US where market pricing of oil and gas helped it move from being net importer of energy to a surplus nation now. 

“Our nation is blessed with significant untapped oil and gas resources. However, the sector needs encouragement to maximise this potential. We need policies that are tailored to reflect and respond to India’s status of an oil and gas importer,” he said. He said numerous resource-rich countries offer lessons for India to translate resource wealth into broader economic development.

Citing the US example, he said that its oil production growth in 2014 was highest in more than 100 years. The country is redefining the global energy landscape. Such a turnaround in the hydrocarbon sector offers constructive lessons for energy import dependent countries like India, Agarwal said. “Investment climate and governance are key drivers for investments. A stable and predictable 

investment regime and a consistency in policy will help enhance confidence besides attracting domestic as well as foreign investments in the oil and gas sector,” he said.

While crude oil produced in the country is sold at international rates, natural gas is sold at a substantial discount to market rate. In case of Cairn, crude oil from its prolific Rajasthan block is sold at a marginal discount to its nearest globally traded benchmark crude to factor in for quality. 

Cairn, which has also discovered gas in Rajasthan, has been pitching for higher crude oil and gas prices. Navin, brother of mining baron Anil Agarwal, said an oil and gas “regime that integrates these philosophies, will not only spur domestic exploration and production activities, it will significantly reduce our dependence on expensive imports.”

Cairn, which in 2004 discovered Mangala oilfield in Rajasthan — the largest onland oil find in more than two decade — is majority owned by Anil Agarwal-led Vedanta Group. India is over 78 per cent dependent on imports to meet its oil needs and over 36 per cent for gas requirement. Its imports top $110 billion. Navin Agarwal said given the growth projections, this demand supply gap is expected to grow. International Energy Agency’s World Energy Outlook 2014 indicates that India’s annual net fossil fuel import bill will be over USD 500 billion in 2040. 

“Clearly, this has serious ramifications for the Indian economy,” he said. “We look forward to an encouraging business environment and policies from a progressive government to maximise the potential of the sector, which in turn will help enhance our efforts and contribution to nation building.”  

Agarwal said Prime Minister Narendra Modi has called for increasing domestic production of oil and gas to reduce import dependence to 67 per cent by 2022. Cairn’s oil production in 2014-15 reduced the nation’s crude oil import bill by over Rs 38,500 crores (over $6 billion). “After a relatively stable oil price at around USD 100 per barrel, the price came down sharply, during the period starting June 2014 and continues to remain low.”