Oil Sector Current Affairs - 2019

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India to import crude oil from US for first time

India, the world’s third-largest oil importer, for the first time will import crude oil from the United States. The purchase comes after Prime Minister Narendra Modi’s visit to the US in June 2017 when President Donald Trump had assured that US looks forward to export more energy products to India.

Key Facts

Indian Oil Corp (IOC) has bought 1.6 million barrels of US Mars crude (a heavy, high-sulphur grade) and 400,000 barrels of Western Canadian Select that will be delivered onboard a Very Large Crude Carrier. The import will take place after IOC gets the carrier in October 2017 from PetroChina. The oil will be loaded off the US Gulf Coast,

The import of crude from US could become an alternative source for the Indian companies for the supply of heavy, high-sulphur grades as feedstocks, which typically sell at a lower cost relative to other oil types. Besides IOC, Bharat Petroleum Corp Ltd (BPCL) is second Indian refiner which also has planned to buy its first ever US crude oil cargo and has issued a purchase tender.

India will be the latest Asian country to buy US crude after Japan, South Korea, Thailand, Australia, China and Taiwan as they seek to diversify oil imports from other regions after the OPEC production cuts raised prices of Middle East heavy-sour crude ( grades with a high sulphur content).

Government announces new licensing policy to boost oil output

The Union Ministry of Petroleum & Natural Gas has announced new Open Acreage Licensing Policy (OALP) for oil and gas exploration.

The new policy will allow bidders to carve out areas where they want to drill. It will help energy hungry India and world’s third-largest oil consumer to attract greater foreign investment to boost output.

Key Facts
  • The objective of OLAP is to increase India’s indigenous oil and gas production by maximising the potential of already discovered hydrocarbon resources in the country.
  • OALP offers single license to explore conventional and unconventional oil and gas resources to propel investment in and provide operational flexibility to the investors.
  • It provides operational flexibility to the investors. It is departure from the current licensing policy of government identifying the oil and gas blocks and then putting them on auction.
  • Under it, Government will conduct auction of oil and gas blocks twice a year, with the first round being held in July 2017.
  • The selection of oil blocks will be based on seismic and well data provided by Directorate-General of Hydrocarbons in National Data Repository which offers total of 160TB data of India’s 26 sedimentary basins
  • The OALP auction will be held under the overhauled exploration licensing policy, allowing pricing and marketing freedom to operators and shifts to a revenue sharing model.
Comment

OALP is part of the strategy to make India a business and investor friendly destination and cut import dependence by 10% and achieve the plan to double  existing oil production from current 80 million metric tons to about 150-155 million metric tons by 2022. In this new model, government will not micromanage, micro monitor with producers rather only share revenue. Thus, it gives an option to a company looking for exploring hydrocarbons to select the exploration areas on its own. The July 2017 auction under this new policy will be India’s first major exploration licensing round since 2010.