While there is a concerted policy-driven effort to move towards cleaner sources of energy for environmental concerns, India’s huge energy demand will continue to make oil and gas the primary source of energy in the country going forward.
“And today we are importing crude oil from across the globe and a wide array of countries, about 85% - 86%. The kind of energy-hungry that we are, we need to explore, discover, and produce to the limit,” said Ranjith Rath, chairman and managing director of state-run Oil India Ltd.
To meet India’s rising energy demand, the government is looking at a diversified energy strategy going forward. Prime Minister Narendra Modi said last year that India’s refining capacity would increase significantly and the government would push towards exploration.
Oil India has set itself ambitious drilling targets to up its drilling operations. For the ongoing financial year, the exploration and production (E&P) company plans to drill over 60 wells, up from 45 in the previous financial year. “Last year we drilled about 45 wells. This year we are looking at 60 plus wells. And this is primarily all onshore. So though it's not only a hike in the number, we are also looking at deeper wells,” Rath told The Core.
The company also plans to dig deeper wells to achieve over 6,000 metres in terms of drilling efforts. “Going forward, we are looking at 75 plus wells year after year. That's as part of the exploration portfolio is concerned,” Rath said.
Rath spoke to financial journalist Govindraj Ethiraj on how Oil India plans to remain relevant in the next decade.
Let's talk a little bit about the history. The only reason is that everyone may know Oil India Limited but may not be fully conversant with its history and how the history determines the way its business is structured and laid out.
I'm glad that you asked a question that is so relevant and close to my heart. Oil India is a legacy company. It dates back to 1889 when the first discovery of crude oil happened in this part of the globe at a place called Digboi. The name Digboi came from the discussion or the direction by the then geologists or the road builders or the railway track builders; they said ‘dig boy, dig’. That's how Digboi came in—means while the Assam Railway Trading Corporation was laying sleepers, wooden sleepers for the railway line to carry coal from the northeastern part of the country, the elephants who were engaged had traces of crude oil in their feet. In those days in upper Assam, we would have seepages of crude oil… and I'm saying this in 1889, 100 plus years ago. After that followed a story or a narrative that unfolded and Assam Shelf, where Oil India has its major operation became one of the most productive, prolific, prospective, and still producing basins. That's the story of Oil India Limited.
After that, in 1959 we became a joint venture company and in 1981, as recent as it could be, Oil India became a national oil company. And as the story unfolded, we went for our listing. Oil India became a Navaratna. Oil India today is a Maharatna CPSE (Central Public Sector Undertaking) under the administrative control of the Ministry of Petroleum and Natural Gas.
Could you give us a sense of Oil India's production in the context of onshore-offshore in the country and the total oil crude? I mean consumption in the country.
Currently, we are doing about 3 million metric tonnes and as we speak we do not have any producing offshore field. But we have discovered a small field in the KG basin, the east coast of India. We have exploration acreages in the Andaman Nicobar basin both the east side and west sides of Andaman Nicobar.
We have one acreage, open acreage licensing policy acreage, in the Kerala-Konkan basin. But our majority of production comes from our main producing area which is the upper Assam. Besides this, we also have a producing asset in the westernmost part of the country where the PML (petroleum mining lease) is extremely west. Beyond Jaisalmer, we have a basin. We have two assets where we are producing crude oil and natural gas.
Could you give us a sense of Oil India's portfolio now? We talked about the drilling and exploration which is of course the oldest part to the refining which of course is the newest and then we'll come to the renewables and everything that's maybe much more recent.
We have about 5,000 square kilometers of mining lease where we carry out our near-field exploration which is a continuous process, plus the production part. That involves about 500 plus wells that are producing currently. And that sprayed from in the easternmost is Digboi and beyond that, we have producing fields in Arunachal Pradesh. There's a place called Kumchai and to the westernmost part of Lakwagaon, Moran, and Naharkatiya.
I must tell you that post-independence, the first oil discovery happened in the Assam Shelf, that place is called Naharkatiya and it is in 1953; followed by 1956 we discovered Moran and those oil wells are still producing. We also are the oldest pipeliner. As we speak we run a pipeline for crude oil for about 1,100 plus kilometers and a product line from Numaligarh to Siliguri, which is about 600 plus kilometers.
As far as the other portfolio is concerned we have about ten assets abroad in seven countries out of which some of them are exploratory assets. Some of them are producing assets. And two flagship assets, which I must mention in terms of our portfolio, one is we have a couple of assets in Russia which is highly yielding in terms of dividends. We have one flagship asset in Mozambique, which is one of the richest gas fields, and it is one of our major single projects, probably the highest investment. We are looking forward to that particular project in gaining access to the natural gas that will come to the east coast and west coast of the country.
This apart, we also have our presence across the gas value chain. We have our gas pipeline, plus we also have geographical areas that PNGRB (Petroleum and Natural Gas Regulatory Board) allocates in terms of providing CGD facilities, both CNG and PNG.
Interestingly, in 2021, we have got the Numaligarh Refinery as part of our downstream acquisition. This gives us the entire bandwidth to become an integrated energy entity today.
If you were to look at the map of India today, as you said, many of those wells have been producing oil for more than a century and perhaps will continue to produce for a long time. There are many wells, particularly offshore and some onshore, I'm guessing, which are yet to but which may have the potential to do. What does it look to you today, as you look maybe a decade or two, where India will continue to produce from and perhaps find new wells if that could be found?
The possibilities India offers today in terms of E&P (exploration and production) are unbelievable. Huge potential is yet to be explored. That's what I strongly believe for two reasons.
One is a bit technical. Today we have about 26 sedimentary basins, which are very nicely categorised into three categories, categories 1, 2, and 3 and it has got a commercial implication. There are seven basins which are category one basins and there we have proven hydrocarbon reserves, which are being produced. Out of the seven we are producing from Assam Shelf, we have our interest in the Tripura Basin, we have our interest in the Assam-Arakan fold bed/belt. Plus we have also our interest in the Jaisalmer Basin.
In terms of category two and category three basins, the pathbreaking reforms which the Government of India has brought in that if instead of the pre-HELP (Hydrocarbon Exploration and Licensing Policy) regime where production-sharing contract was the order of the day, through HELP during 2016-2017, government brought in a reform where the E&P companies could offer their bids or offer their proposals or evince interest in large parcels of land track or offshore areas. That's why it's called open acreage licensing policy. Another thing that was brought in is the revenue sharing contract, by which, if you were intending to do exploration in category two and category three basins, the revenue commitment is nil. And that speaks volumes in terms of the opportunity that has been created.
In recent times, the Government of India has unlocked about 1 million square kilometres of the explorable area both offshore of the east coast, offshore of the west coast, and the Andaman Nicobar Basin, which has made available the deep and ultra-deepwater areas which have not been explored. To supplement this, the government, through the Ministry of Petroleum and Natural Gas and the Directorate General of Hydrocarbon (DGH), the National Seismic Program, is acquiring extensive data in these areas, and where Oil India was also mandated to do it.
Oil India is also carrying out airborne gravity gradiometry. The intent is to create a database, which will entice the explorers like the national oil companies, both ONGC and Oil India, and also the IOCs or the NOCs of the globe. To me, the opportunity is there. And with now the ecosystem that has been created, we look forward to the future rounds of OLP-9 and OLP-10 going forward.
You talked about aerial surveys. And let me bring in the technology aspect here versus the resources that one has to commit to find the same additional barrel of oil. How does that stack up today versus, let's say, what it was earlier, and how bright, if so, is the future?
Let's acknowledge the fact that we are an ever-increasing consumer in terms of energy. Considering that oil and gas will continue to be the mainstay source of our energy. And today we are importing crude oil from across the globe and a wide array of countries, about 85% - 86%. The kind of energy-hungry that we are, we need to explore, discover, and produce to the limit. Given the production strategy that we have, while we have created a concerted strategy to enhance our production from our mining lease areas, we need to have focused attention to exploration.
What is required in terms of an explorer is a stable price point. Now, we are aware of the fact that it is extremely volatile and that the fluctuation will always remain. Now, if the price point goes beyond its threshold, there is a drop in the demand and then the price is brought down. So as an explorer, we would always look forward to a stable or near fluctuation regime of price point that would help us, a kind of a horizon to explore. That's one in terms of crude oil.
In terms of natural gas, recently the government has made a pathbreaking decision of offering a price point in terms of the nominated fields where we otherwise were calling it the APM (administered price mechanism) gas, which is currently about 6.5 million, $6.5 per MMBtu (metric million British thermal units), with also a possibility of having additional 20% if you discover new gas. So these things encourage us to look for new horizons to explore and produce for the country.
Let's talk about the downstream part now. You acquired the Numaligarh refinery a few years ago. That gives you a foothold there. But that comes at a time when you're also, in a way, looking to expand beyond conventional energy into non-conventional energy. How does Oil India divide its mind space and resource allocation between these sorts of downstream ambitions versus maybe, organic ambitions?
I'll tell you, this has been the silver lining for Oil India in terms of NRL acquisition. We have been traditionally supplying to NRL in terms of crude oil and natural gas. So there was a very natural synergistic gain that happened. Given the fact that NRL is now expanding from three million tonnes to nine million tonnes capacity, we are looking forward to completing the project before the end of 2025. The idea is that it would create an opportunity to have an enhanced crude portfolio. Whatever extra that Oil India would produce we will find a market next door.
Of course that would require NRL expansion, would require importing crude oil because I'm sure we are not targeting nine million metric tonnes in the near horizon, which entails laying a pipeline, which probably would be the longest crude oil line from Paradip to Numaligarh refinery, about 1,640 km. So that project is also on track. Now, beyond this, I must tell you, in terms of our commitment towards the green energy portfolio, and given the clarion call of honourable Prime Minister Mr Modi for looking at the various possibilities in terms of import substitution, the blending possibilities in both petrol, which is MS (motor spirit) or diesel. Now, the first narrative is we need to have the percentage blending in terms of ethanol in petrol.
You must know that the current commitment is to achieve 20% blending of ethanol in petrol. So to that effect in NRL, we have the first of its kind across the globe. No food controversy. For food to fuel, the feedstock is bamboo. In the northeastern part of the country, we have plenty of bamboo available as part of the feedstock. So based on bamboo as a feedstock, we have a joint venture company, which is called Assam Biorefineries, where we are going to produce ethanol. That's one part of it. Through our collaboration with Assam Petrochemicals, basis the feedstock, which is gas, which we are producing from our field, we are also converting. We have got a 600-tonnes-per-day methanol plant. That methanol will get blended in diesel. So this is the benefit, or what I call synergistic gain in terms of the downstream derivative.
Now, because the petrochemical intensity or the petrochemical consumption in the country is relatively lower than across the globe, we have also decided on setting up a 360 KTPA (kilo-tonnes per annum) petrochemical plant, which is a polypropylene unit that will be downstream of the Numaligarh refinery expansion project. And we have already initiated work on this. So that's the kind of portfolio we envisage as part of our downstream segment, including further derivatives.
Let's say in the next decade, and I don't want to go too far beyond that, what does Oil India look like?
It's a fantastic canvas to paint. You have multiple options. Ten years we are looking at augmenting. Currently, as we speak, we are running about ten odd studies in terms of various feasibility reports or detailed project reports. All those pan out in 10 years for which we have already created a strategy and a diversification study as part of our strategy exercise. We will have augmented seismic data acquisition, 3D seismic at that.
Last year we drilled about 45 wells. This year we are looking at 60 plus wells. And this is primarily all onshore. So though it's not only a hike in the number, we are also looking at deeper wells. The intent is to dig as deep as to reach about 6,000 plus metres in terms of our drilling efforts, which will be both exploratory and production. And going forward we are looking at 75 plus wells year after year. That's as part of the exploration portfolio is concerned.
You're saying 6,000 metres, which is 6kms, sounds pretty deep. How does that compare with anywhere else in the world in terms of deep onshore drilling?
Only a few areas where you need to drill that deep. Permian Mission in the US there are certain deeper wells. The story of Assam Shelf is very unique. Here as we are drilling deeper, we are establishing more hydrocarbon. So the quest for hydrocarbon is driving us to attempt to drill deeper. The stack of sedimentary formations in this part of the globe, in the Upper Assam is thick and we get very nice sandstone horizons, which are oil-bearing. So the quest for hydrocarbon, we are not only looking at deeper depth, we are also bringing in the advent of technology to have multiple wells from a single well plinth, which will be a radial one and we would have access to the formations which is otherwise initially not thinkable and with, of course, availability of drilling rig remains a concern. That's part of the 10-year horizon. In terms of exploration.
In terms of production, we see a lot of opportunities to enhance our production from the existing PML areas. And we are also hopeful, rather optimistic, that some of our open acreage licensing policy exploration efforts would also yield results. That's a very concerted strategy is going on in terms of our drilling in OLP acreages. And we are hopeful of striking something. And though it is time will tell, but we'll have to wait. And we have factored in that as part of our strategy.
Plus, we are also looking at creating a portfolio of utilising those not-so-successful wells. Because every well that you would drill need not necessarily get converted to a production well. So those wells we want to utilise as part of our portfolio to create a mechanism that we could use for Co2 sequestration. That's one area which we are looking at as very futuristic. And given the portfolio, we intend to have, a net zero by 2040.
Plus the Andaman Nicobar exploration acreage. We are going to spurt the well by mid-2025. That would open up Oil India's exploration efforts offshore. We are also looking forward to the OLP 9 and OLP 10 bidding rounds where we would have possibly some acquisitions of OLP blocks and take up the exploration. And should there be any discovery, then we would also get onto the field development part of it.
And this, besides the alternative energy portfolio will continue to be harnessed. We have already taken a decision that we would create an Oil India Green Energy Limited, of course, subject to the approval of the government. But that decision has already been taken.
Does hydrogen and all come under that?
Yes, we must tell you that we have already created the first pilot plant basis solar energy source, electrolyzer, and a hydrogen pilot plant. Plus we have also got through our startup idea, a hydrogen fuel cell bus, which is under trial run right now. And as we look at it with the Numaligarh refinery, we have already placed an order for 2.4 KTPA of green hydrogen and we are going to scale it up. Plus we are also looking at other possibilities of green hydrogen and green ammonia, along with some fertiliser companies. And these things would come under the Oil India Green Energy Limited, which would possibly be a wholly-owned subsidiary.
You've talked about, for example, the need for technology partnerships particularly when it comes to, let's say, drilling new wells or the ability to explore acreage that you've got. And you've got, as I understand, more than 60,000 sq kms. So what's the kind of technology that exists in the world that companies like Oil India could access or would need to access, and what would that specifically achieve?
I would narrate it in two parts. One is since this is our venture into offshore wells off the coast of Odisha in Mahanadi. Those are in the late 80s and early 90s. Now we are looking at deep and ultra-deep water. So our effort, along with DGH and the Ministry of Petroleum and Natural Gas, through various roadshows and one-on-one interactions, is to have some collaboration with international oil companies or the NOCs (National Oil Companies) of the globe who have got significant presence offshore. It's more about derisking the effort in terms of identifying the prospects.
As we speak, we are also collaborating with some of the universities in the USA. We are also having a good collaboration with IIT-Bombay, and IIT Kharagpur in the country. And we are looking at the studies which are primarily called petroleum system modelling. And the extensive data which was not available gives us access to establish the prospectivity of the area. So we are looking at selecting from an offshore exploration point of view, the serious factor that makes the well successful or not successful, but not a failure in terms of understanding the prospectivity of the location or the field or the basin. So with the data that is available with the software that is available today, we are looking at that. We are seeking collaboration with the IOCs (Indian Oil Corporations) of the world to bring in and help Oil India Limited to adopt it. That's one part.
In terms of onshore exploration. We would enhance our portfolio through our concerted strategy of doing enhanced oil recovery. And there we have been successful. And I must tell you this, today we are producing about 600 barrels per day from our Jaisalmer Basin asset. But this is one of the oldest oils, 1 billion-plus, or nearly 1 billion-plus sitting at a depth of about 1,060 metres within the Jodhpur sandstone. And this oil is non-flowing with about 1,000 centipoise viscosity. So we are soaking the formation with pure steam at a temperature of 360 degrees for 21 days. And then after 21 days, once you switch off, the oil starts flowing to the surface. So we are expanding that effort also.
Plus we have already placed an order and we are going to do hydro-fracking for those tight formations sitting at a depth of 3,000 plus metres to enable the hydrocarbon molecules to flow. These are a couple of those technologies which we are adopting.
What you described earlier is fracking, isn't it?
Fracking. Yes. But this fracking is different. Not in principle. Principle wise it is the same. But the way the fracking is done for the shale oil and shale gas in the USA and what we are going to do here.
You are going to be part of the India Energy Week (IEW) which brings together energy companies like yourselves and everything that goes with it. So what are you looking out for or looking forward to?
Three things. The last year's experience with the IEW has been excellent. The platform has been created by the Ministry of Petroleum and Natural Gas and the Government of India. India Energy Week allows us to interact with who's who in the sector, and who's who in the industry coming together from around the globe to India. And by the one-on-one or the bilateral discussions that we have with the IOCs and NOCs of the world help us pave or create that narrative of collaboration.
The entities would like to look at Oil India's data. The confidentiality agreement has to be signed and the purpose is they assess the assets in terms of their materiality. It takes time but that nucleus is germinated in IEW. That's one piece.
Second, as part of our production enhancement, we also do a lot of PEC contracts. So we would also expect the startups that are interested in delving into the ecosystem of oil and gas to collaborate with Oil India Limited and that also would happen in IEW. That is the second piece.
The third and very important piece is to tell the oil story to the world. So the stall that we are going to put up this year, I must tell you, is a very planned approach to state and to share with the world the legacy of Oil India Limited 100 years plus with the latest acquisition of NRL and the possibilities of stepping further down to the chemical derivatives.
While oil and gas will remain as a mainstay for mobility, it offers immense opportunity for chemical derivatives which is a narrative already existing in the world. We would do it. Plus telling the story that Oil India Limited as an integrated energy company will continue to focus attention in terms of expedited exploration and enhanced production. So probably one of the best possible partners for any entity or energy giant looking at India with its favorable considerations. So that's the third part that we are looking at.
If you were to go back a few decades, what would you say to a young person, because you mentioned startups, which means young people who should look at energy both conventional and non-conventional, what would you say to someone who's, let's say passing through IIT Kharagpur may be considering should I do geology? Should I not do geology? And what is the future ahead?
For geologists, there is absolutely no problem with the kind of exploration narrative that is unveiled not only in oil and gas but in the mineral sector also or in the natural resource sector per se, in totality. Plus there is another dimension of geology which is called engineering geology which is a mainstay for infrastructure development. So for geologists, I don't see any difficulty, that's one piece.
But let me tell you, it's not about only geologists, it's about engineers it's about the MBAs who are practicing HR. It's about the finance people. Now for everybody, India continues to remain a bright spot. As public sector undertakings, we have a social commitment in terms of creating a capital-intensive narrative.
I mean, you must appreciate that last year the oil and gas PSUs, in total did about one lakh crore investment. And this year we will also do a similar number. All these investments in hydrocarbon space create economic opportunity and employability. That's one part. Plus we also give a lot of thrust on startups. And last year in IEW, two of the startups which were incubated under Oil India Limited, were awarded first and second rank also. And they are very forward-looking. And we have continued to create a narrative in terms of encouraging startups. We have an initiative called SNEH and we collaborate with IITs, and IIMs to help the students to create those opportunities. And like last year, I'm sure this year also we will have a display of those innovative ideas through the startups. Some of them will be also nurtured by Oil India Limited and some of them will be future Oil India partners. So that's something that also happens in IEW.