India in the right direction, but market-driven energy pricing the way to go: BP

On a day when Petroleum Minister M Veerappa Moily talked about self- reliance in energy by cutting oil and gas imports to almost zero, British oil giant BP said India can achieve this only by allowing more competition and market-linked pricing of energy products.

BP made the biggest foreign direct investment in India by buying 30 per cent stake in 21 oil and gas blocks operated by Reliance Industries (RIL) for $7.2 billion.

Mr Moily said he has appointed a committee under Vijay Kelkar (former finance secretary and renowned economist) for suggesting lowering dependence on oil imports and becoming energy self-reliant by 2030. It was Mr Kelkar whose suggestions for a hike in the prices of LPG and diesel were implemented by the government recently.

Citing self-reliance in energy by the US and Canada, BP Group chief economist Christof Ruhl said, "vast unconventional reserves have been unlocked in the US. This has been made possible not only by the resources and technology, but also by 'above-ground' factors such as a strong and competitive service sector, land access facilitated by private ownership, liquid markets and favourable regulatory terms."

When NDTV asked Mr Ruhl about the recommendations made by Prime Minister's Economic Advisory Council, headed by Dr C Rangarajan, on new pricing formula for natural gas, Mr Ruhl said, "it is a step in the right direction", but a lot needs to be done.

According to BP's Energy Outlook 2030, in the next 18 years, 40 per cent of the energy basket will be non-conventional, and crude oil will play less dominant role.

Mr Ruhl added that for achieving energy self-reliance through non-conventional resources, countries like the US and Canada, and unlike China and Venezuela, which have more resources than the US and Canada, have followed the right strategy of allowing more competition and market-linked pricing. Market-linked price puts the risk on the contractor and that is the way forward, he said.

BP's Energy Outlook 2030 further says, "growing production from unconventional sources of oil - tight oil, oil sands and biofuels - is expected to comprise all of the net growth in global oil supply by 2020, and over 70 per cent of the growth by 2030. By 2030, increasing production and moderating demand will result in the US being 99 per cent self-sufficient in energy; in 2005, it had achieved only 70 per cent self-reliance. Meanwhile, with continuing steep economic growth, major emerging economies such as China and India will become increasingly reliant on energy imports, the report says, adding that these shifts will have a major impact on trade balances.

Also, as against Mr Moily's expectations of lesser imports for self-reliance, BP Group chief executive Bob Dudley said, "China and India are expected to need a lot more imports to keep growing." Dudley added that the outlook shows the degree to which the once-accepted wisdom has been turned on its head. Fears over oil running out - to which BP has never subscribed - appear increasingly groundless. The US will not be increasing dependence on energy imports, with energy set to reinvigorate its economy.