Oil and Natural Gas Commission (ONGC) is planning to invest US$ 1.5 bn in Bombay High to increase the oil recovery from 28% to 40%. The investment is to be staggered over a period of three years. The rise in recovery will imply an increase of 160 m tonnes in output.
India's domestic crude oil production has been stagnating at 2.6 to 2.8 m tonnes per month over the last one year. Added to this is the spurt in international crude prices, which are currently at over US$ 20 per barrel. These factors have led to a sharp appreciation in India's oil import bill giving rise to a fresh bout of criticism of the inefficiencies in the upstream oil sector.
ONGC's move is aimed at putting a stop to such criticism and also consolidating its leadership position in the domestic crude oil production sector. With private participation in the upstream oil sector likely to increase over the coming years, ONGC would have to become more efficient in order to compete with the private sector players on the price front. Moreover, a step up in production would increase its lead over potential competitors.
Apart from the company specific reasons, it is essential for the economy to become more self sufficient in terms of crude oil production. This will help in reducing the burden of the oil import bill. A lower oil import bill would alleviate concerns pertaining to the trade account deficit. This would improve the overall fiscal situation of the government as it continues to subsidise a number of petroleum products.
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