Is India’s oil addiction undermining its economy once more?
From about the beginning of 2017, even skeptics had to admit, India looked to be recovering from a growth slowdown. Most dramatically, in the last two quarters for which data is available, investment in physical capital — which had long been too low for growth to recover — increased by 12 percent and 10 percent, respectively. In the first two months of 2018, exports grew by over 9 percent. For once, optimism seemed warranted: Decent growth and macroeconomic stability seemed likely to bolster optimism, encourage more investment and launch a virtuous cycle. Unfortunately, while growth is indeed reviving, the macro-economy isn’t looking all that robust. Most worryingly, the rupee is just about the worst-performing currency in Asia this year; some analysts believe that it will, before the end of the year, be cheaper against the dollar than ever before. Others may not be as gloomy but, across the board, they’ve lowered their forecasts for India’s currency. What’s going on? Well, in part, the problem is a familiar one: India’s dependence on imported oil. The health of the Indian economy tends to rest on two great, uncontrollable factors — the level of monsoon rains and the price of oil. India’s enjoyed a nice run of low prices and lower import bills for the past several years, as crude prices crashed from over $100 a barrel to near $40 a barrel. But now that they’ve climbed back to $75 a barrel and may go higher, India’s again facing worries about inflation, government spending, and the current account deficit. Back when crude oil prices were at their peak, India was being talked about as one of the “fragile five” economies most at risk from a tightening of the U.S. Federal Reserve’s monetary policies. The country’s current account deficit stood at an uncomfortably high 4.8 percent of GDP. There were even murmurs that India might have to seek relief from the International Monetary Fund, until the government, spooked into action, imposed a sharp series of import controls — particularly on gold, for which India has a ravenous appetite. Then, luckily, crude oil prices began to crash in the middle of 2014. So did the current account deficit, falling to 0.7 percent of GDP in 2016-17. Now things are heading in the opposite direction: Kotak Institutional Equities worries that during 2018-19, India’s current account deficit could be as high 2.9 percent of GDP. In itself, that wouldn’t be a crisis. India has more than enough dollar reserves; capital inflows show no signs of stopping. But, the trend has been ugly enough for the rupee to crash and for worries about inflation to return. The central bank committee that sets monetary policy for India released the minutes of its last meeting recently and most members seem to think that the Reserve Bank of India might need to act soon. In other words, the incipient recovery might be choked off by higher rates even before it properly begins. It’s a frustrating rerun: Once again, India’s insatiable thirst for imports seems destined to hold it back. But, that’s really only half the story. While the cost of imports is rising, exports, in a well-run economy, should be rising to compensate. Instead, India has consistently under-performed as an exporter. After the healthy start to 2018, export growth turned negative in March. Four years ago, India exported $310 billion worth of goods a year. Now, it exports $302 billion a year — the lowest, as a percentage of GDP, in a decade and a half. And anemic world trade isn’t to blame. Four years ago, Vietnam’s exports were $150 billion; in 2017, at $213 billion, they were worth 43 percent more. India’s failure isn’t the inability to wean itself off imported crude. It’s that it has failed to compete in world markets so it can pay for the oil it needs. India has wasted the easy years since 2014 when it should have reformed its export processes, cut red tape, backed its manufacturers and pushed them to go out and create new markets. Instead, export processes are by and large just as complex and inefficient as they were four years ago. Tax incentives for exporters have been withdrawn, tax refunds withheld and the entire orientation of India’s economy turned inward. Instead of building up exports, India has decided to try and ward off imports; the government has raised tariffs across the board, for the first time in a generation. There’s still time to reverse things. If the rupee does in fact hit record lows, India shouldn’t mourn. It should see the new level as a boost for its exporters, an unhoped-for reduction in the price of Indian goods. The government should follow up by slashing red tape and the tariffs that keep Indian companies from integrating with global supply chains. India’s import dependence need not be a chronic disease. There is a cure: exports. Kevin Long Womens Jersey
ONGC bids for 37 oil blocks, Cairn 55 in 1st OALP round
ONGC today bid for 37 oil and gas blocks while Cairn India put in bids for all the 55 areas on offer in India’s maiden auction of oil and gas acreage under the newly formulated open acreage licensing policy. As many as 110 bids had been received, the Directorate General of Hydrocarbon (DGH) tweeted. Bidding in the auction of 55 exploration blocks on offer for prospecting of oil and gas as under the open acreage licensing policy (OALP) closed today. Oil and Natural Gas Corp bid for 26 blocks on its own and another 11 with partners. Cairn India, which is now known as Vedanta Ltd, bid for all the 55 blocks, sources privy to the development said. Cairn put in very aggressive bids for 13 blocks and a little less so for another 9. The remaining bids were mostly routine, they said. State-owned Oil India Ltd (OIL) is the other major bidder in the round that also saw participation of other PSU oil firms like Indian Oil Corp (IOC), GAIL and Bharat Petroleum Corp Ltd (BPCL) mostly as consortium partners. DGH, the upstream technical arm of the ministry of petroleum and natural gas, began opening of offers received under the OALP bid round being held under the new Hydrocarbon Exploration and Licensing Policy (HELP). India had in July last year allowed companies to carve out blocks of their choice with a view to bringing about 2.8 million sq km of unexplored area in the country under exploration. Under this policy, companies are allowed to put in an expression of interest (EoI) for prospecting of oil and gas in any area that is presently not under any production or exploration licence. The EoIs can be put in at anytime of the year but they are accumulated twice annually. As many as 55 blocks were sought for prospecting of oil and gas by prospective bidders, mostly by state-owned explorers Oil and Natural Gas Corp (ONGC) and Oil India Ltd (OIL) and private sector Cairn India by the end of the first EoI cycle on November 15, 2017, they said. The blocks or areas that receive EoIs at the end of a cycle are put up for auction with the originator or the firm that originally selected the area getting a 5-mark advantage. The 55 blocks have a total area of 59,282 sq km. This compares to about 1,02,000 sq km being under exploration currently, they said. Blocks would be awarded to the company which offers highest share of oil and gas to the government and commits to do maximum exploration work by way of shooting 2D and 3D seismic survey and drilling exploration wells. Increased exploration would lead to more oil and gas production, helping the world’s third largest oil importer to cut import dependence. Prime Minister Narendra Modi has set a target of cutting oil import bill by 10 per cent to 67 per cent by 2022 and to half by 2030. Import dependence has increased since 2015 when Modi had set the target. India currently imports 81 per cent of its oil needs. Sources said ONGC and Cairn India had put in 41 out of 57 bids received in November last year. Private player Hindustan Oil Exploration Co (HOEC) bid for one area in a round. Of the 57 EOIs put only 55 blocks were cleared for bidding after eliminating areas that are under no-go zone or overlapping with existing mining lease. The new policy replaced the old system of government carving out areas and bidding them out. It guarantees marketing and pricing freedom and moves away from production sharing model of previous rounds to a revenue sharing model where companies offering maximum share of oil and gas to government are awarded the block. Till now, the government has been selecting and demarcating areas it feels can be offered for bidding in an exploration licensing round. So far 256 blocks had been offered for exploration and production since 2000. The last bid round happened in 2010. Of these, 254 blocks were awarded. But as many as 156 have already been relinquished due to poor prospectivity. Tyson Jackson Jersey
ONGC sets $2.64 billion capex for drilling oil, gas wells in 2018/19
India’s top explorer Oil and Natural Gas Corp said on Wednesday it plans to invest 176.15 billion rupees ($2.64 billion) on drilling in 2018/19, a growth of about 24 percent over the last fiscal year. ONGC aims to drill 535 oil and gas wells in this fiscal year to March 2019, compared with 503 well drilled in the previous year, the company said in a statement. Clark Griswold Authentic Jersey
LR to class first ever FSRU ordered for Indian waters
LR recently signed a contract to class the first ever floating storage regasification unit (FSRU) to be ordered for Indian waters. Stationed at Jafrabad port and operational 24 hours a day, 365 days a year, it will be built to LR’s Rules for the Classification of Offshore Units by Hyundai Heavy Industries (HHI) for SWAN LNG Pvt. Ltd. (SLPL). It is due for delivery in December 2019. The new 180,000m³ FSRU project will help meet the demand for LNG in the region, natural gas is projected to make up 20% of India’s total energy consumption by 2030. The Indian gas market is expected to be one of the fastest growing in the world over the next two decades, the country is the fourth largest energy consumer in the world (after the US, China and Russia). FRSUs are an attractive alternative for meeting the growing demand for regasification because they are significantly cheaper to operate than onshore plants and also highly versatile. SLPL’s Bhavik Merchant said: “Our FRSU based LNG Terminal at Jafrabad will help India’s push to increase the proportion of gas in its energy mix to power its economic expansion. SLPL is pleased to be working with Lloyd’s Register on this prestigious project as they have a wealth of expertise in large gas projects and we have been impressed by their desire to constantly improve the overall quality during construction to ensure uninterrupted operation.” LR’s Marine & Offshore Area Manager for South Asia, Middle East and Africa, Piet Mast, commented: “LR is delighted to be working with SLPL on this first of its kind project in India, this success is owed to the real global collaboration of all LR teams involved. LR is expanding its scope of work in this area with a number of other FSRU and gas related opportunities in India, Sri Lanka and Bangladesh.” Jeff Heath Womens Jersey