03.06.2021 Author: Dmitry Bokarev

Power Industry in India: Consequences of the Pandemic and Russian Involvement

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The COVID-19 pandemic, which began in late 2019 and continues through 2021, has led to an economic downturn worldwide caused by reduced movement of people and goods due to quarantine measures, which has inevitably resulted in a drop in trade, production and business shutdowns. This has affected virtually all areas of the economy in all states and is fully true of India’s oil and gas industry. In a country that has reduced production, demand for fuel has declined, and due to more than two months of nationwide lockdown, some fields have been shut down.

For example, India’s state-owned Oil and Natural Gas Corporation (ONGC) in fiscal year 2020-2021 (from the beginning of April to the end of March) reduced oil production by 2% compared to the previous fiscal year. And overall, according to the Indian Ministry of Petroleum and Natural Gas, oil production in the country fell by 5% (from 32.7 million tons to 30.5 million tons). The decrease in gas production was 8% (from 31.18 billion cubic meters to 28.67 billion cubic meters) compared to the previous similar period.

In early 2021, India was hit by a new epidemic of catastrophic proportions. As a result, at the beginning of May 2021, when more than 20 million infected people were registered in the country, Indian authorities introduced new, even harsher quarantine measures. Of course, due to this necessary step, the fiscal year 2021-2022 will be even less productive for all areas of the Indian economy than the previous one.

It should be recalled that India is one of the largest economies in Asia, with a huge, rapidly growing industry that operates in enormous quantities of fuel. India imports a significant amount of hydrocarbon energy from the Middle East, but the country’s own, not so rich deposits also play a significant role in its energy sector, and a decline in production by 5 or 8% is quite critical for India: it is a big loss, which better be compensated at the first opportunity. In the current situation, there are no such opportunities, but the Indian leadership is already thinking about how it will deal with the consequences of the crisis in the future.

Another problem is that even before the COVID-19 pandemic, Indian oil and gas production showed a small but steady decline year after year. This process began in 2011, and the coronavirus crisis only gave it a strong additional impetus. The reason for the gradual decline in Indian hydrocarbon production lies in the slow depletion of its old fields. At the beginning of development, the minerals lie closer to the surface, but as the deposit is mined out, mining has to go deeper and deeper, which leads to more and more technical difficulties and a gradual decline in production. This is the problem that Indian oil and gas workers have had to deal with in recent years as their work has become increasingly difficult. Now India’s largest hydrocarbon producers – state-owned companies Oil India and the aforementioned ONGC are facing the need to master more high-tech and expensive production methods.

In addition, new fields need to be developed. India does have them, but the problem is that they are located under the seabed, at great depths, and their development also requires complex and costly technology of ultra-deepwater drilling.

The easiest way to solve the problems facing the Indian oil industry would be to seek technological assistance from foreign partners. However, foreign companies have had little interest in Indian oil in recent years.

Among India’s successes in attracting foreign partners to its oil and gas industry is the cooperation between ONGC and the Russian enterprise Sevmorneftegeofizika (SMNG). SMNG is a marine geophysical company, part of Russian Geological Holding ROSGEO, and is engaged in high-tech exploration of marine subsoil all over the world. At the end of 2019, SMNG won the ONGC tender for exploration work on the Indian continental shelf. In January 2020, the Indian and Russian companies signed a corresponding contract, under which the Russian side undertook to explore several promising areas of the Mumbai oil and gas basin in the Gulf of Cambay in the Arabian Sea with the help of SMNG’s state-of-the-art research vessel “Academician Primakov”.

The original plan was to have the work done by the end of 2020, but the coronavirus pandemic, which swept the world in 2020, pushed the deadline back. In January 2021, the management of ROSGEO reported that the exploration of new Indian deposits will be completed by June 2021.

In April 2021 it became known that ROSGEO intends to participate in another Indian tender, from which one can conclude that the work is going well and the parties are pleased with each other.

Apparently, the exploration work in the Arabian Sea will start a new chapter of cooperation between Russia and India. The two countries have been in active and mutually beneficial cooperation for a very long time now, and a thorough study by Russian specialists of Indian offshore fields makes Russian oilmen the most likely foreign candidates to develop them. And until it starts, Russia participates in maintaining India’s energy security by supplying it with coal. At the end of April 2021, the media reported a record shipment of this energy carrier in the Sakhalin port of Shakhtersk: the port received the largest cargo ship “MINERAL YANGFAN” 300 meters long and loaded 188,119 tons of coal on it. The ship was bound for India. In addition to coal, India is also interested in Russian liquefied natural gas (LNG): in March 2021, the Indian Ministry of Petroleum and Natural Gas announced that it was negotiating a long-term contract with Russia’s largest LNG producer, NOVATEK.

In conclusion, the human losses associated with the coronavirus pandemic cannot be made up for by anything. However, the author would like to hope that India’s long-standing and trusting relationship with Russia, as well as Russia’s extensive oil and gas capabilities, will help India successfully emerge from the current energy crisis and overcome the economic consequences of the pandemic, and open a new field of mutually beneficial cooperation for the two countries.

 Dmitry Bokarev, political observer, exclusively for the online magazine “New Eastern Outlook”. 

 


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