The volatility in global crude market continued to pose a major threat to India's energy security and eroded the bottomlines of many oil companies in 2007, even as several new hydrocarbon discoveries were made and oil assets acquired overseas to secure the country's fuel needs.
To tide over a part of the crisis, the government also launched another round of auctions for its oil and gas assets, the seventh under the new policy, and hoped to attract $3-3.5 billion in investments, over and above $8 billion attracted in exploration in the previous six rounds.
"From a year back, India's energy sector has seen notable progress on policy and reforms front," said Arvind Mahajan, national industry director, infrastructure and government, for global consultancy KPMG.
"While in some sectors policy initiatives have moved forward, in others, actual private participation has also made progress," he said in a report titled "India Energy Report - 2007".
The consultancy said the Indian energy sector would need investments of $120-150 billion over the next five years as demand was expected to more than double over the period.
As global crude prices continued to surge during 2007 and threatened to breach the psychologically important level of $100 per barrel, policy makers were at pains to address the situation. Political compulsions, such as elections to some state assemblies, had prevented them from biting the bullet to raise prices of energy fuels, which led to what is called under-recovery of prices of transport and cooking fuels.
With the country dependent on overseas sources for about 74 percent of its oil needs, India's oil bill import also surged despite the 12.5 percent rise in the value of the Indian rupee vis-a-vis the dollar.
Some global think tanks in the energy industry ranked India fifth in the world in terms of petroleum demand and said that by 2010, the country was projected to replace South Korea and emerge as the fourth-largest consumer of energy, after the US, China and Japan. And by 2025, it is also forecast to overtake Japan.
The International Energy Agency (IEA), a global forum on energy security, even projected that India's dependence on oil imports will grow to more than 90 percent by 2020. And as per the 11th Five Year Plan, too, India's crude oil needs would rise to 145 million tonnes in 2011-12 from the 127 million tonnes in 2006-07, while domestic production should rise to 40 million tonnes from 34 million.
"The next 10 years will be crucial for all countries, including China and India, because of the rapid expansion of energy-supply infrastructure," Nobuo Tanaka, executive director of the agency, said recently.
"We need to act now to bring about a radical shift in investment in favour of cleaner, more efficient and more secure energy technologies," he added, while releasing the latest edition of the World Energy Outlook.
During the year, several companies, both domestic and multinationals, reported new discoveries, notably in the Krishna-Godavari, Cauveri and Mahanadi basins. Yet, India's dependence on the world energy markets only surged during the year.
Earlier this month, the government also offered 57 exploration and production (E&P) blocks to both domestic and multinational companies in deepwater, shallow waters as well as on land.
This followed 49 discoveries made by private and joint venture companies in 15 blocks under the previous six rounds of auctions, inviting an investment to the tune of $8 billion.
"Indian sedimentary basins are still poorly explored in terms of well density, which means, higher opportunity for the E&P companies and more chances to get oil and gas in the country," Petroleum Minister Murli Deora said.
This year, key oil and gas discoveries were made by the state-run Oil and Natural Gas Corp (ONGC) and the Mukesh Ambani-led Reliance Industries Ltd (RIL) in the Krishna-Godavari (K-G), Cauveri and Mahanadi basins.
The Reliance discovery was the first in the Krishna deep-water basin, which was awarded to the company under the first round of auctions under the new policy.
Reliance also struck oil and gas in a deep-water block in the east coast - again a first time in the Cauvery deep-water basin. This contract was awarded under the third round and the company holds 100-percent participating interest in this block.
ONGC made its second discovery in the Mahanadi basin, for which the company had bid exclusively without any partners under the first round. The state-run firm also struck oil and gas overseas and led the Indian companies that acquired hydrocarbon assets abroad.
The company's overseas arm ONGC Videsh Ltd (OVL) won two exploration blocks in Brazil through international competitive bidding in November and signed production-sharing contracts for some deep water exploration blocks in Myanmar, with participating interests.
Before that, the newly-formed joint venture between the investment arm of the London-based steel tycoon L.N. Mittal and OVL, named ONGC Mittal Energy Ltd, acquired 30-percent participating interest in an exploratory block in Turkmenistan, as also in Trinidad and Tobago.
"The benefits of ONGC's expertise and global hydrocarbon presence and the networking of Mittal Steel have been synergised to make big forays in our joint quest for securing oil equity for India," said ONGC chairman R.S. Sharma.
"We are trying to set footholds in E&P business in 21 countries across the world," Mittal said. "We will contribute significantly to the energy security of India."
While India's dependence on imports for crude oil continued to grow during 2007, the country emerged as net exporter of fuel products like petrol and kerosene. As per industry estimates, oil-refining companies, which had a capacity for 143 million tonnes, were expected to add 90-100 million tonnes over the next four to five years.
"This large-scale commissioning of capacities, when viewed against the expected demand of 196 million tonnes, suggests that India's petroleum product exports are slated to rise from the current 17 percent of fuel processed in the country," the KPMG report said.
The year also saw Indian oil companies joining hands with international oil and gas majors for technological and business collaborations, both in India and abroad.
ONGC and British Petroleum (BP) signed a pact for collaboration in oil and gas exploration and production business. The company tied up with Norway's Norsk Hydro to develop its deepwater oil and gas blocks in India.
The year also witnessed key regulatory changes in the domestic oil and gas sector, even as the government announced new gas pipeline policy that provides for setting aside 33 percent of the pipeline capacity by the owner for providing open access to other users.
The government set up the Petroleum and Natural Gas Regulatory Board with L. Mansingh as the first chairperson to act as an independent watchdog for the downstream petroleum sector.
In the area of cross-border pipelines, although talks continued for importing gas from Iran via Pakistan, little progress was made, as several issues still remained to be resolved, especially on pricing and access charges.
"The general theme of private participation and competition has advanced in the past one year with some concrete examples on the ground to substantiate it. Going forward, we expect these themes to manifest on a wider scale," Mahajan said.