Volume 7, No. 2, February. 2006

 

THE HOAX OF ENERGY SECURITY

Ranjan

Not only petro product prices, natural gas (NG) prices have also been increased. The NG has increased from Rs 2850 /1000 scm (standard cubic meter) to Rs 3200/1000 scm i.e Rs 350/1000 scm or a 12.28% increase. The after effects of these will be felt in the increase of auto fuel (in selected cities) LPG, power, fertilizer and petrochem prices.

Yet again the constitutional lefts have compromised with the ruling classes and robbed crores from the common people. The target of this loot is not only the poor but also the middle classes. The poor of India have reached an extreme limit of exploitation. The Congress led and left supported UPA government is continuing with more zeal and aggressiveness the liberal reforms of the BJP led NDA govt . The left are giving a sweet edge to this reform-dagger only to erect a husmane face of this reform process while the country is on sale ,the lives of poor common downtrodden people are at the mercy of international market controlled by imperialist capital. In a underdeveloped semi colony like India, like all other sectors, in the petroleum sector also the loot and exploitation of the common masses and the resources of the country have crossed beyond all limits .In the pro big business pro imperialist budget the govt is giving a tax sop to the industries by cutting down tax rate from 35% to 30% creating a massive loss to the national exchequer while they are ready to decrease the subsidy on Oil, power, fertilizer, seed, irrigation …every sphere that touches the common peoples’ life .The other day this Dr Singh while inaugurating the Nathpa-Jahkri hydroelectric project declared that free power cannot be given to farmers. In this way they are trying to squeeze out even the last drop of subsidies .Let us analyze how the Indian petroleum sector is getting controlled more and more by imperialists and their cronies and how our own resources are on sale for throwaway prices, for a fraction royalty and how in the name of energy security the Indian ruling classes are making the country more dependent on imported crude and gas.

Deregulation of petro price

"Since 1991, through the ‘reforms’ period, the Government has taken several measures in the name of ‘Petroleum Policy’ hiking oil prices, squeezing subsidies on petroleum products (particularly kerosene and diesel), more dependence on the import of crude petroleum than indigenous production, privatization of public sector oil companies. In 1996, the UF government (of which the CPI/CPM was a major part) took a major policy decision that "comprehensively laid down the time-table for dismantling the administered price mechanism in a phased manner". With that the shift to market-determined prices began in a few petroleum products, while the public sector oil companies were restructured to pave the way for their sell-out. Subsidies too were slowly eased out, raising the price of the poor-man’s fuel, kerosene, 3 to 5-fold. By April ’98 prices of only petrol, diesel, kerosene and domestic LPG were controlled; prices of all other products were decontrolled. In that year the BJP government decided to totally dismantle the APM (Administered Prices Mechanism) in phases over the next four years. This it has now been done by virtually removing the entire subsidy on kerosene, diesel and LPG. (GLOBALISATION An Attack on India’s Sovereignty VII Disinvestments or Sale of India’s Assets)

After dismantling the APM (administered price mechanism) the ruling classes are trying to link the price of refined petro products at par with international market prices which is ,highly volatile and speculative ,in the firm control of omnipotent international imperialist capital .The Indian ruling classes are trying to dismantle the APM completely so that competitive pricing in petro products bring choices to the consumers but actually the motto behind this is to siphon the subsidy in petro products to their booty .International oil prices are so volatile that even a news of King Fahd’s hospitalization increases crude prices by $2 a barrel. On other occasions international capital plays with the oil price to amass wealth by speculation. The Indian cronies of imperialist capital are trying to implement this volatile irrational speculative price mechanism to the internal market to rob the masses to the maximum extent .

Increased Oil & Gas Demand and Import

 

 

In the past 15 years of reform the skewed increase in petro product consumption in the country has almost gone 2-fold; with respect to 80-81 it is more than 3 fold . India’s oil consumption, now about 2.25 million bbl/day, is estimated to rise, at present rates of expansion, to a huge 5 million bbl in five to seven years. This increase is correlated with deformed growth induced by the neo liberal policy which induced a crippled growth or rather growth for a small section of Indian society while exploiting the rest. The Indian big bourgeoisie and ruling classes, instead of developing the economy on a self reliant path by creating a secured & developed local market for itself by land redistribution and developing its own technology, chose the path of underdevelopment, chose to be the local partner of imperialism to exploit the masses of the country .Whenever the world imperialism faces a crisis they tried to escape that by carrying ruthless exploitation to the underdeveloped countries of the world. Economic reforms suggested by the World Bank and IMF are just another ploy of imperialism to further impoverish the underdeveloped colonies/semi-colonies. In India also the new economy induced growth for only 2-3% of the upper strata of the population, made a section of the middle classes into upwardly mobile middle classes who can buy high end consumer durables, cars, consumer non durables. All these products are either imported or made in the underdeveloped country with imported imperialist technology and machinery.

The increase in the passenger car and two wheeler segment has out grown commercial vehicle production .(see: Table: Automobile production in numbers :economic survey03-04) This increase in passenger car and two wheeler (specially motor bikes) segment indicates a growth in the neo rich and "upwardly mobile" middle class and this growth in the passenger car segment also increased motor spirit & hsd consumption in the country creating an almost unsustainable demand for crude import .

Table: Automobile production in numbers :Economic Survey 03-04 (GOI)

Category

98-99

99-00

00-01

01-02

02-03

03-04

 

Passenger cars

390709

577243

513415

564052

608851

842437

 

Multi utility vehicles

113328

124307

127519

105667

114479

146103

 

Commercial vehicles

135891

173521

156706

162508

203697

275224

 

Two wheelers

3374508

3778011

3758518

4271327

5076221

5624950

 

Three wheelers

209033

205543

203234

212748

276719

340729

 

Total

4223469

4858625

4759392

5316302

6279967

7229443

 

Source:ministry of heavy industry and public enterprises

 

While our indigenous crude oil production by ONGC and OIL and JV(joint venture) fields has remained almost static at 31 to 33 mt (million tones) over the last 15 years while simultaneously imports has increased from 20.7 mt(90-91) to 90.4 mt (03-04).In dollar terms petroleum ,oil and lubricant import has increased from USD 6028 million(1990-91) to USD 17640 million (2002-03).

Natural Gas Production

 

2000-01

2001-02

2002-03

2003-04

NG production

29.48

29.71

31.40

31.96

(Billion Cubic Meter)

 

 

 

 

(Billion Cubic Meter) Source: MOP&NG

In the natural gas sector the picture is not so different though in the Krishna Godavari basin Reliance has struck gas tothe order of 7 trillion cubic feet (198 BCM) it will come into commercial production after 2006-07. Natural gas consumption is increasing rapidly, to cope with the demand massive deals with foreign Oil & Gas majors are in progress to import NG either through pipelines from Iran, or Central Asia through Afghanistan or by sea-carrier in the form of LNG(liquefied natural gas). The increasing demand in natural gas is to be fulfilled by the import of costly LNG. Petronet LNG Limited (PLL), a joint venture of Indian oil & gas PSUs, was formed for the import of LNG to meet the growing demand of natural gas.PLL has constructed an LNG terminal at Dahej in Gujarat for 5 MMPTA capacity and has planned to construct another at Kochi (Kerala) for 2.5 MMPTA capacity. Further, PLL is considering expansion of the capacity of Dahej Terminal to 10 MMPTA and that of the Kochi Terminal to 5 MMPTA, to cater to the future demand of re–gasified LNG (RLNG).PLL has contracted RasGas of quatar for a period of 20 years for LNG supply. In addition, Shell India Private Limited is setting up a 2.5 MMPTA LNG terminal at Hazira in Gujarat. Again negligence in exploration and concentration on import of costlier products is the feature of Natural Gas as well.

Stagnant Exploration and New Exploration and Licensing Policy (NELP): INDIA ON SALEN

The national production of indigenous crude has almost stagnated at a level of 31 to 33 mt /yr over the last 15 years (from 90-91).What has happened to our PSUs like ONGC and OIL which performed quite well in the early years ?

"Both Oil and Natural gas Corporation(ONGC) and Oil India Limited(OIL) have been handicapped by a paucity of resources and exploration and exploitation activities have to be funded with internally generated and extra budgetary resources .No budgetary support has been available for these two PSEs and it has been legitimately complained that the allocation of resources for Plan Schemes has been woefully inadequate and the two public sector enterprises could not execute expeditiously even on-going schemes."-New Initiatives Imperative by P.A.S( survey of Indian industries (1997).The Hindu)

So it may be assumed that by direct and indirect policies and measures the Indian ruling classes intentionally neglected indigenous crude production by PSUs so that this same stagnation in crude production may be used as a cause for opening up exploration sector to TNCs and selling off exploration blocks to TNCs and other private players at a throwaway price. The collaborator compradors of imperialism had done this in the form of a New Exploration and Licensing Policy (NELP).

 

Terms of earlier policy

New exploration policy

ONGC/OIL had mandatory10-40% stake

No state participation through ONGC/OIL. Companies can bid directly

ONGC/OIL enjoyed special status & could get blocks

on nomination basis for their stand alone block offer.

ONGC/OIL will compete with other parties for license.

ONGC/OIL were getting only administered prices while  crude while under joint venture contract

International prices were being paid .

International oil prices to be paid to ONGC/OIL along with other parties.

Companies could bid only during bidding rounds and only for the blocks on offer .

Entire area to be demarketed on a grid and made available on a continuous basis .Companies free to choose the areas of block & timing of the offer .

Royalty & cess at specific rates on behalf of the contractor by ONGC/OIL

Cess abolished & Royalty made 12.5% for onland ,10% for offshore and 5% for more than 400 meters deep blocks for 7 years

The government had the first right to crude produced under the contract

Contractors will have the freedom to market in the domestic market .

 

From the above comparison table it is clear that cess has been abolished ,royalty has been lowered to 5% to 12.5% ,a liberal tax holyday of 7 years from commercial productions have been granted .That’s not all; international crude prices to be paid to the contractor and the policy ensures full repatriations of profits abroad and no import duties to be paid for the capital goods (machinery) imports .And this new exploration policy is supposed to provide India energy security and act as a safe guard from fluctuations in international crude oil prices!! Our government has already compromised on crude prices and royalty and taxes and thus it has created a happy hunting ground for international oil & gas TNCs. That is reflected in the earlier NELP rounds and in the latest one NELP-V (bidding completed in may05) where most of the big TNCs like Total (France), Petronas (Malaysia), Statoil (Norway), ENI (Italy), Talisman (Canada) and British Petroleum have flocked to grab this booty. The Comptroller and Auditor General of India(CAG) in its report found serious flaws in block allocation in previous rounds of the NELP. In its previous reports the CAG has commented harshly upon what is mentioned as shabby treatment given to national oil companies, ONGC and OIL and the loss caused to the exchequer by the offering of the Panna ,Mukta and Ravva fields to foreign parties. The CAG has charged the MOP&NG with having discriminated against the National oil companies and drawn attention to the infirmities in the bidding and evaluation procedure. The ministry has been charged with having sold the fields cheap to the private parties. The award of the Panna ,Mukta and North Tapti fields to the ENRON-RELIANCE consortium has come for biting criticism from CAG. The CAG report has charged the ministry for not having reimbursed ONGC its expenditure of Rs. 676 crores on the development of the fields.

This makes one thing clear that ONGC/OIL has been used by the comprador collaborators to find the best fields for the imperialist bosses and that too free of charge. This sell out of Indian Oil & Gas blocks has created unprecedented enthusiasm among the TNCs .Under the previous four rounds of NELP, production sharing contracts (PSCs) have been signed for 90 blocks. The fifth round, which is underway, has been opened for inviting bids for 20 exploration blocks. Out of these 20 blocks, six are in offshore areas along the eastern and western coast of the country and 12 are onshore.

Investment by PSUs in foreign Countries: energy security or energy dependency?

In NELP, total investment up to March’ 04 is $ 667 million, expected investment in all three phases under NELP is $ 4 billion while our ONGC Videsh Limited has committed investment of $ 4.3 billion abroad ;surprisingly one of the main reason shown by the ruling classes for selling the oil and natural gas blocks to TNCs and their JV companies is inadequate fund for investment in exploration. While we see ONGC Videsh Limited (OVL) a wholly owned subsidiary of ONGC Limited, has been formed to invest in foreign oil and gas fields and it has committed an investment of USD 4.3 billion of which 64% have actually been invested till 31st march 2005 while gas exploration and production has reached a stagnation at home. This is completely ridiculous as the indigenous blocks are supposedly on sale for the lack of investment .

OVL now participates in equity of 15 Assets in 12 countries: Vietnam , Russia, Sudan (3 Assets), Iran, Iraq, Libya (2 Assets), Myanmar, Syria, Ivory Coast, Australia , Qatar and Egypt. Two Assets – one each in Vietnam (Gas) and Sudan (Oil) are in production and four Assets – Russia, Myanmar, Qatar and Sudan (5A) have Oil/Gas discoveries where appraisal and development are in progress. Exploration is in progress in nine Assets – Iran, Iraq , Sudan (5B), Syria, Libya (NC 188 & 189), Ivory Coast, Australia and Egypt.

This makes OVL the biggest Indian Corporate having investments abroad.

If we see between the lines we clearly can observe that OVL a PSU is investing in such countries like MYANMAR, SUDAN, LIBIYA, SIRIYA & IRAN where US and British TNCS will not risk their shareholder’s money either for a sanction from the GOVT or in fear of so called terrorist attack or people’s unrest. But OVL, a public sector undertaking of India ,may be dictated by the Imperialists and their comprador cronies to invest in those countries where UK & US TNC’s investment will be illegal in their own country or where the situation is hostile, while they (the TNCs) can loot in the happy safe hunting ground called India. The production from those countries made by OVL is always secure to the TNCs as buying from OVL at a cheaper price involves no legal or physical risk.

Conclusion

The war in Iraq and Afghanistan has been fought for the control of oil and gas.

All global oil majors supported by different imperialist interests are preying upon India.

There is no need for war as our servile rulers have from the very start of globalization been surreptitiously opening out parts of this sector and sabotaging local production so that the big guns can increase their exports to India. In other words India is to become more and more dependent on foreign produced oil and gas, whose price will be doubled or even tripled that produced in the country and in the name of energy security our economy will be more and more dependent on imported crude and gas. International price increases will continue to rob the masses, and the resources of the country will be siphoned away. TNC’s grip on the Indian economy will become tighter and imperialist aggression will increase at an ever faster pace if the people of our land are not able to get rid of this system of under-development.

For that we have to build our economy on our own, have to develop our own energy efficient environment friendly technology. We have to create a huge lively internal market by complete land redistribution. We have to resist each and every sell out of our resources by the state; we have to build a new democratic India where these compradors will be history.

 

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