By HARSH JOSHI
India's oil and gas companies need more energy. Since 2001,
they've spent $16 billion on offshore oil producers and
refiners, while their Chinese rivals have spent $97 billion
over the same period.
Now, the Indian companies have no choice but to open their
Energy demand will grow 41% by 2017 if India achieves an
ambitious government target for economic growth of 9% a year,
national think tank Planning Commission says.
But existing domestic output is dropping as oil wells
mature. Oil & Natural Gas Corp., or ONGC, which generates
65% of India's crude-oil production, says output at its local
wells has fallen 8.6% in the last five years.
The government estimates that domestic production at India's
largest private refiner, Reliance Industries, will halve by
So far, Indian companies have been mostly all talk on
ramping up acquisitions abroad. Earlier this year, ONGC and its
main domestic peer, GAIL (India) Ltd., said they were jointly
bidding on Mozambique-focused Cove Energy.
Instead, Thailand's PTT Exploration & Production is set
to buy Cove for about $1.9 billion after fighting off giant
Royal Dutch Shell.
The Indian sluggishness is partly
because government red tape and approvals hold up the
acquisition process. Chinese firms by comparison enjoy much
greater autonomy, says analyst Neil Beveridge at Bernstein
Even when they're stirred into action, Indian companies don't have a good
track record. Take ONGC's acquisition of Russia's Imperial
Energy for $2.1 billion in early 2009. Production there has
been dropping steadily from about 30,000 bpd in 2009 to just
15,500 by December 2011.
There should be funding available for some big purchases.
ONGC says it will invest $8.8 billion in oil and gas assets
globally over the next five years. Reliance has $13.8 billion
New Delhi, the major shareholder in GAIL and ONGC, has
lately urged expansion too, and could provide
valuable financial clout.
As yet, India's energy needs aren't at crisis levels. But
PTT's likely acquisition of Cove shows other countries are
emerging as active buyers.
That will surely push up the cost of good assets. Indian companies must step up now to
avoid paying a lot more later.
Dow Jones Newswires