Oil constitutes 32% of current energy basket. Major concerns here are meager oil assets, high import dependency and rising fuel bill.

India as a globally significant oil consumer

Reserves: India has total reserves (proved & indicated) of 5.8 bn bbl of crude oil as on 2009.(World reserves - 1333 bn bbl)

Consumption: In 2009, India consumed 3.2mn bbl/d making it the fourth largest consumer of oil in the world. (Total world consumption - 84mn bbl/d)

Imports: In 2009, India was the sixth largest net importer of oil in the world, importing nearly 2.9 mn bbl/d, or about 70 percent, of its oil needs.

Outlook: The EIA expects India to become the fourth largest net importer of oil in the world by 2025, behind the United States, China, and Japan. The combination of rising oil consumption and relatively flat production has left India increasingly dependent on imports to meet its petroleum demand.

The impact of oil-sector expenditures on budgetary stability

In 2009, under-recoveries accruing to India’s state-owned Oil Marketing Companies (OMCs) have exceeded Rs1,030bn. The GoI (Government of India) issued close to Rs712bn in oil bond debt to OMCs in 2009 which means 70% of under recoveries burden was borne by GoI. This illustrates the huge impact of petroleum product pricing on the health of India’s national budget and on India’s macroeconomic stability as a whole.

Thus, given huge import dependency and rising under-recoveries associated with crude oil, gas usage must be encouraged. Natural gas can be used for almost all purposes – industry/ power/transport. The use of natural gas though requires investment in storage, transportation and distribution infrastructure; much more than that needed for crude oil. Historically, relatively low prices for crude made this investment uneconomical; natural gas was not really the fuel of choice. Higher sustained crude oil prices and advancement in LNG technology have made natural gas use much more attractive. Natural gas spot prices in the US (Henry Hub) have now traded well below oil price parity for some time now. While arguments for higher crude price outlook sustain on the lack of adequate supply, large new natural gas discoveries and production projects imply a benign gas price environment for some time. Thus keeping all the energy dynamics in view, natural gas is clean, cheap and could emerge as the fuel of choice.

SOLID TO LIQUID TO GAS! WE ARE PROGRESSING

As regards the fuel mix, coal is likely to be the mainstay in the near future with focus on clean coal technologies. However, India's coal reserves are limited. Further, investments in the coal sector have to rely on government budgeting. There is a renewed focus on nuclear power; however, very large capacity additions are not likely in the near future. Also there are concerns of availability of uranium and costs related to its mining. In case of coal supply shortfall, the economy is likely to adjust through the use of alternatives which is most likely to be crude oil due to its easy and flexible availability. However, a shortage of coal would need additional oil imports which could increase India's total import bill substantially. Thus gas usage must be encouraged.

GLOBAL COMPARISON REVEALS - INDIA REMAINS GAS STARVED

By world standards, per capita natural gas consumption and Natural Gas share in Energy Mix in India is lower than that in developed and other developing nations. India has been lagging in per capita consumption levels vis-à- vis other nations, with only 0.05 bcm of natural gas consumption compared to world average of 0.44. Natural gas currently is a minor part of overall energy mix accounting for only 10% of total energy consumption in 2009. This is much lesser than the world average of 24%.