History of the oil industry in India

The history of the Indian oil industry extends back to the period of the British Raj, at a time when petroleum first became a primary global energy source.

Colonial rule, 1858-1947

The first oil deposits in India were in 1889 near the town of Digboi in the state of Assam.[1] This discovery came on the heels of industrial development. The Assam Railways and Trading Company (ARTC) had recently opened the area for trade by building a railway and later finding oil nearby. The first well was completed in 1890 and the Assam Oil Company was established in 1899 to oversee production. At its peak during the Second World War the Digboi oil fields were producing 7,000 barrels per day. At the turn of the century however as the best and most profitable uses for oil were still being debated, India was seen not as a producer but as a market, most notably for fuel oil for cooking. As the potential applications for oil shifted from domestic to industrial and military usage[2] this was no longer the case and apart from its small domestic production India was largely ignored in terms of oil diplomacy and even written off by some as hydrocarbon barren. Despite this however British colonial rule laid down much of the country’s infrastructure, most notably the railways.[3]

Independence, 1947-1991

After India won independence in 1947, the new government moved to a Communist system, often termed as License Raj. In terms of economic policy this meant a far bigger role for the government and little or no role for the private sector. This resulted in a focus on centralized planning, heavily bureaucratic and inefficient system that meant a large public sector and economic protectionism.[4]

The foreign companies continued to play a key role in the oil industry. Oil India Limited was still a joint venture involving the Indian government and the British owned Burmah Oil Company (presently, BP) whilst the Indo-Stanvac Petroleum project in West Bengal was between the Indian government and the American company SOCONY-Vacuum (presently, ExxonMobil).[5] This changed in 1956 when the government adopted an industrial policy that placed oil as a “schedule A industry” and put its future development in the hands of the state.[5] In October 1959 an Act of Parliament was passed which gave the state owned Oil and Natural Gas Commission (ONGC) the powers to plan, organise, and implement programmes for the development of oil resources and the sale of petroleum products and also to perform plans sent down from central government.

In order to find the expertise necessary to reach these goals foreign experts from West Germany, Romania, the US, and the Soviet Union were brought in.[5] The Soviet experts were the most influential and they drew up detailed plans for further oil exploration which were to form part of the second five-year plan. India thus adopted the Soviet model of economic development and the state continues to implement five-year plans as part of its drive towards modernity.[6] The increased focus on exploration resulted in the discovery of several new oil fields most notably the off-shore Bombay High field which remains by a long margin India’s most productive well.[5]

Liberalisation, 1991-present

The process of economic liberalisation in India began in 1991 when India defaulted on her loans and asked for a $1.8 billion bailout from the IMF.[7] This was a trickle-down effect of the culmination of the cold war era; marked by the 1991 collapse of the Soviet Union, India’s main trading partner. The bailout was done on the condition that the government initiate further reforms, thus paving the way for India’s emergence as a free market economy.

For the ONGC this meant being reorganised into a public limited company (it is now called for Oil and Natural Gas Corporation) and around 2% of government held stocks were sold off.[5] Despite this however the government still plays a pivotal role and ONGC is still responsible for 77% of oil and 81% of gas production while the Indian Oil Corporation (IOC) owns most of the refineries putting it within the top 20 oil companies in the world.[8] The government also maintains subsidised prices.[8] As a net importer of oil however India faces the problem of meeting the energy demands for its rapidly expanding population and economy and to this the ONGC has pursued drilling rights in Iran and Kazakhstan and has acquired shares in exploration ventures in Indonesia, Libya, Nigeria, and Sudan.[8]

India’s choice of energy partners however, most notably Iran led to concerns radiating from the US.[8] A key issue today is the proposed gas pipeline that will run from Turkmenistan to India through politically unstable Afghanistan and also through Pakistan.[8] However, despite India’s strong economic links with Iran, India voted with the US when Iran’s nuclear program was discussed by the International Atomic Energy Agency although there are still very real differences between the two countries when it comes to dealing with Iran.[8]

See also

References

  1. ↑ "Digboi: The First Oil Well in India". EduGreen. The Energy and Resources Initiative. Retrieved 23 July 2012.
  2. ↑ Engdahl, F. W. (22 June 2007). "Oil and the origins of the 'War to make the world safe for Democracy'". Geopolitics - Geoeconomics. Oil Geopolitics. Retrieved 23 July 2012.
  3. ↑ Roy, Tirthankar (Summer 2002). "Economic History and Modern India: Redefining the Link". The Journal of Economic Perspectives. American Economic Association. 16 (3): 109–130. doi:10.1257/089533002760278749. JSTOR 3216953.}
  4. ↑ Panagariya, Arvind (2008). India: The Emerging Giant. Oxford University Press. p. 514. ISBN 978-0-19-531503-5.
  5. 1 2 3 4 5 "History". Oil and Natural Gas Corporation Limited. Retrieved 23 July 2012.
  6. ↑ Staley, Sam (June 2006). "The Rise and Fall of Indian Socialism". Reason.
  7. ↑ India's Pathway through Financial Crisis. Arunabha Ghosh. Global Economic Governance Programme. Retrieved on 2 March 2007.
  8. 1 2 3 4 5 6 Haté, Vibhuti (7 September 2006). "India's Energy Dilemma" (PDF). South Asia Monitor. Center for Strategic and International Studies.

External links

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