An uncertain pivot

India’s brittle energy security is inextricably linked to two opposing paradigms — fossil fuels, and the transition to green energy.

- ‘S DINAKAR

The first powers the present; the second paves the way for Viksit Bharat in 2047. But for now, both are in jeopardy — buffeted by geopolitics on one side and dependency on the other. Muddling the mix are domestic taxes.

Energy security was what was occupying the minds of officials from India’s oil ministry in 2024 when they burnt the midnight oil for months — consulting global oil majors and state oil companies to understand why no international oil company came to drill in India, while dispatching giant offshore drilling rigs to minions like Guyana and Trinidad, a senior government official said.

These discussions laid the foundation for India’s most ambitious upstream drilling regime, the cornerstone of energy security for a nation that depends on geopolitical hotspots like Russia and the Gulf for nine out of every 10 barrels it consumes.

State-run explorers ONGC and Oil India were already in advanced talks with ExxonMobil, Chevron, Shell, BP, and Total — and all, barring Shell, plan to bid for blocks jointly with state-run explorers under India’s 10 drilling rounds, once the government notifies the terms of the Oilfields (Regulation and Development) Amendment (ORDA) Act, 2025, atop ONGC official told Business Standard.

All this optimism took just an announcement to unravel. On a day when the country was celebrating a steep cut in the goods and services tax rates, India’s oil sector was in a fix — GST on exploration, development, and production of oil and gas was hiked from 12 per cent to 18 per cent effective September 22, increasing production costs for exploration and production firms amid sliding oil prices.

“Tt is a double whammy and could lead to some assets not being developed on account of poor returns,” said Prashant Vasisht, senior vice president at ratings agency Icra, a Moody’s affiliate.

Geopolitics and GST