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Economist

Indian energy: A price worth paying

July 4, 2013

ONE of India?s big strategic worries is energy security. It imports most of its oil. It has lots of coal but struggles to dig it up, mainly because of the state mining monopoly?s ineptitude. Gas is in demand but too little is pumped: by 2016 two-fifths of India?s supply is likely to come from expensive imports of liquefied natural gas (LNG). All this leaves India exposed to supply interruptions in the Middle East and elsewhere, and strains its balance of payments.India has not encouraged enough exploration and production at home. In the past 15 years only $16 billion has been invested in oil- and gasfields in India. That is under half of what Brazil has spent, and is less than India?s own energy firms have put into buying and developing fields abroad. Although there have been auctions of exploration rights in India, few foreign firms have a big presence. BP paid $7 billion in 2011 for a stake in the offshore fields of Reliance Industries, but the deal is generally seen as a dud, since production in the venture?s main field has fallen.The country is thought to have huge potential reserves of oil and gas?perhaps the world?s 15th-largest, reckons the Boston Consulting Group. But only about one-fifth of likely hydrocarbon-bearing basins are classified as ?well explored?. One reason is that the price domestic gas producers receive has been tightly capped at a dismal level:...

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