India - Cambay Basin Petroleum Project

Document of The World Bank FOR OFFICIAL USE ONLY A g. t2y3 -j Report No. 4928-IN STAFF APPRAISAL REPORT INDIA CAMBAY BASIN PETROLEUM PROJECT March 8, 1984 Energy Department Petroleum Projects, Division I This document has a restricted distribution and may be used by recipients only in the perfonnance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  CURRENCY EQUIVALENTS Currency Unit = Rupee (Rs) Rs I = Paise IU0 US$ 1 Rs 10.0 Rs I = US$ 0.10000 Rs I million = US 100,000 MEASURES AND EQUIVALENTS 1 Metric Ton (mt) = 1,000 Kilograms (kg) I MeLric Ton (mL) 2 2,204 Pounds (lb) I MeLer = 3.28 Feet I Kilometer (km) = 0.62 Miles 1 Cubic Meter (m3) = 35.3 Cubic Feet (cft) 1 Barrel (Bbl) = 0.159 Cubic MeLer I Metric Ton of Oil (390 API) = 7.60 Barrels I Normal Cubic Meter (Nm ) of Naturai Gas = 37.32 Standard Cubic Feet (SCF) 1 Kilocalorie (kcal) = 3.97 British Thermal UniLs (BLU) m-w = 1,000 kilowaLts kWh = kilowatt-hour GWh I 1 Million kWh Bbl/d = Barrels per day HMCMD = Million Cubic Meters per Day TCF = Trillion Cubic Feet toe T Ton of Oil Equivalent tpd = Ton per day tpy = Ton per year PRINCIPAL ABBREVIATIONS AND ACRONYMS USED BOP - Bomby Offshore Project DCF - Discounted Cashflow DEA - Department of Economic Affairs EOR - Enhanced Oil Recovery GOI - Government of India HIL - Hydrocarbons India Limited ICB - International Competitive Bidding IDT - Institute of Drilling Technology IOIP - IniLial Oil in Place LPG - Liquefied Petroleum Gas LSES - Low Sulfur Heavy Stock NGL - Natural Gas Liquids OIDB - Oil Industry Development Board OIL - Oil India Limited ONGC - Oil and Natural Gas Commission FISCAL YEAR April 1 - March 31  FOR OMCALu USE ONLY INDIA CAMBAY BASIN PETROLEUM PROJECT Loan and Project Summary Borrower: Government of India (GOI) Beneficiary: Oil and Natural Gas Commission (ONGC) Amount: U$242.5 million equivalent (including capitalized front-end fee of 0.25x) Lending Terms: Repayable over 20 years, including five years of grace at the standard variable interest rate. On-Lending Terms: Government of India (GOI) to ONGC (US$242.5 million): Funds wilI be onlent to ONGC at a rate of at least 12X per annum; repayment over a maximum of 15 years, including five years' grace. GOI would bear the foreign exchange and interest rate risks. Project Description: The purpose of the project would be to assist the Oil and Natural Gas Commission (ONGC) in developing its capabilities for optimizing the production of existing, mature oil fields-a new area of technology for India's fledgling oil industry. The project comprises the preparation and implementation of a US$954 million investment program for increasing the production of oil and gas from the onshore Cambay Petroleum Basin located in the State of Gujarat in western India. Specifically, assistance would be provided in (i) exploration - to delineate, by seismic survey and drilling, the limits of the known producing zones; (ii) development and production - to sub- stantially increase the production of both oil and gas; (iii) enhanced oil recovery - to test alter- native technologies for increasing recoverable reserves; and (iv) technical assistance and train- ing to ensure that ONGC staff acquire the requi- site skills to successfully implement the new methodologies. The principal project risks are those normally associated with petroleum exploration and development, i.e., geological and technological. The geological risks include the possibility that oil will not be found in commercial quantities in the deeper zones to be explored. The technology being irtroduced under the project is a blend of proven, profitable and -leading edge- technology This document has a restricted distribution and may be used by recipients only in the performance of their official duties. Its contents may not otherwise be disclosed without World Bank authorization.  in such proportions, and with adequate foreign technical assistance and training, that the risks - both economic and environmental - are acceptable under all reasonably expected adverse scenarios. Estimated Costs: (US$ millions) Local 1/ Foreign Total Exploration 19.3 61.7 81.0 Development and Production 269.9 319.2 588.8 Enhanced Oil Recovery 2.6 5.0 7.6 Technical Assistance and Training 2.0 5.0 7.0 Total Base Cost 293.5 390.9 684.4 Physical Contingencies 39.7 58.4 98.1 Price 75.3 95.9 171.2 Total Project Cost 408.5 545.2 953.7 Front-End Fee - 0.6 0.6 Total Financing Required 408.5 545.8 954.3 (US$ millions) Financing Plan: Local Foreign Total IBRD - 242.5 242.5 Cofinancing 2/ - 245.0 245.0 ONGC 408.5 58.3 466.8 Total 408.5 545.8 954.3 Estimated Disbursements: (US$ millions) BANK FY84 FY85 FY86 FY87 FY88 FY89 FY90 Annual 0.63/-35.8 60.6 72.8 36.3 24.3 12.1 Cumulative 0.6 36.4 97.0 ]69.8 206.1 230.4 242.5 Economic Rate of Return: About 91% for total project. Financial Rate of ReLurn: About 18% after taxes. Appraisal Report: No. 4928-IN, dated March 8, 1984. I/ Includes an estimated US$150 million in duties and taxes. 2/ Including Euro-currency borrowings and suppliers' credits. 3/ Front-end Fee.  - i - INDIA CAMBAY BASIN PETROLEUMI PROJECT STAFF APPRAISAL REPORT Table of Contents Page No. I. INTRODUCTION .................... I........................ 1 II. THE ENERGY SECTOR ............................ .6666666666666*666...... 1 A. Energy Resources and Consumption ....................... 1 B. Investments in the Energy Sector .................. ....... 3 III. THE PETROLEUM SUBSECTOR .................. ..............*..* 4 A. Petroleum Resources, Production and Consumption ........*666666 666666666..................... 4 B. Petroleum Pricing ............... .... ....... 6 C. Subsector Institutions *666666e666 .6...... .............. 8 D. Petroleum Exploration Policies and Investment Strategy.. 9 E. The Bank's Role and Lending Strategy in the Petroleum Subsector 666666.......6............-....... 10 IV. THE OIL AND NATURAL GAS COMMISSION (ONGC) ................... 12 A. Introduction ........................................... 12 B. Organization and Management ... ......................... 13 1. Organization and Management Structure 66 6.........6 13 2. Management Information Systems .................. ..... 14 3. Accounts and Audit 666............................... 16 4. Insurance ....................6.66.....66.....666... 16 C. ONGC's Investment Program (1984/85-1989/90) 666666666666 16 D. Operating Peformance and Challenges .................... 18 V. THE PROJECT ........................................66 66.666 ... 19 A. Background 666666666..................... ....6666666666 6666 19 B. Main Characteristics of the Hydrocarbon Fields in the Cambay Basin ............... ........ 21 C. Status of Development of the Cambay Basin ....... **... 21 D. Project Concept and Objectives ......................... 23 E. Project Components ...................666 .......666666 23 1. Exploration Component ............ ........... 23 2. Development and Production Component ............ 25 3. Enhanced Oil Recovery (EOR) Component ...66666.666 26 4. Technical Training and Assistance Component ....6.. 27 This report was prepared by Messrs. Denis T. Carpio, Hannachi Morsli, Aifin Oduolowu, Jean-Paul Pinard and Stephen Tisza of the Energy Department.  - ii - Table of Contents (Cont.) F. Project Implementation . * .............. .... ......... 28 1. Organization for Project Implementation ........... 28 2. ONGC and Contractor(s) Work Program ............... 29 3. Implementation Schedule ............. so.. 30 G. Project Cost EstimaLe ...* ................... ems...... . 30 H. Financing Plan and Procurement .......... ............... 32 1. Project Financing Plan ............................ 32 2. ILems Proposed for Bank Financing .................. 34 3. Procurement and Disbursements ...................... 36 I. Ecology and SafeLy ............... .................. 38 J. Project Risks ..................... ........ , , .38 K. Reporting Requirements 39 .......... ... ..... . 39 VI. FINANCIAL ANALYSIS ..................... *............. 40 A. Main Lssues and Bank Objectives in ONGC's Finances 40 B. ONGC - Financial Performance and Forecasts 4] C. Finanzing of ONGC Investment Program (1984/85-1989/90).. 44 D. Financial Rate of Return of Development Components . 45 1. Financial Rate of Return ..&*...... ...... 45 2. Utilization of Heavy Oil 45 'JII. ECONOMIC JUSTIFICATION .................... 45 A. Justification for Exploration Component 45 B. Justification For Enhanced Oil Recovery Pilot Schemes ......... ...... ,*.. 46 C. Economic Rate of Return of Development Components .. .....** .... ..... 47 1. Economic Rate of Return ... 47 2. Sensitivity Analysis ... 48 VIII. AGREEMENTS REACHED AND RECOMKENDATIONSC........... 48 ANNEXES 2.1 Production, Trade and Consumption of Primary Energy 2.2 Sectoral Distribution of Energy Consumption 3.1 Sedimentary Basins of India 3.2 India PeLroleum Summary 3.3 Production and Consumption of Petroleum Products 4.1 ONGC Corporate Organization Chart 4.2 ONGC Western Region Organization Chart 4.3 ONGC Investment Program 4.4 ONGC Operations in the Cambay Basin 5.1 Geology of the Cambay Basin 5.2 Project Components 5.3 Description of Exploration Wells 5.4 Seismic Survey and Drilling Program 5.5 Project Implementation Schedule 5.6 Project Cost Estimate 5.7 Project Cost Summary by Field and Activity 5.8 Phasing of Project Expenditures 5.9 Estimated Schedul of Disbursement 6.1 ONGC Accounting Principles  - iii - Tables of Contents (Contd.) 6.2 ONGC Financial Statements 6.3 Schedule of ONGC Long-Term Loans Outstanding 6.4 Financial Rate of Return Calculations 7.1 Economic Rate of Return Calculations MAPS IBRD 17603 and 17604 DOCUMENTS CONTAINED IN THE PROJECT FILE 1. Chemical Flooding Enhanced Oil Recovery Projects, - Cambay Basin (October 26, 1983) by Ted M. Geffen - Consultant 2. The Evaluation of the Skills of Workers and their Training Needs - Cambay Basin (September 1983) by Bruce R. Whalen - Consultant 3. Enhanced Oil Recovery Projects (Heavy Oil) - Cambay Basin (August 24, 1983) by Philip D. White - Consultant 4. Cambay Basin Petroleum Project Feasibility Study (July 25, 1983) by ONGC (Western Region) 5. Feasibility Report - Final Development Plan Kalol Field (March 1983) by ONGC (Institute of Reservoir Studies) 6. Cambay Basin Exploration and Development Projects (February 1983) by ONGC 7. Laboratory Studies on Steamflooding for Balol Field (February 1982) by: ONGC (Institute of Reservoir Studies) 8. Identification of a Suitable Polymer and Polymer Flood Studies on Horizon IX & X - Jalora Field (July 15, 1983) by ONGC (Institute of Reservoir Studies) 9. In-Situ Combustion Studies for Lanwa Field, Field Pilot Design and a Study of Variation in the Parameters Between Lanwa, Balol and Santhal Fields (May 1981) by ONGC (Institute of Reservoir Studies) 10. Pilot Thermal Flooding Demonstration Project - Balol Field (Mar'- 1980) by ONGC (Institute of Reservoir Studies) 11. Stratigraphy of Cambay Basin at a Glance (August 1981) by ONGC  I. INTRODUCTION 1.01 The Government of India (GOI) has requested a Bank loan of US$ 242.5 million equivalent for a petroleum project in the Cambay Basin (the project) located in the State of Gujurat (IBRD Map. No. 17604). The project will be implemented by the Oil and Natural Gas Commission (ONGC), the national oil company. The main objectives of the project are to: (i) increase oil and gas production by about 2 million tons of oil equivalent per year representing about 12% of 1982/83 petroleum imports; (ii) implement enhanced oil recovery (EOR) pilot schemes; and (iii) explore the petroleum potential of deep horizons and the unexplored area in the Gulf of Cambay. These objectives are expected to be achieved by improving ONGC's technical and operational capabilities in drilling and production. Improvements will come partly through training and technical assistance and partly through a shift from force account drilling to contracting. 1.02 The total financing required for the project, which accounts for about 60% of the Cambay Basin investments and about 5% of ONGC's 'verall investment program during 1984/85-1989/90, is estimated at US$954 million (Rs 9.5 billion) including about US$546 million (Rs 5.5 billion) in foreign exchange. In addition to the proposed Bank loan, ONGC will seek export, buyers' and suppliers' credits for the project; it will also seek during the project implementation period, commercial bank loans for part of its total corporate investments. Part of such borrowings will be utilized in the proposed project. The total co-financing is expected to be about US$245 million. The balance of the financing required will be provided by ONGC. 1.03 The Bank has indicated for some time its interest in reviewing ONGC's onshore operations. Thus, in late 1981, ONGC first mentioned to the Bank the idea of undertaking some pilot enhanced oil recovery schemes for the heavy oil fields in the northern section of the Cambay Basin. Subsequently, the dialogue between ONGC and Bank staff expanded to include the full evaluation of the petroleum production potential of this mature basin as well as the operational and technological priorities to rapidly increase production, modernize operations, and develop a program of optimal oil and gas recovery in the basin. During the course of discussions about ONGC's exploration and investment program in 1982, the concept of a project addressing the main operational and technical problems, as well as the major exploration and development investment opportunities, in the Cambay Basin was developed. Following an identification mission and a preappraisal missiou in March 1983 and July 1983, respectively, the project was appraised in September 1983 by a mission consisting of Messrs. Denis T. Carpio (Chief), Hannachi Morsli, Jean- Paul Pinard, Stephen Tisza and Akin Oduolowu of the Energy Department and Mr. Ted Geffen (EOR consultant). II. - TEE ENERGY SECTOR A. Energy Resources and Consumption 2.01 Commercial primary energy (coal, oil, gas, hydro and nuclear power) accounts for about 46% of total energy consumption in India, with the balance (54%) being derived from non-commercial sources such as firewood and agricultural and animal wastes. Over the past ten years, the growth of energy  -2- consumption in India averaged 4% per annum, which was marginally below GDP growth for the period. Over the same period, commercial energy consumption increased by 5.3% per annum. Per capita consumption of commercial primary energy is about 166 kg of oil equivalent, which is half the average for low- income developing countries. The share of oil products and natural gas in India's commercial primary energy consumption, at about 33%, is low for a developing country, primarily because of the significant use of coal in power generation. Firewood is the most widely consumed fuel in Indta, accounting for about 65% of total non-commercial energy consumption. Other sources of fuel, such as vegetable and animal wastes, account for the remaining 35% of non-commercial energy consumption. The energy supply in India by primary energy sources is shown in Annex 2.1 and is summarized below. Table 2.1: Primary Energy Sugply in India (million tons of oil equivalent)0 Average Annual Actual Estimate Growth Rate (%) 1960/61-1970/71- Fiscal Year 1960/61 1970171 1975/76 1980/81 1981/82 1982/83 1970171 1980/81 Commercial Primary Energy Coal & lignite b/ 27.8 37.1 50.6 58.4 64.7 67.8 2.9 4.7 Petrqleum c/ Oil 7.9 18.6 23.3 33.6 34.9 32.5 8.9 6.1 Gas N.A 0.4 0.8 1.1 1.6 1.5 N.A 11.0 Subtotal 7.9 19.0 24.1 34.7 36.5 34.0 9.2 6.2 Hydro & Nuclear Power d/ 1.9 6.6 8.6 11.9 11.9 11.6 1.3 7.2 Subtotal 37.6 62.7 83.3 105.0 113.1 113.4 5.2 5.3 Noncommercial Primary Energy f/ Firewood 48.8 57.8 65.2 N.A. N.A. N.A. 1.7 2.5.2 Agricultural waste 13.2 15.6 17.6 N.A N.A. N.A. 1.7 2.5f Animal dung 12.0 14.2 16.1 N.A. N.A. N.A. 1.7 2.5e/ Subtotal 74.0 Wi 39. N.A. N.A. N.A. 1.7 2.5S1/ Total 111.6 150.3 182.2 N.A. N.A. N.A. 3.0 3.9e/ a/ Based on the following conversion factors: one ton of oil equivalent (toe) is equal to 2 tons of domestic coal; 5.88 tons of lignite; 0.94 tons of refined petroleum products; 1,235 cubic meters of natural gas; 4,166 kwh of hydro and nuclear power; 2.04 tons of firewood; 2.33 tons of agricultural waste; and 4.54 tons of animal dung. b/ 99.3% coal and 0.7% lignite in terms of toe in 1982/83. c/ Natural gas excludes quantities flared and used in field operations. Petroleum supply includes those for fuel as well as for petrochemical feedstocks. d/ About 94% hydro power and 6% nuclear power in 1980/81. But in 1981/82 and 1982/83 there was no power generation from nuclear plants due to spare parts and maintenance problems. The figures are gross power generation. e/ Growth rate from 1970/71 to 1975/76 only. The same rate assumed for the 10-year period (1970/71-1980/81). f/ Non-commercial energy figures are for consumption which are taken as equal to supply.  - 3 - 2.02 Coal is the most abundant indigenous energy resource and the main domestic source of commerjcal primary energy in India with reserves estimated at about 85 billion tons - equal to about 42 billion tons of oil equivalent (toe), 25 billion tons (about 12 billion toe) of which are proven reserves. Most of the coal is of low to medium quality (3,500 to 5,000 kcal/kg) and is primarily used for power generation. Coal production, which stagnated between 1976/77 and 1979/80 because of power shortages, delays in commissioning new mines, labor difficulties and transportation bottlenecks, has risen substantially from about 104 million tons in 1979/80 to 131 million tons in 1982/83, making India the sixth largest coal producer in the world. However coal production is still about 4 million tons per year less than demand. 2.03 Based on the proven coal and hydro resources, India possesses the potential to increase its power generating capacity. However, due to low capacity utilization, delay in commissioning new thermal plants, lack of essential spare parts for timely maintenance, and poor management, the supply of power has consistently been less than potential demand in recent years. In 1980/81, the estimated deficit (calculated as actual supply compared to potential unrestricted demand) was about 13% despite a growth in power generation of 9% in the same year. If the government can successfully overcome these problems, power generation capacity could reach 50,900MW in 1984/85 and, from 1988/89 onwards, the country's overall average electrical energy requirements may be satisfied, although a peak capacity deficit and regional imbalances would most likely continue until the mid-1990s. 2.04 India also possesses significant reserves of natural gas both onshore and offshore. Proven gas reserves, mostly offshore, are estimated at about 410 billion cubic meters (or 330 million toe), equivalent to about 41% of total estimated hydrocarbon reserves. Gas resources are not yet widely utilized due to lack of market development. However, the importance of gas as an energy source in the industrial sector to substitute for oil is increasingly recognized by the government which is now making concerted efforts to accelerate exploration and development of gas resources (para 3.01). B. Investments in The Energy Sector 2.05 The energy sector claims a large and increasing share of public investment in India, reflecting the growing concern that inadequate energy supplies may become a serious constraint to economic development. Direct real investment in the power, coal and oil subsectors as a whole grew at an average annual rate of 15% between 1974/75 and 1980/81, while its share in total outlay increased from about 18% in the Third Five-Year Plan to about 27% in the current Sixth Five-Year Plan. This is a major commitment and should accelerate the exploration for and development of India's energy resources. Although the power subsector continues to receive the major share of funds allocated to the energy sector, direct investment in the coal and oil subsectors have increased three to four times between 1974/75 and 1980/81. 1/ These are for reserves in seams greater than 1.2 metres thick and at a depth of less than 600 metres.  - 4 - 2.06 The size and rapid growth of investment in all energy subsectors, especially in power and petroleum, reflect GOI's determined efforts to minimize the adverse economic effects of energy shortages on the one hand, and large oil import bills on the other. Stepped-up investment in this sector has resulted in significant increases in energy production. Domestic crude production has more than doubled from about 8 million tons in 1974/75 to about 21 million tons in 1982/83. Coal production has also increased by over 30% between 1979/80 and 1982/83, while installed capacity in the power sector (utilities) has increased by more than 75% over the past seven years. Nevertheless, inadequate supply of energy has remained a major constraint to India's economic growth. Although considerable indigenous energy resources exist their development has not kept pace with demand; efforts to meet the energy demand of the economy from domestic sources must still be intensified and made a national priority, notwithstanding the encouraging progress made recently in increasing oil production. The momentum of energy investments needs to be maintained in the coal and oil/gas subsectors, and substantially incredsed in the power sector, in order to eliminate power shortages and prevent the re-emergence of coal shortages by the early 1990s as well as reduce oil imports to a more manageable level of say 30% to 35% of domestic demand. This would mean that the energy sector should continue to absorb a large share of India's investment resources in future development plans. 2.07 The sectoral distribution of energy consumption is shown in Annex 2.2. Industry and transport together account for about 79% of total commercial energy consumption, households 11%, agriculture 6% and all other sectors the remaining 4%, respectively. The industrial sector is the largest (55%) user of commercial energy, accounting for about 75% of coal, 63% of electricity and 19% of petroleum consumption, respectively. The transport sector is the next largest (24%) user of commercial energy, accounting for about 53% of petroleum and 16% of coal consumption, respectively. The household sector accounts for a relatively small share of commercial energy consumption (7% of coal, 19% of petroleum and 10% of electricity). 2.08 The Government is aware that policies and actions are needed for both energy demand management and development of local energy resources. Since 1979 several studies have been undertaken to address both areas and some specific policy decisions and action programs have evolved from these studies. Some of those pertaining to petroleum are discussed in the following chapter. III. - PETROLEUM SUBSECTOR A. Petroleum Resources, Production and Consumption 3.01 In India, there are 27 sedimentary basins (Annex 3.1) with total area of approximately 1.7 million k2, of which about 1.4 million km (81%) are onshore and the remainder offshore (to a water depth of 200 meters). Commercial petroleum production has been established in only three sedimentary basins, viz., the Upper Assam Shelf in north-eastern India, the Cambay basin in Gujarat, and the Bombay offshore basin which has several petroleum fields, namely, Bombay High, North Bassein (Panna), South Bassein, Heera and Ratnagiri (Ratna). Many of India's potential petroleum-bearing areas are still less tham fully explored. Historically, the pace and scope of exploration activity has been unever. and resources have been concentrated on a few promising  -5- areas. Since the discovery of the giant Bombay High field off the West Coast of India in the mid-1970s, India has not made a new major discovery. The ongoing exploration efforts of ONGC, however, have been encouraging and have identified several petroleum-bearing areas which need further exploratory drilling to determine their commercial potential. Indications of petroleum have been found in eight other basins: Krishna-Godavari, Cauvery, Rajasthan, Bengal, Andaman Islands, Himalayan Foothills-Ganga Valley, Tripura Fold Belt and the Assam-Arakan Fold Belt. Furthermore, four other basins are considered prospective on general geological grounds, although hydrocarbons have not yet been discovered. These basins are Saurashtra, Kutch, Konkan-Kerala and Mahanadi. The Krishna-Godavari and Cauvery basins offer the most promising undeveloped potential to date. Estimates of India's potential total recoverable hydrocarbon reserves are 4.5 billion tons of oil equivalent (toe), of which about two-thirds are located offshore and 75% are expected to be in the form of natural gas. Proven and probable recoverable hydrocarbon reserves are currently estimated at 800 million toe of which 470 million tons is oil and the remainder is natural gas (410 billion cubic meters or 330 million toe). Natural gas is becoming increasingly important to the Indian economy following the development of the Bombay High oil field with its associated gas and as a result of the ongoing development of the large offshore South Bassein gas field. Gas consumption is estimated to have reached the equivalent of 1.5 million toe in 1982/83, as compared with 1.1 million toe in 1980/81, and is expected to increase sharply to about 6.8 millon toe by 1989/90. 3.02 As a result of the rapid development of the Bombay High field, crude oil production from domestic reserves has increased steadily over the past 20 years, from about 0.5 million tons in 1960/61 to almost 7 million tons in 1970/71 and an estimated 21 million tons in 1982/83. For 1983/84, domestic production is estimated to about 26 million tons mainly as a result of further development of the Bombay High field. Consumption of crude oil grew at about 6.5% per annum over the past five years, and reached an estimated 40 million tons in 1983/84. In that year imported crude oil accounted for 14 million tons or about 35% of consumption. The estimated import bill for crude oil and petroleum products was about US$4.S billion for 1983/84 representing 32% of total merchandise imports and 58% of India's merchandise export earnings. By the end of the Sixth Plan period (1984/85), consumption is expected to reach about 44 million tons per year. This would exceed expected domestic production from known petroleum reserves by about 14 million tons per year. Table 3.1 summarizes the consumption and production trends for hydrocarbons. 3.03 While there are good prospects for increasing production from existing fields, offshore as well as onshore, India's dependence on imported oil could increase from a low of 33% in 1984/85 to about 50% in the early 1990s unless new major discoveries are made and developed in the next few years (Annex 3.2). Thus, a concerted effort to accelerate exploration of prospective areas and improve the efficiency of production of existing petroleum resources is of vital importance and is a central objective of Government petroleum policy. In recognition of this need, India is making efforts to attract risk capital by inviting foreign oil companies to assist in exploring for oil, both onshore and offshore; areas in about half of the country's sedimentary basin areas have been offered to private oil companies  -6- Table 3.1: India: Petroleum Production and Consumption Trends Ac ya1 Forecast a/ 1970/71 1980/81 -= 1981/82 1982/83 1984/85 1989/90 Crude Oil (million tons) Domestic Production 6.8 10.5 16.2 20.6 29.8 34.2 Net Crude Oil Imports 11.7 16.3 14.5 11.8 11.1 22.5 Net Product Imports 0.4 6.9 4.9 4.6 3.4 7.3 Total Consumption 18.9 33.7 36.6 37.0 44.3 64.0 X Self-Sufficiency 36 31 45 56 67 53 Natural Gas (million toe) Field Production 1.2 1.9 3.1 3.3 3.3 8.3 Less: Field Uses 0.2 0.2 0.3 0.5 0.5 0.7 Flared Gas 0.6 0.6 1.2 1.3 0.6 0.8 Net Consumption 0.4 1.1 1.6 1.5 2.2 6.8 Total Petrtleum Consumption 19.3 34.7 37.2 38.5 46.5 70.8 a/ Production forecasts are based on development of presently known petroleum reservoirs and do not assume new discoveries from the accelerated exploration program. b/ Domestic crude oil production in 1980/81 was adversely affected by political unrest in Assam. In comparison, domestic production was 11.8 million tons of oil in 1979/80 representing 37% of total oil consumption. c/ Crude oil equivalent of petroleum products converted at 1.0638 tons of crude per ton of products and gas at 0.81 toe/1000 cubic meters. The trends in the production and consumption of petroleum products are shown in Annex 3.3. Source: Annex 3.1 and Indian Petroleum and Petro-Chemical Statistics 1982-83. to participate in exploration under production-sharing contracts (para 3.09). In addition, the investment programs of ONGC and Oil India Timited (OIL), the Government-owned institutions engaged in exploration and development of hydrocarbon resources, have been increased by over 100% in real tenrs in the current Sixth Five Year Plan (1980/81-1984/85) compared to the previous plan period (para 3.10). B. Petroleum Pricing (a) Consumer Prices of Refined Petroleum Products 3.04 Domestic petroleum product and crude oil prices are regulated by the Government, and the Government policy in petroleum pricing has been to consistently set the price of petroleum products at levels designed to ensure efficient use of energy. Retail product prices have been maintained, on average, at or above international levels. At the present time, both the level and structure of petroleum prices in India are considered satisfactory. Current retail prices are summarized in Table 3.2.  - I - Table 3.2: Retail Prices of Petroleum Products. INDIA Retail in US$/g,llon d, Rs/litre