UPSC MainsGS Paper IIIEnergy Security
Energy Security: Balancing Public and Private Ownership
📰 The debate over privatising ONGC and OIL has resurfaced amid geopolitical uncertainty, even as 99% of India’s offshore no-go areas have now been cleared for exploration.
Offshore No-Go Areas Cleared
99%
New Area Opened for Exploration
~1 Million sq km
Finding Cost (Godavari/Mahanadi/Andaman)
$60–80 per barrel
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PSU Privatisation Debate: News
- A recent debate has emerged over whether India should privatise ONGC and OIL, re-emerging amid geopolitical uncertainties and energy supply disruptions.
- India’s oil and gas exploration has historically been constrained less by geology than by limited access to prospective areas.
- However, with 99% of offshore no-go areas cleared and nearly 1 million sq km opened for exploration, this constraint has eased.
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Need for Both Public and Private Presence in Energy
- Privatising ONGC would mean transferring ownership of an entire ecosystem of strategic assets.
- ONGC holds an eighth of Petronet LNG and a seventh of IOC, among other strategic stakes.
- The government would also lose OTPC, the Northeast’s only large gas-based power producer.
- Finding costs in ONGC’s Godavari, Mahanadi and Andaman basins are as high as $60–80 per barrel.
- A barrel in the Andaman deep water that is not commercially viable at $70 for PSUs will not be viable for private firms either.
- Geology and the forward curve are indifferent to shareholding pattern — the underlying resource does not change.
- PSUs can pursue broader national objectives while private companies serve shareholder interests and the bottom line.
Advantages of the Dual (Public-Private) Approach
Strategic Storage
Strategic reserves serve as insurance against supply disruptions, not commercial revenue maximisation.
Sovereign Capacity
State-owned producers can maintain output despite weak prices and absorb temporary losses as an asset.
Exploration Risk Absorption
PSUs can undertake high-risk, long-gestation exploration that private firms avoid due to shareholder pressures.
Geopolitical Buffer
When geopolitics disrupts maritime routes, energy security cannot be left entirely to market incentives.
Private Dynamism
Private firms bring specialised technical expertise, global partnerships and operational efficiency to production.
PSU-Private Synergy
PSUs such as ONGC can partner with global firms, as shown by its 2025 Mumbai High technical services agreement.
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Issues in India’s Energy Security Approach
- Strategic Petroleum Reserve Gap: India’s strategic petroleum reserves are inadequate relative to import dependence and disruption risk.
- Offtake Constraint: India could require long-term suppliers to maintain strategic stocks earmarked for Indian markets abroad.
- Storage Capacity Deficit: India must build adequate storage capacity to withstand prolonged disruptions.
- Exploration Underinvestment: India’s oil and gas exploration has been constrained by limited access to prospective areas.
- Renewable Transition Gap: Ethanol blending and domestic alternatives are not yet at scale to buffer major oil supply shocks.
- Overreach Risk: The government must not interfere in day-to-day PSU operations but retain instruments to guide the energy value chain.
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Way Forward for India’s Energy Security
Two-Pronged Strategy
Strengthen domestic production while simultaneously expanding strategic reserves across both PSUs and private players.
Reinforce Proven Producers
Strengthen ONGC and OIL rather than privatise them in ways that could dilute their strategic focus.
New Private Players
Create space for new private players in exploration, production and storage alongside strengthened PSUs.
Ethanol and Domestic Alternatives
Expand ethanol blending and domestic production to reduce dependence on imported barrels altogether.
Offshore Exploration
Use seismic surveys to identify multi-year discovery prospects in newly opened offshore areas.
Long-Term Offtake Agreements
Require long-term suppliers to maintain strategic stock earmarked for Indian markets in their home countries.
The way forward is neither fully public nor fully private, but both working complementarily — backing institutions that have delivered over decades while creating space for new private players. Energy security is a national interest imperative that markets alone cannot guarantee.
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Source: Indian Express
