Right from the royal dispute between the Ambani siblings over KG basin gas to the charges of favouritism against the upstream regulator, accusations of Petroleum and Natural Gas Minister Murli Deora taking sides in the corporate battle over gas and the role of the downstream regulator in the grant of licenses for city gas distribution networks, 2009 was quite a controversial but eventful year for the oil and gas sector.

Having earned the distinction of being the only Petroleum Minister to return to office again, Mr. Deora’s second stint saw him preside over controversies dogging institutions and individuals under his domain.

The serious charges against the former Directorate General Hydrocarbons (DGH) V.K. Sibal, of showing “undue favour” to Reliance Industries Limited (RIL), presently being probed by the CBI, marred the credibility of the Petroleum Ministry and the DGH as an institution.

Mr. Deora also received flak for taking sides in the battle for gas between Mukesh Ambani and Anil Ambani. The handling of the entire gas dispute issue, as also the case pertaining to the extension of Mr. Sibal, clearly reflected the failure of the Petroleum Ministry to do its homework.

Although the year began on an eventful note with the government firmly handling the strike by oil PSU officers that threatened to hold the entire country to ransom, the Ambani gas row dominated proceedings in the industry in the second half of the year.

Mr. Anil Ambani’s RNRL unleashed an advertisement campaign against the Petroleum Ministry, accusing it of helping his elder brother. The Ministry’s role also came under the scanner for not coming out in support of power sector PSU — the National Thermal Power Corporation (NTPC) — in its legal battle for gas at a contracted price with Mukesh Ambani’s RIL.

Such was the impact of the gas dispute on international investors that India’s latest round of auctioning of oil and gas blocks — the New Exploration Licensing Policy (NELP) VIII — was ruined, with major global oil and gas companies staying away from the bidding.

Crude prices

2009 began with crude oil prices dipping below the $100 per barrel mark from the historic peak of $147 per barrel. Oil prices touched $40 per barrel, but instead of using the opportunity to deregulate petrol and diesel prices, the government directed PSU companies to cut retail prices with an eye on the Lok Sabha polls in May 2009. Experts feel that an opportunity for reform was lost as a result.

The situation was no different for the downstream sector where the functioning of the Petroleum and Natural Gas Regulatory Board (PNGRB) came under scrutiny. The mid-stream pipeline business was in equal disarray with the PNGRB not sanctioning a single cross-country pipeline to connect gas sources with consumption centres. The Ministry is already toying with the idea of a new pipeline authority for which a separate legislation is being drafted.

The PNGRB unnecessarily entered into a dispute with existing service providers of CNG and PNG, instead of opening new networks.

Some bright spots

However, there were also bright spots with the RIL starting gas production from the KG basin fields, helping the power sector to a large extent. The peak output of 80 mmscmd will wipe out most of the gas deficit in the country, but doubts remain when this will be achieved as customers named by government are yet to take their entire allocated quantities.

Cairn India, the unit of Scottish explorer Cairn Energy Plc, also began crude oil production from its Rajasthan field, the most prolific on-land discovery in more than two decades. The acquisition of UK-listed Imperial Energy, which has assets in Russia, by Oil and Natural Gas Corporation Videsh Limited (OVL), was another highlight of the year. However, its counterpart, ONGC saw a continuous decline in its oil and gas production with the Petroleum Ministry giving a strict no to its proposal for diversification.

2010 is likely to begin on an eventful note with the report of an expert group headed by a former member of the Planning Commission, Kirit Parekh, on fuel prices likely to come in January.

The judgment over the Ambani gas dispute is also likely to be pronounced by the Supreme Court early next year. With China going aggressively and beating India in the African nations, Myanmar and recently Iran to acquire oil and gas assets, industry analysts feel the Petroleum Ministry needs to be more aggressive and proactive in its pursuit of energy security for the nation.