Special Correspondent

Access to reserves is the number one business risk

NEW DELHI: Global consulting firm Ernst and Young (E&Y) on Wednesday warned oil and gas companies in India with unstable policy regime and business risk due to volatile crude oil prices.

According to the 2009 Ernst and Young Business Risk Report, the continued instability in policy regime makes the business scenario uncertain for national and international oil companies.

“A fragmented energy policy creates ambiguity, forcing oil and gas companies to repeatedly make decisions in uncertain environment and deters long-term planning. The policy requires review to balance competing goals of security of supply, affordability, meeting demand growth and climate change considerations,” the report said.

It said the oil and gas sector has been impacted globally by the economic downturn, which has created new risks for the industry threatening the near-term survival and prospects of a number of oil and gas companies.

“Crude oil price volatility is among the largest business risk that oil and gas companies in India face. This is followed by unstable policy regime, managing costs and risks emerging from technological advancements,” it said.

The 2009 global report, based on interviews with some of the sectors’ leading CEOs, analysts, commentators and academics, identified access to reserves as the number one business risk for the oil and gas sector, up from fourth place in 2008.

The uncertainty around energy policy moved up from sixth to the second position, followed by a new entrant in third place — price volatility, the report said.