Practical analysis for investment professionals
23 January 2014

Fesharaki: Indian Oil and Gas Production Stymied by “Antiquated Policy Making”

Posted In: Equity Investments

India’s oil minister recently announced an effort to refresh the two-decade-old estimate of oil and gas reserves. But Fereidun Fesharaki, chairman at FGE, a consulting group focused on oil and gas markets, remains skeptical about efforts to further develop India’s gas and oil industries — unless the government allows prices that are competitive with the international market.

“There is room for substantial reform. I think the Indian production can go up several hundred thousand barrels per day with a new system,” Fesharaki told attendees at the India Investment Conference in Mumbai last week. “There is substantial room also for higher natural gas production in India, which has been stymied because of the bad pricing policy.”

This recent push for exploration will be the 10th round of India’s New Exploration Licensing Policy (NELP), which Fesharaki described as a generally failed policy, largely because previous rounds failed to attract bids from investors outside of India. A combination of high costs and “antiquated policy making” has made it difficult for even domestic companies to invest in oil production.

“The number one issue in India is whether the government will allow an increase in the price of domestically produced crude from $41 to $65,” Fesharaki said. “That, I hope, will be fixed before this government’s term finishes. If it’s not done, then significant opportunities in terms of finding new oil in India will be lost until the next government comes and gets their act together.”

You can watch the entirety of Fesharaki’s presentation below. He also discusses:

  • Why Saudi Arabia is more important than market forces in determining the price of oil.
  • The mechanisms that — barring unforeseen geopolitical events — will result in a significant decline in oil prices over the coming years.
  • Why the particularly challenging refinery industry is even more challenging in India.
  • The natural gas industry in India.

Please note that the content of this site should not be construed as investment advice, nor do the opinions expressed necessarily reflect the views of CFA Institute.

About the Author(s)
Jennifer Curry

Jennifer Curry formerly served as managing editor of the Enterprising Investor. Previously, she was the social media manager at the New York Society of Security Analysts (NYSSA). Prior to her work at NYSSA, Curry worked as the senior project editor for a nonfiction imprint at Barnes & Noble Publishing and as an assistant editor at the H.W. Wilson Company. She is the editor of several volumes in the Reference Shelf series, and her writing has appeared in Smithsonian, IndustryWeek, Barnes & Noble Review, and other publications. Curry holds a BS in journalism and a BA in anthropology from the University of Kansas, and an MA in anthropology from Hunter College, City University of New York.

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