By IANS,
New Delhi : Upstream oil companies have told the government they are unable to pay their share of the subsidy burden due to falling oil prices, Petroleum Secretary R.S. Pandey said here Monday.
“The upstream companies have approached us to say that they cannot contribute Rs.45,000 crore (Rs.450 billion) this year and this matter is under consideration,” Pandey said at the contract signing ceremony of blocks awarded to companies under the seventh round of auctions of hydrocarbon assets.
Oil India Ltd (OIL) and Oil and Natural Gas Corp (ONGC) are the two companies involved in upstream oil exploration.
ONGC chairman R.S. Sharma conceded oil explorers are finding it difficult to make ends meet because of the low-ruling global oil prices.
“We are not comfortable with the current prices, our margins are under pressure,” Sharma told reporters on the sidelines of the function.
Pandey described the current drop in oil prices as a short-term phenomenon and said prices would definitely increase.
“All indicators are that the current fall in oil prices is going to be a short-term phenomenon,” he said in his address to operators in an attempt to assure them that their investments would reap benefits.
Oil was ruling at $44 a barrel Monday, down from more than $140 in July when it reached its peak.
“During my visit to the London conference, I did not meet a single person who said that the oil prices will continue to fall indefinitely,” Pandey said referring to the ministerial meet on oil prices held in London recently.
He said oil prices would pick up once the global economic condition stabilised.
“The day the global recession ends and economic activity improves, oil prices will pick up again.”
He urged all operators to go forth with their investment plans as per their responsibilities in the production sharing contract.
“When you sign a contract, you take on your responsibility, I hope that no company would seek for an extension of the contract,” Pandey said.
The seventh round of the auctions, which started in December last year, attracted $1.5 billion in investment from oil companies. It offered 57 exploration blocks covering a sedimentary basins area of about 171,000 sq. km.