The Debate

Should India Privatize Assam’s Oilfields?

Concerns about foreign investment and environmental damage are overestimated.

Should India Privatize Assam’s Oilfields?
Credit: Oil pump via

The Indian government recently arrived at a decision to privatize 12 small oilfields in Assam. This, as part of the new policy that will privatize 67 small oil fields in India, has drawn understandably strong reactions from the vocal civil society of Assam. Assam has had a long checkered history with oil, with its roots in the Assam movement in the 1980s, when slogans like “Tez dim tel nidiu” — we give blood, not oil — stirred emotions across the state. Thus naturally any talk about oil in Assam elicits strong reactions.

Thirty years have passed since then, however. Homegrown oil companies in Assam like Assam Oil have withered away. Local oil refineries like Digboi, with its falling production limits, are now within the gambit of Oil India Limited (OIL). Royalties from oil payments have been stuck in a legal battle since 2008. Despite having immense potential, the natural resources in Assam — including millions of metric tonnes of oil and gas — lie unused. And meanwhile, a large population remains unemployed.

It is in the context of these issues that the question of privatizing oilfields in Assam must be addressed. The first critique that is often offered is the bogey of foreign investment. The image of foreigners exploiting resources often makes for vivid imagery in the socio-political landscape of Assam. Yet a mere declaration of a policy intending to invite foreign investment will not automatically translate into foreign investment. The global economy faces uncertainties: Brexit has roiled international markets, and oil prices remain depressed. These factors, combined with a weak domestic market, make the chance of foreign investors flocking in to invest in Assam seem quite remote. When one considers the perception of Northeast India as an investment location, the chances of foreign investment seem even bleaker. Hence the charge of foreign incursion into Assam’s oilfields is unfounded.

Another aspect of the privatization debate is the potential threat to the environment. It is true that the extraction of natural resources always takes a toll on the environment. But in a fast-developing world where oil is the basic consumption fuel for everything from machines to transportation, to sit on top of oil reserves and do nothing with them makes no sense. At some point there have to be systematic efforts to harvest natural resources. However, this must be coupled with the twin paradigms of sustainable technology and accountability.

Today, a number of companies worldwide are investing in and implementing technologies that make oil and gas drilling as sustainable as possible. For example Cenovus, a company working in northern Alberta, Canada, is trying to minimize their impact on the pristine landscape by using reusable wooden mats to create temporary access roads. The wooden mats provide stable work conditions for equipment and the crew and help protect the ecosystem underneath. When finished, they simply pick up the mats and move them to the next location.

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In another example, Brazil’s Petrobras has been drilling in Urucu province in the Amazon. In a span of more than two decades, the company has built on less than 0.5 percent of the site; the rest is undisturbed. Petrobras has built 71 kilometers of paved roads, but they are built only when needed. When doing exploratory drilling, the company doesn’t build a road to a potential site; it clears a patch of land and brings in equipment by helicopter. If the exploratory work proves disappointing, native plants are brought from an on-site nursery to restore the forest. The nursery, at last count, had about 200,000 seedlings and more than 85 varieties of orchids.

Apart from these examples, companies can go paperless and give back to the community in form of plantation programs, among others. Thus, in the 21st century oil and gas drilling is beginning to evolve as a sustainable force that can’t be ignored. Steps like giving back to marginalized communities in form of building hospitals and schools would further strengthen this process. Though contested, it can’t be completely denied that the poor have less access to sustainable means of development. For example, the poor use firewood for cooking instead of more sustainable cooking gas.Hence upgrading local livelihoods has an indirect spinoff on environmental sustainability as well.

There is, however, the perception of environmental damage, which is much harder to confront. In the last 30 years, streams have grown dry, hills have been mowed down, and river beds have become a thriving business avenue for a large number of people. A Ramsar site of repute, the Deepor Beel, is under continuous threat of encroachment. The hills around Guwahati have become the site of illegal settlement. And yet it is oilfields alone which are seen as bringing massive environmental upheaval to Assam!

The threat to the environment is real. However the solution lies in accountability and self restraint. If there is no accountability, the environment will wither away irrespective of whether investments in oil fields are made or not. Hence a nuanced approach would be to ensure the environmental accountability of oilfield operations. Social and environmental impact assessments are the heart and soul of any modern day program. Accountability must be placed upon those who seek to invest in the oilfields, with assurances not only to give back to the community but also to contribute toward innovating sustainable measures for themselves. Steps like engaging in construction where only needed would ensure that balance is maintained between the quest for oil and gas and the environment.

Then there is the question of how the privatization of oilfields can benefit Assam. The answer to that lies within the socio-political milieu of Assam, if it can assert itself as a responsible actor that is vigilant and cooperative, instead of indulging in uninformed rhetoric. According to the National Sample Survey’s 66th Round, Assam has the third highest unemployment rate in the country: urban unemployment of 52 percent, rural unemployment of 39 percent. The numbers for urban unemployment seem dismal already; the lower rate of rural unemployment is no cause for cheer either. Rural employment is largely in agriculture, a sector that is plagued by large scale underemployment and disguised unemployment. It’s likely that the true unemployment rate for rural Assam is even higher.

From 2013-14, the state GDP of Assam grew by 14.68 percent; Bihar grew by 25 percent  and Goa by 39.84 percent. While the growth of Assam is slightly above the national average of 14 percent, this growth rate, seen in the context of large numbers of unemployed people, does not seem enough to fulfill the aspirations of a burgeoning youth population. At this juncture, the government estimates that the 12 oilfields could bring 4 billion rupees ($600 million) to Assam, acting as a big boost to the development of the state. This is apart from the money that would flow into the state coffers,in form of oil royalties.

This oilfield auction must also be seen as an opportunity to develop homegrown potential within the state. Today, Gujarat Power Corporation Limited participates in oilfield auctions and has also ventured into new areas like solar energy. Tripura has a similar success story with regards to gas exploration. The auction process opens the possibility of reviving Assam Oil as a premier oil and gas exploration company. Also, if these small oilfields are developed, they would not only employ a large number of people, but also create the human resource of trained manpower to work for oil companies in the future.

The debate around the privatization of oilfields, therefore, has to be approached in a nuanced manner. A jingoistic approach cloaked in unwillingness to reason will  harm the interests of Assam, rather than protect it.

Ibu Sanjeeb Garg is an avid follower of ethnic contentions and politics in India’s Northeast. The views expressed here are his own.