It is difficult to answer the question 'what is India's energy security strategy’ but it is possible to say with certainty that investing in 'equity oil' is among its predominant energy security strategies. Though India began planning for its energy needs right from the first five year plan, it rarely had a consistent and clearly articulated strategy for energy security. The first Five year plan documents talked about generating power so that area under irrigation can be increased. The Third Five year plan brought up the idea of 'self-sufficiency' in the context of energy to promote investment in nuclear power. In 1962, almost a decade before the oil crisis provided the global context for the pursuit of ‘energy security’, the first Prime Minister of India set up a Committee on Power & Energy realizing the importance of energy in nation building. The Committee’s report submitted in 1965 mapped energy resources of India and offered suggestions on how they may be utilized. Subsequently, the Fuel Policy Committee Report in 1975, the Report of the Working Group on Energy Policy set up by the Planning Commission in 1979, the Report of the Advisory Board on Energy set up in 1985 as well as Research Reports by the National Council of Applied Economic Research (NCAER) in 1985 provided data and recommendations broadly on the same lines. A striking feature in all the reports was that they offered elaborate projections for wood fuel demand in the future as the decline in wood fuel use was apparently not anticipated. An Energy Policy Committee was set up by the Planning Commission in 1995 but its report which essentially projected energy demand for the future was not published in final form. The Sixth Five Year Plan (1979-84) which followed the first oil crisis had a dedicated section for 'energy' for the first time. 'Self-sufficiency' was its driving theme and development of domestic resources and the need for pricing reforms to conserve energy were among measures emphasized. Subsequent plan documents emphasized the same ideas but they also stressed investing in 'equity oil' to reduce growing import dependence.

In 2000, the Hydrocarbon Vision 2025 commissioned by the Prime Minister of India to address the issue of energy security in the context of the hydrocarbon sector (Oil & Gas) was released. The report recommended 'intensification of exploration efforts and securing acreages in countries having 'high attractiveness for ensuring sustainable long term supplies' such as Russia, Iran, Iraq and North Africa. The recommendations were repeated with some variations in subsequent documents. The Integrated Energy Policy Report released in 2006 commented that 'obtaining equity oil, coal and gas abroad do not represent adequate strategies for enhancing energy security beyond diversifying supply sources’ but also recommended 'investing in equity oil' to enhance energy security in subsequent sections.

A new division on 'energy security' was created within the Ministry of External Affairs (MEA) of the Government of India in 2011 and was designated as ‘the nodal point for 'energy security' related matters involving coordination with line Ministries, Planning Commission, Indian Missions and Posts Abroad, International Organizations and Foreign Missions'. The overarching theme in its mandate is that of securing equity investment and bilateral energy deals in energy exporting countries in Africa, Latin America, Central Asia and South East Asia.

Despite questions over whether 'equity oil' actually contributes to energy security, ONGC Videsh (OVL) was created with the mission to pursue 'equity oil' investments. Barring a few exceptions, the list of countries in which OVL has so far made equity investments reads like the list of states to avoid – Vietnam, Myanmar, Russia, Kazakhstan, Iran, Iraq, Syria, Libya, Nigeria, Sudan, Brazil, Columbia and Venezuela.

In Vietnam OVL has invested USD 114 million in exploratory assets and USD 244 million in a producing asset which gives OVL 2.249 BCM of gas and some condensate. In Myanmar India has invested USD 160 in natural gas assets from which production is anticipated next year. Russia has the largest of OVL’s equity investments at 4 billion yielding 1.4 mmt of oil and 0.415 BCM of gas. In Iran and Iraq, OVL has exploratory assets acquired for a consideration of USD 38 million. In Syria OVL has two assets, one producing and one exploratory accounting for an investment of USD 277 million with 0.662 mmt of 'equity oil' in 2010-11. In Libya, OVL has invested USD 50 million in three exploratory assets out of which formal letters on relinquishment are awaited on two while force majeure notice has been served and operations suspended on the third. In Nigeria, OVL has invested USD 257 million in exploratory blocks out of which USD 25 million has already been written off. OVL’s USD 2.5 billion investment in the Greater Nile Project in Sudan gives ownership of about 1-2 mmt of 'equity oil' each year. Another producing asset in Sudan assigns OVL about 0.226 mmt of equity oil for an investment of USD 428 million. In Venezuela OVL has a producing asset in which it has invested USD 191 million and gets the right to about 0.757 mmt of crude. In Cuba OVL has invested USD 69.7 million in exploratory assets and in Columbia it has invested USD 9.5 million in exploratory assets and a producing asset in which it has invested 437.5 million with right to 0.468 mmt of crude. In Brazil a USD 548 million investment gives about 0.573 mmt of crude and 0.013 BCM of gas. It also has an investment of USD 81 million in exploratory assets. All the above figures from OVL’s website add up to an investment of USD 1.1 billion in exploratory assets and USD 8.7 billion in producing assets yielding about 5.3 million tonnes or 38.8 million barrels of equity oil. This is about 3 percent of India’s annual consumption. We have invested USD 10 billion (not counting other costs) for 38.8 million barrels per annum of equity oil.

We may presume that owning foreign or equity oil will add to India's energy security as the 'owned oil' may be seen to be contributing to India's oil supplies. This is often not the case as 'equity oil' is sold to the global oil market. In that case we may presume that the profits from sale of oil will insulate India's economy from high world oil prices. But this too makes no economic sense. The world market prices oil according to its opportunity cost. The price of equity oil is roughly the same as that of traded oil. If equity oil investments are seen as having commercial benefit from the perspective of OVL or as a hedge against foreign exchange exposure, it would be better for India to allow domestic price to rise to international price levels and distribute the wind fall profit from owning oil to the population in India rather than subsidize the price in the domestic oil market (and thus give domestic manufacturers and consumers an incentive to use too much oil).

Does the purchase of equity oil lead to smoother national income? The equity investment will always look beneficial if one looks backward after oil price has risen. But if the price of oil falls, people suffer a loss of income and wealth (relative to having invested the money elsewhere). Assuming the foreign oil assets are priced fairly at the time of purchase, India would benefit only when the purchase helps smooth its income; however, purchases may increase income volatility for a large country like India.

As India accounts for a growing share of oil demand, world oil price is likely to be high when India is growing strongly and citizens have better income, whereas the price is likely to be low when India is doing poorly. Foreign oil assets are a bad hedge in such cases, for they subtract from citizens’ income when it is already low and add to it when it is high. India's property rights in foreign oil assets are actually diminishing in risky countries even as oil price increases. The upstream assets of the Greater Nile project straddle the new territorial border and the continued operation of the project remains uncertain. OVL is also said to be incurring a loss of over USD 8 million per month in the project over inability to supply 12,000 bpd of crude to Sudan as agreed. 85 percent of the project is said to be in South Sudan and South Sudan is reportedly demanding a royalty of USD 36/bbl against an offer of USD 1/bbl from Sudan. The Deputy Chairman of the Planning Commission of India was probably right when he pointed out at a conference organized by ORF in 2006 that, 'it was never clear in anybody's mind what energy security was'!