Supply constraints, a sharp rise in demand and record high prices are likely to result in a wider-than-projected gap between demand and availability of oil and gas in the current Five-Year Plan (2007-2012).
"That gap has been widening and will continue to widen," said RS Sharma, chairman and managing director of Oil and Natural Gas Corporation.
Though crude oil prices in the market are at a record high and analysts say they could breach the $200-per-barrel mark soon, consumption has grown rapidly in India as prices of petrol, diesel, kerosene and liquefied petroleum gas are heavily subsidised by the government and its oil production and marketing companies.
For instance, the government had projected demand for petroleum products to be 117.55 metric tonnes in 2007-08, whereas the country actually consumed 129 metric tonnes.
Higher demand, coupled with higher prices, is also likely to drive up the country's oil import bill to over $100 billion in this financial year, from $68 billion in 2007-08. In 2006-07, the crude oil import bill was $48 billion.
"The crisis is more due to the price rather than supply," said Arvind Mahajan, executive director, KPMG Advisory.
On the supply side, there is a worldwide shortage of supply of liquefied natural gas, which feeds around 40 per cent of India's total gas requirement currently.
India is fully dependent on imports of LNG and is, therefore, feeling the pinch. Nearly 78 per cent of the country's crude oil requirement is imported.
India is sitting on considerable reserves of gas but "production from the large discoveries made by ONGC and GSPC (Gujarat State Petroleum Corporation) on the east coast is likely to start only after 2012", said a Delhi-based analyst with an advisory firm.
As a result, the energy situation in the country will only improve after 2012, the terminal year of the current Five-Year Plan.
"The global LNG market will remain under pressure till 2012. After that, it will ease as new liquefaction capacities will come on stream," said UD Choubey, chairman and managing director of GAIL (India), the country's largest transporter and marketer of gas.
Reliance Industries Ltd will also reach peak production at its Krishna-Godavari basin reserves by then. "This has the potential to wipe out the gas supply deficit," Choubey said. "But we will still remain a net importer of oil and oil products," he added.
The oil industry is, on its part, gearing up to produce oil and gas from alternative sources to meet the demand.
While ONGC is focusing on producing gas trapped in coal seams (coal bed methane) and gasification of coal itself (underground coal gasification), GAIL (India) is looking at projects such as converting coal to liquid fuels.
"We are focused on coal-to-liquid technology," said Choubey. The coal ministry recently called for expressions of interest for such projects. Private sector giants such as RIL and the Tatas are also reported to be interested.