Global oil games: India playing a shrewd hand

The country is ensuring its growth story is not hampered by lack of energy

Global oil games, Donald Trump, Khalid al Falih, India Energy Forum, G20 Summit, Saudi Arabia, Narendra Modi, US, Buenos Aires, iran, Saudi oil exports
The government has made a move in this direction by involving Saudi Arabia and the UAE in developing an integrated refinery and petrochemicals complex at Ratnagiri in Maharashtra.

A Ahmad

With deep sectarian Shia-Sunni divisions polarising countries in West Asia, US President Donald Trump’s bid to isolate Iran by imposing sanctions on Tehran’s export of oil and the emergence of the US as a major oil producer has changed the landscape of the oil industry in a manner that was unthinkable earlier.

At the India Energy Forum last year, Saudi foreign minister Khalid al-Falih praised PM Narendra Modi for making it easier to do business in the country and reassured New Delhi that Saudi Arabia was ‘committed to meet any shortfall that may arise due to sanctions on Iran.’ This was followed up by a meeting between PM Modi and Saudi Crown Prince Mohammed bin Salman on the sidelines of the G20 Summit in Buenos Aires. The result of such efforts is that the fall in Iranian oil exports to India has so far been successfully offset by an increase in Saudi oil exports.

Also read: Growth is a five-day match affair, hitting out wildly in the 20-over format will exhaust policy options

But maintaining regular oil supply is just one of India’s concerns. Another key area for Delhi to focus on is setting up of large-scale refineries to process crude oil. The government has made a move in this direction by involving Saudi Arabia and the UAE in developing an integrated refinery and petrochemicals complex at Ratnagiri in Maharashtra. A MoU to this effect was signed by Saudi ARAMCO and the Abu Dhabi National Oil Company (ADNOC) to jointly develop the Ratnagiri Refinery & Petrochemicals Ltd (RRPCL). Once finished, RRPCL will be capable of processing 1.2 million barrels of crude oil per day (60 million metric tonnes per annum) and will rank as one of the world’s largest refining and petrochemicals projects.

Such moves show the world and specifically West Asia’s recognition of India as an energy power. This could be seen in February last year when ADNOC awarded a consortium of Indian oil firms 10% stake in Abu Dhabi’s Lower Zakum concession. This is the first time that Delhi received a stake in Abu Dhabi’s national oil and gas resources. This partnership was cemented when oil minister Dharmendra Pradhan confirmed that Indian companies would jointly bid with UAE-based companies for projects in the UAE ensuring that the ‘energy relationship between India and the UAE had gone beyond that of a buyer-seller relationship.’ Pradhan also said that India had agreed to form a partnership for a strategic crude oil storage facility in Mangalore. Under the partnership, ADNOC is storing 5.86 million barrels of crude oil in India’s underground facilities.

The growing energy relationship with the UAE is just one of India’s acquisitions globally in the energy field. Indian Oil Corporation (IOC), the country’s largest oil firm, has acquired Royal Dutch Shell’s 17% stake in Oman’s single largest oilfield—Mukhaizna—for $329 million.

Moving away from West Asia, the other key relationship for India is Russia. Apart from joint participation by Indian and Russian state-held oil and gas companies in more oil and gas projects in Russia, the major coup for India is the fact that Russia is supplying LNG to India. As Russian supplier Gazprom docked in Dahej, Gujarat, last year, Pradhan called it a ‘golden day in India’s energy roadmap.’ Speaking to reporters, he then said, ‘First we renegotiated price of LNG from Qatar, then reworked Australian supplies and now gas from Russia under renegotiated terms have started to flow.’ India will import LNG worth an estimated $25 billion over the contract period of 20 years from Russia.

Looking to India’s immediate neighbourhood, the increased interest shown by New Delhi in gas pipeline projects is a positive sign. The India-Bangladesh Friendship Product Pipeline (IBFPP) is a key example. With both countries having entered into an agreement in April 2018 during foreign secretary Vijay Gokhale’s visit to Bangladesh, the 129.5-km pipeline was inaugurated in September last year. Going from Numaligarh Refinery in Siliguri to Parbatipur in Bangladesh, the pipeline is the second transnational pipeline after the India-Nepal pipeline also inaugurated last year and provides an annual capacity of 1 million metric tonnes from Dhaka to Delhi. As Pradhan tweeted at the time, ‘Oil and Gas engagements are an important pillar of the growing bilateral cooperation between India and Bangladesh. The Neighbourhood First policy of PM Narendra Modi has given an impetus & provided Notun Projonmo-Nayi Disha to our bilateral relations.’

The government has looked not only to attract investment in the exploration and production sector, but also to develop domestic oil production, which has been declining over the years. Policy reforms such as a new exploration licensing policy that offers marketing and pricing freedom for gas producers and a higher gas price for output from difficult fields have been the key policy changes made to ignite interest in the country’s upstream sector.
In an uncertain geopolitical landscape accompanied by unpredictable behaviour by state actors today, India will constantly need to recalibrate policy and balance relations to ensure its interests are maintained. But so far the government’s outreach towards other nations and policy initiatives at home seems to be paying dividends ensuring that India’s growth story is not hampered by lack of energy.

The author is a foreign and energy affairs analyst with a focus on West Asia

Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.

Most Read In Opinion