In­dia courts Iran, Russia, and other petro states to sat­isfy its grow­ing thirst for oil

Naren­dra Modi is court­ing Iran, Russia, and other petro states In­dia “can’t af­ford not to fo­cus on en­ergy se­cu­rity”

Bloomberg Businessweek (Asia) - - CONTENTS -

In May, shortly be­fore he spoke to Con­gress in Wash­ing­ton, In­dian Prime Min­is­ter Naren­dra Modi trav­eled to Tehran to sign a deal with the lead­ers of Iran and Afghanistan to de­velop a port on the Gulf of Oman, with In­dia pro­vid­ing $500 mil­lion in fi­nanc­ing. “Iran has pri­or­i­tized ex­pand­ing re­la­tions with those states that stood by its side when it was un­der sanc­tions,” Tehran-based po­lit­i­cal an­a­lyst Mostafa Khoshcheshm said on Ira­nian state television in May. In­dia, though pres­sured to buy less oil from Iran, stayed close to the coun­try dur­ing the sanc­tions. The port deal strength­ens ties be­tween Iran and In­dia, which ac­counted for al­most a third of Iran’s oil ex­ports in March.

The prime min­is­ter is look­ing north, too. In­dia’s largest oil com­pany, sta­te­owned Oil & Nat­u­ral Gas Corp. (ONGC), com­pleted a $1.3 bil­lion pur­chase of 15 per­cent of Vankor, one of the big­gest Rus­sian oil fields to go into pro­duc­tion in the past 25 years. Three other com­pa­nies—Oil In­dia, In­dian Oil, and Bharat Pe­tro­leum’s Bharat PetroRe­sources—on June 17 agreed to buy 23.9 per­cent of Vankor. The rest is owned by Russia’s top oil com­pany, state-con­trolled Ros­neft.

The In­di­ans aren’t fin­ished. In­dian com­pa­nies are con­sid­er­ing buy­ing a stake in Ros­neft it­self, Dhar­men­dra Prad­han, the coun­try’s oil min­is­ter, told re­porters in New Delhi on June 23. With In­dian in­vest­ment in Rus­sian oil projects reach­ing up to $6 bil­lion, strong bi­lat­eral re­la­tions “will en­sure In­dia’s en­ergy se­cu­rity for a long term,” he said. By tak­ing stakes in overseas projects, In­dia also en­sures lo­cal com­pa­nies ben­e­fit from the money spent on im­ported oil and gas.

For Modi, se­cur­ing a re­li­able sup­ply of oil and gas is a “for­eign pol­icy pri­or­ity,” says Ashok Sharma, an in­ter­na­tional-re­la­tions fel­low at the Univer­sity of Mel­bourne’s Aus­tralia In­dia In­sti­tute. In­dia “can’t af­ford not to fo­cus on en­ergy se­cu­rity.” The pre­vi­ous govern­ment had sim­i­lar goals, but Modi has made them a higher pri­or­ity, says Dhruva Jais­hankar, a for­eign pol­icy fel­low at Brook­ings In­dia, a New Delhi-based af­fil­i­ate of the Brook­ings In­sti­tu­tion. “You have seen the govern­ment be very ag­gres­sive,” he says.

De­mand for oil is grow­ing faster in In­dia than any­where else. It jumped 400,000 bar­rels a day in the first quar­ter, to 4.4 mil­lion bar­rels, ac­count­ing for al­most 30 per­cent of the in­crease in world­wide con­sump­tion, the In­ter­na­tional En­ergy Agency said in May. Driv­ing that thirst is In­dia’s grow­ing car mar­ket: Do­mes­tic ve­hi­cle sales rose 5.6 per­cent in the year ended in March, to more than 20 mil­lion, help­ing pro­pel a 14.5 per­cent in­crease in gaso­line pur­chases. The IEA ex­pects the coun­try to ac­count for 25 per­cent of global de­mand from 2013 to 2040.

In­dia im­ports more than three­fourths of its oil and about 40 per­cent of its gas, putting pres­sure on the rupee

“En­trepreneurs who have capped their wells in Al­berta or North Dakota will be look­ing at this kind of story with a greater amount of in­ter­est.” Atanu Chakraborty, head of In­dia’s Direc­torate Gen­eral of Hy­dro­car­bons

and the trade deficit. By 2022, Modi wants to re­duce im­port de­pen­dence by 10 per­cent, so he’s of­fer­ing at­trac­tive terms to for­eign com­pa­nies to drill off In­dia. “En­trepreneurs who have capped their wells in Al­berta or North Dakota will be look­ing at this kind of story with a greater amount of in­ter­est,” says Atanu Chakraborty, head of In­dia’s oil-reg­u­lat­ing Direc­torate Gen­eral of Hy­dro­car­bons. Even so, the coun­try still needs im­ports. “In­dia just doesn’t seem to be blessed, or cursed, with large de­posits of oil and gas,” says Brook­ings In­dia’s Jais­hankar.

Modi has hunted for deals in Saudi Ara­bia, the United Arab Emi­rates, and Qatar. En­ergy se­cu­rity was on the agenda when he vis­ited Mozam­bique on a trip sched­uled for July 7. In­dian com­pa­nies in­clud­ing ONGC, Oil In­dia, and Bharat Pe­tro­leum own 30 per­cent of a gas field off of Mozam­bique. Lead de­vel­oper Anadarko Pe­tro­leum, a Texas-based ex­plo­ration com­pany, says the field has the po­ten­tial to make Mozam­bique the world’s third-largest ex­porter of nat­u­ral gas. In­dian com­pa­nies have al­ready spent as much as $6 bil­lion on it. State-owned gas dis­trib­u­tor Gail In­dia in April be­came the first Asian com­pany to buy shale gas from the U.S. By 2018, In­dia will be im­port­ing about 6 mil­lion met­ric tons of U.S. liq­ue­fied nat­u­ral gas an­nu­ally. Bruce Ein­horn and De­b­jit Chakraborty, with Gol­nar Mote­valli

The bot­tom line With more In­di­ans buy­ing cars, the coun­try is ex­pected to ac­count for 25 per­cent of global oil de­mand from 2013 to 2040.

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