Bilateral Benefits: India’s international collaborations in the oil and gas sector

India’s international collaborations in the oil and gas sector

With the economy expanding at a rapid pace, the demand for energy has shown a significant increase, catapulting India to the position of the third largest energy consumer in the world after China and the US. To meet this massive growth in demand, India has been steadily increasing its oil and gas imports.

As per data from the Petroleum Planning and Analysis Cell (PPAC), Ministry of Petroleum and Natural Gas (MoPNG), crude oil imports increased at a compound annual growth rate (CAGR) of 4.17 per cent from 189.2 million tonnes (mt) in 2013-14 to 213.9 mt in 2016-17. In 2017-18 India imported 202 mt of crude oil.

The scenario for natural gas is similar. Imports of liquefied natural gas (LNG) increased from 17,191 million metric standard cubic metres (mmscm) in 2013-14 to 24,686 mmscm in 2016-17, recording a CAGR of 12.8 per cent. During 2017-18 (till February 2018), India imported 22,531 mmscm of LNG. India thus became the third largest importer of oil and the fourth largest importer of natural gas in the world. Domestic production has not been able to keep pace with demand. India produced only 36 mt of crude oil and 31,897 mmscm of natural gas in 2016-17.

Growing imports of crude oil and natural gas need to be supported by strong bilateral relations to ensure that the country receives an uninterrupted supply of oil and gas. India imports crude oil primarily from the Organization of the Petroleum Exporting Countries (OPEC) with Iraq, Saudi Arabia and Iran being the top three oil suppliers during 2017-18. For the period April-October 2017-18, Iraq supplied 25.8 mt of oil making it the largest supplier for the year. The largest quantity of natural gas is imported from Qatar followed by Nigeria, Equatorial Guinea and Australia. India has also recently begun importing LNG from the US when a charter ship from US energy firm Cheniere Energy’s Sabine Pass liquefaction facility in Louisiana arrived at Dabhol in March 2018.

Recent bilateral engagements

The international cooperation division of the MoPNG is endeavouring to increase the country’s level of engagement with its oil and gas partners. To this end, it has undertaken a policy shift from “Look East” to “Act East”. Under the policy, it is working closely with neighbouring countries to ensure energy security of the entire region. India has pursued international cooperation with several countries such as Saudi Arabia, Israel, Qatar, the US, Japan and Bangladesh. It is also engaging with international organisations such as OPEC, the International Energy Agency and the International Energy Forum.

Amongst its neighbours, India signed agreements with Bangladesh and Myanmar for the supply of petroleum products. Under the sale and purchase agreement with Bangladesh, the Bangladesh Petroleum Corporation (BPC) will import 66,000 tonnes of high speed diesel equivalent to 30 rakes from Numaligarh Refinery Limited (NRL). The exports will take place during the period May-December 2018 from NRL’s Siliguri marketing terminal to BPC’s Parbatipur depot in Bangladesh. NRL has also entered into an agreement with the Parami Energy Group of Companies in Myanmar for the supply of diesel as well as for collaboration in Myanmar’s retail petroleum segment. With Nepal, India is working on the development of the Motihari–Amlekhgunj product pipeline to supply petroleum products to Nepal.

With other countries that are not accessible by land too India is planning a number of investments to promote bilateral relations. For instance, India signed an MoU with Sri Lanka in April 2017 under which the two countries will collaborate on several energy and infrastructure projects in Sri Lanka. The MoU proposes Indian investment in the development of oil tank farms in Trincomalee, the setting up of LNG power plants and terminals, and the setting up of piped natural gas infrastructure in Colombo. In Mauritius, India is developing a bunkering and oil jetty project which is being jointly developed by Mangalore Refineries and Petrochemicals Limited, Indian Oil Corporation Limited (IOCL) and the State Trading Corporation of Mauritius. With Indonesia, India has set up a joint working group (JWG), for developing a policy framework, setting up oil and gas infrastructure, and assessing cooperation opportunities in capacity building and business opportunities for both countries.

To ensure continuous availability of oil and gas, India is continuing to build strong bilateral relations with its major suppliers, especially Qatar and Saudi Arabia. In a meeting held in Qatar in June 2017, the two countries discussed the existing level of bilateral cooperation in the hydrocarbon sector and further explored cooperation in new development areas. Saudi Aramco recently established an India office in Gurugram, Haryana, enabling it to engage in the marketing of crude oil and liquefied petroleum gas, offer engineering and technical services, and undertake business development in the country more actively.

More recently, India has cultivated bilateral relations in the sector with countries such as the US and Israel. It has started importing LNG from the US on a long-term basis. The first shipment of US crude was delivered in October 2017 at Paradip port while the first shipment of LNG arrived at the Dabhol terminal in March 2018. With Israel, India has set up a JWG, the first meeting of which was held in August 2017 in Israel. An Indian consortium of ONGC Videsh Limited, Bharat PetroResources Limited, IOCL and Oil India Limited was also awarded an offshore block by Israel’s energy ministry in the bidding rounds held in November 2017. Further, an MoU has also been signed between India and Israel for cooperation in the oil and gas sector.

To promote research and development in the sector, an international think tank has been constituted by the MoPNG to assist in policy formulation in the hydrocarbon sector. The think tank has as its members people of Indian origin holding key positions in global oil and gas companies, research organisations and universities, and national and international financial institutions.

The way forward

The international cooperation division of the MoPNG has been taking steps to strengthen India’s energy security by sustaining and promoting engagements with several countries and international organisations of strategic importance for the country’s oil and gas sector. There has also been sustained engagement with existing suppliers while new avenues have been opened by fostering relations with new exporters. Going forward, India’s requirement of oil and gas is expected to increase further. As per data available from the PPAC, the requirement for petroleum products and natural gas will increase to 244.96 mt and 606 mmscm per day, respectively, by 2021-22, which is expected to necessitate significant imports of oil and gas. This high level of imports will require the development of bilateral relations, and the strategic importance of maintaining such relations is expected to only grow.