India
chases down new energy supplies By Priyanka Bhardwaj
India, facing a
huge deficit in its indigenous energy production
and a power sector struggling to pay for fuel
imports as the economy tries to maintain annual
growth of 6.5%, is chasing down all possible
sources of energy supplies to achieve efficiency
and meet demand.
About 70% of India's oil
demand is met by imports, with Iran a foremost
supplier. The government in New Delhi has
therefore reacted with considerable caution to the
European Union's imposition of a new punitive
package that embargoes Iran's natural gas (earlier
sanctions included Iranian oil) and aims to plug
loopholes that enabled Iran to circumvent Western
sanctions and raise funds for its disputed nuclear
program.
Indian Oil Minister Jaipal Reddy
tried to play down the issue by
revealing at the
Petrotech 2012 Conference held in New Delhi this
week the country's intention of keeping shipments
from Iran at around "current levels". India's
continuing oil trade with Iran, despite a
downgrading in India's import of Iranian crude to
about 8-9% of its oil needs from 12% a year
before, has not gone down well with Republicans in
the United States, who feel that the Barack Obama
administration has been handing out exemptions to
India and China a bit too easily.
Dov
Zakheim, a senior defense advisor to the Mitt
Romney presidential campaign minced no words when
he said, "India is a good friend. It's an ally. We
understand that India has a long relationship with
Iran. But if India is still importing oil, it
should stop. As simple as that ... There are other
alternatives to choose from. I can say that it is
not in India's long-term interest to buy one ounce
of oil from this Iranian regime."
Reports
suggest additional sanctions are being drafted
into the US annual defence policy bill to be
effected right after the November presidential
election.
The Indian government had
earlier verbally ordered its state refiners to cut
down their dependence on Iranian crude by 15%.
Iran, India's second-largest oil supplier after
Saudi Arabia in 2010-11, has now slipped to fourth
position. Tanker discharge information indicate a
decline in Iranian oil imports of 42% in July
compared with June, and of about 40% from same
point last year. This points to India's
willingness to compromise its energy security to
some extent to adhere to Western-imposed actions
against Iran and in return secure a waiver from US
sanctions. The next logical step for India would
be to manage an extension of the waiver, just as
Japan has managed to do, by producing records of
imports for the six months from when the waiver
was first granted in June.
But two recent
events could jeopardize India's effort to bag the
extension. Hindustan Petroleum Corporation Ltd -
Mittal Energy Ltd (HMEL) bought 2 million barrels
of Iranian oil for its Bhatinda refinery last
month. Earlier, another private Indian refiner,
Essar, procured an average 85,000 barrels per day
(bpd) of Iranian crude in 2012-'13, though company
sources suggest this is down from an originally
contracted 100,000 bpd.
Due to US
sanctions, its only option to pay for Iranian
crude in dollars is via Turkey's Halkbank until it
arrives at a barter arrangement that could include
investments in Iranian projects.
Emerging energy suppliers The
space left by the decline in Iranian crude imports
is being filled by Iraq, which has emerged as
India's second-largest crude oil supplier in
recent months while Saudi Arabia retains the top
position while Qatar and Kuwait are emerging as
important sources.
In the fiscal year to
March 2012, crude imports from Iraq rose 43% to
24.51 million tonnes, from Saudi Arabia 19% to
32.63 million tonnes, and from Kuwait 54% to 17.67
million tonnes.
With Indian refining
capacity set to increase to 6.23 million barrels a
day by March 2017, oil imports are expected to
grow. In June, Reddy said that up to 100,000
barrels each year of Saudi Arabian crude is
expected to flow in coming years.
Meanwhile Indian refiners have been
scouting other nations to secure energy supplies.
Reliance Industries Ltd has signed an
agreement with Venezuelan state oil firm Petroleos
de Venezuela SA for a 15-year heavy crude oil
supply, with a memorandum of understanding for
further development of Venezuelan heavy-oil fields
with over US$8 billion worth of investments and
$20 billion of investments in petrochemicals and
refining.
India's state-run energy
explorer, Oil and Natural Gas Ltd, or ONGC, was
approached at the India-Russia Joint Working Group
meeting last week by Russian Deputy Energy
Minister Yury Sentyurin to take up a stake in the
Rosneft-operated Madagan 2 field in the northern
part of the Sea of Okhotsk.
If concluded,
this would be the third Russian hydrocarbon outing
for ONGC, which already has a stake in Russia's
Sakhalin-1 oil and gas project in the Pacific, and
owns Imperial Energy oil company in western
Siberia.
Domestic exploration
India also has its own potential
hydrocarbon reserves to exploit. A report by PwC
India, titled "It's our turn now: E&P
Partnership or Energy Security' states, "India
would have increased its GDP by a whopping 6.5% if
import of crude oil were avoided completely. Add
to that the sector would have provided 9.4 million
person years of employment over a period of 20
years. If 50% of domestic requirement is met by
home production, it is likely to generate an
additional value of $47.2 billion."
The
report notes that high prices for crude in
international markets and depreciation of the
rupee have helped to drive up India's crude oil
import bill by 43% in the year to March 2012,
while its crude imports rose only 5% to 171.7
million tonnes from 163.6 million tonnes,
according to an Oil Ministry data.
No
doubt aware of the urgent need to boost domestic
fuel supplies, the government has announced a 10th
round of new exploration and licensing [NELP] to
be held by end of the year, with a more
investment-friendly policy than previously.
"To improve the investment regime, we will
put [in place] a more investor-friendly system,"
Reddy announced. "There have been complaints. We
will try to minimize them. After that we will go
for the 10th NELP round."
Since 1999, when
the first round of NELP was held, 254 blocks have
been awarded to domestic and overseas explorers.
So far 113 oil and gas discoveries have been made
in 38 blocks.
A high-level government
expediting committee recently cleared exploration
for the bulk of 52 blocks, mainly belonging to
ONGC, Reliance Industries, Australian BHP
Billiton, Cairn India, Santos International,
British Gas, BP, Focus Energy, ENI of Italy and
Jubilant Oil and Gas. The oil ministry estimates
that India's energy demand will more than double
by 2035.
Priyanka Bhardwaj is a
New Delhi-based freelance journalist. She can be
reached at priyanka2508@yahoo.co.in.
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