Thursday, March 10, 2005

India Petroleum Update

The Russian frontier
Despite all the hoopla about India being made big offers in Russia, is appears that all of these are contingent on one event scheduled for September-October: the passing of the Russian Sub-Soil Mineral Rights law, which gives the Russian government ownership over all natural resources. TOI reports that the Rosneft-Gazprom merger removes the only other big bump in the relationship. India is looking at sourcing about 1 million barrels a day from Russia, over the next 5-7 years, by when that would be 20% of India's requirement. Interestingly a lot of it would be via the oil equity route.

The happenning ONGC!
Meanwhile, ONGC tastes success off the Andhra Coast, in Egypt, in Nigeria and has been offered an oilfield in Venezuela, in what could mark, "India's foray into the Latin American hydrocarbon sector". ONGC plans to process the Venezuelan crude in MRPL, a stake in which was offered to a Venezuelan company in return. To bring home all the oil and gas from its several properties overseas, ONGC is going to buy a very large crude carrier (VLCC) soon. This would be India's sixth VLCC since 2003, when India had none.

Reliance on the prowl too
Reliance Industries was awarded the International Refiner of the year 2004 award by Hart's World Refining magazine. On the exploration side, Reliance does not want to be left far behind ONGC either. They are in talks with countries in West Africa (Nigeria, Chad, Angola, Ghana, Cameroon, Congo and Gabon), in Latin America (Venezuela, Mexico and Brazil) and in the Middle East (Iran, Saudi Arabia and Qatar). They would be helped by the fact that their crack team for the prowls is led by Atul Chandra, who at ONGC Videsh Ltd (OVL) oversaw the Sakhalin and Sudan deals for OVL.

Restructuring options
At recent presentations to the 'synergy for energy' committe, GAIL argued for an, "integrated national gas behemoth", while on a different note IOC argued for three integrated oil and gas companies, led by IOC, BPCL and ONGC, where all three had a presence in upstream, downstream and retail.

NELP-V lures Talisman and Shell
Talisman, the $14 billion Canadian oil giant, which sold ONGC the 25% it now holds in Sudan's Greater Nile Petroleum Operating Company, is planning an India foray. "The company plans to participate in the bidding for oil and gas blocks offered under the fifth round of the New Exploration and Licensing Policy." Shell is coming back too.

Aiyar this week
EOU refineries is the latest salvo being pushed by Aiyar to reduce the forex outflow because of India's dependence on foreign crude. The idea is to set up huge export-oriented refining capacities near ports to eventually make India an net petroleum product exporting country. Demand remains huge in China, Japan and Korea.

Moot Point: Aiyar keeps saying that India has reserves of 225 billion barrels of oil or oil equivalent gas. Assuming that 5 years from now India would need 5 million barrels a day, and assuming that only 25% of the reserves are recoverable, that means we have enough for (225,000 * 0.25) / (5 * 365) = 30 years. This is if we start sourcing our entire requirements from local sources. Even if we import just 50% of our requirements then on (as against the 85% Aiyar predicts), we will still have enough for 60 years. Obviously that is not the case. So what have I got wrong here?