Saturday, April 23, 2005

India Petroleum Update

The Venezuelan Angle

ONGC is in talks with Venezuela's state oil company PDVSA for a 49% stake in an oil field that contains about 1 billion barrels of recoverable light crude reserves. ONGC will also be bidding for offshore natural gas licenses for six blocks.

PDVSA will partner Oil India Ltd on a pilot heavy oil exploration project in Rajasthan. Venezuela has by far the biggest reserves of super-heavy crude in the world, and an increase in acceptability of the stuff in refineries around the world will open up a much bigger market for Venezuelan crude.

Domestic Sources

Cairn Energy meanwhile has upgraded the estimated output from its Rajasthan oil discoveries to 120k to 150k barrels of oil a day, from 80-100k previously. Cairn has three oil fields in Rajasthan - Mangala (the biggest with an estimated reserve of 1.1 bn barrel in place), Bhagyam and Aishwarya. Development costs are expected to be around $3-$3.5 per barrel, which is quite low.

ONGC is trying out new technologies to ensure energy supplies from its oil fields in Assam.

The annual figures are officially out. And they again highlight the importance of having to pursue oil security abroad. India's domestic crude oil production increased for the second year in succession - in two years the growth has been a stupendous 3%. The oil import bill on the other hand has grown by just 32% in the first 11 months of 2004-05.

The Pipeline Saga...

India is getting tough with Bangladesh on the gas pipeline from Burma. It may be recalled that the initial tri-partite agreement was signed by the oil ministry, where Bangladesh made demands of transit rights to Nepal and Bhutan. The actual ministry that could make such promises is the ministry of external affairs. The official stand now is that, "an assurance on power supply from Bhutan and Nepal to Bangladesh could not be made part of the trilateral MoU since it concerned two other countries which were not party to the document".

Oil Minister Mani Shanker Aiyar, declared that the Turkmenistan-Afghanistan-Pakistan pipeline would be discussed between Indian and Pakistani ministers next month. Aiyar would like to suggest extensions to the proposed pipeline to link Uzbekistan in the north, and the proposed Indo-Iran pipeline in the south.

Still on the topic of pipelines, India has declared intent to become part of the Energy Charter Treaty. Being a part of this treaty would obviate the need for separate multilateral agreements for various pipeline projects. This would help because India is working with Burma, Bangladesh, Pakistan, Iran, Turkmenistan and Uzbekistan on the three proposed pipeline projects. Think of all the paper and trees we would save!

The Hinduja Connection

After Reliance and Videocon, the Hindujas are becoming the latest private Indian business house to enter the Oil Great Game for India. Last week they took a small 51 per cent stake in a small Chinese company. But they also have huge investments lined up in Qatar. I am looking for more details on these and hope to do a separate post on this soon.

The Black Gold's Curse

To wind up, an article titled, The Black Gold's Curse, from one of the original architects of the Indo-Iran pipeline project.