Sunday, June 12, 2005

India Petroleum Update

After Encana in Equador, its Pogo in Thailand, where India's ONGC Videsh Ltd is pitted against a Chinese consortium for buying oil assets. On stake in Thailand are assets worth $700 million.

IOC meanwhile has bid for controlling stake of Turkey's biggest refiner Tupras. While it does not have great mineral assets, Tupras falls nicely into the Indian PSU's strategy by allowing IOC to use its transportation and logistics infrastructure for getting oil and gas from countries in the region that it has tie-ups with.

Aiyar in Pak

On Oil minister Mani Shakar Aiyar's recent trip to that country, Pakistan was offered discounted diesel, an offer that was later enhanced to include other petrochemicals like those used to make polyester fibre and for detergents. On its part Pakistan agreed to review the diesel import policy, "when it comes up for review next". (Ironically on the Eastern border, illegal Bangladeshi diesel imports are causing IOC loss of sleep).

While Musharraf is said to have given his nod for the Indo-Iran pipeline, Pakistani papers were rife with reports of how the US was pressurising Pakistan to not go ahead with it.

Signing the ECT

Considering that 18 agreements would have to be signed for just the Indo-Iran pipeline, the benefits of signing the Energy Charter Treaty (ECT) came into focus again.

Domestic Exploration

Oil India Ltd announced three new discoveries in Assam, their main domain for exploration. While figures related to reserves are not available, the company is said to be "upbeat" about the discoveries.

Apparently of the 48 companies bidding for the 20 blocks on offer under NELP-V, Reliance and ONGC put in the most aggressive bids, and might corner all the 20 blocks with ONGC likely to get at least 10 blocks.


After organizing a buyer-seller summit between Asian buyers and Middle East producers, earlier this year, Oil Minister Aiyar is now preparing to host a meeting between Asian buyers and oil producers from the Caspian, Central Asian and Russian regions. This plays in nicely with India's new efforts to reach out for Caspian oil and gas. An Israeli pipeline could play a vital part in this strategy.

The fastest growing category of merchandise export from India was petroleum products which grew at over 90% last year. An avid fan of the EOU refinery concept Aiyar, reiterated that he would push for Indian refining capacity to promote exports. There are reasons though why Aiyar's "export blueprint" might not be such a hot idea after all.

Refinery margins are currently as high as $7-8 a barrel just because there is a huge shortage of refining capacity in the US, China and other nations. However, when this shortfall is rectified, as it will likely happen soon, the margins should fall to just $2.50. The strategy will feel the strain then. Traditionally too, refineries are generally closer to the markets, because transporting crude is much cheaper, whether by tanker or by pipeline. Otherwise only the oil producing countries would have had all the refineries in the world.