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Press Release [FREE Access]
Petro Intelligence Ľ India: Going From A Pawn To A King On The Oil Chessboard

by R. Sasankan

Vladimir PutinThe Gulf nations are scrambling to grab a slice of India’s lucrative oil and gas market. The latest to join the frenetic race is Kuwait, following in the wake of the United Arab Emirates (UAE) and Saudi Arabia. Kuwait should never have been cast in the role of a laggard; after all it was one of the early birds and had signed a Memorandum of Understanding (MoU) with Indian Oil Corporation – India’s largest state-owned refining and marketing company -- way back in the 1990s when it offered to pick up a 26 per cent stake in the 15 million metric tonne per annum (MMTPA) refinery proposed at Paradip on the east coast in the state of Orissa.

But Kuwait’s initial interest in India evaporated after the MoU collapsed and the project languished for more than a decade before IOC revived it after scrapping plans for the petrochemical unit. Paradip Refinery was commissioned only a year ago. Obviously, both sides must have wrangled over the terms of investment. But those details have never been disclosed. Kuwait Petroleum Corporation (KPC), which signed the MoU, cannot be blamed for its diminished enthusiasm for investment in India. After all, back in the 1990s, India wasn’t recognised as a top-notch investment destination. Ever since the oil boom, the oil-rich Middle East nations have always preferred to park their funds in the West. They could not obviously imagine that India would become the world’s third biggest importer of crude and its economy would emerge into the fastest-growing in the world.

Mohammad Bin SalmanIn contrast, the UAE leadership has shown sharper reflexes by deciding to offer India an equity stake in a major producing field. The traditionally conservative Saudi Arabia, which has been looking to pick up an equity stake in an existing refinery, surprised the oil industry when it opted for a 50 per cent stake in the proposed 60 million tonne refinery that the country’s three oil PSUs have jointly decided to establish. Kuwait is now playing catch up. It does not want to be left behind and has started exploring opportunities to invest in an existing Indian refinery. Kuwait lost the first mover advantage but it is better to be late than never.

Readers may wonder why I picked this subject for a column. Clearly, there is something more than that meets the eye. In the Middle East, the UAE and Kuwait are extremely friendly with Saudi Arabia and accepts its leadership without demur. The Saudi overture in India has only piqued their interest in the region. But then that might be a very simplistic explanation given the various undercurrents that are at play.

Mohammed Bin Zayed Al NahyanThere is a battle brewing among various oil producers around the world to capture a share of India’s growing market. The Gulf brigade – which has held a virtual hammerlock on India’s energy imports – was caught completely by surprise when Vladimir Putin’s Russia wrested the 20 million tonne per annum Essar Oil’s refinery on the West Coast. Saudi Aramco tried to muscle into the game with a counteroffer but Putin intervened personally to ensure that Russia’s state-owned Rosneft bagged the deal. The advantage of Essar Refinery is that its capacity can be doubled which is precisely what Rosneft is now planning to do. It also has got close to 4,000 retail outlets. Rosneft is also planning a petrochemical unit at the same location.

Both geographically and politically, Russia is very close to Iran. The Saudi-led oil rich countries have been close allies of the US. The American leadership has been contemplating fresh sanctions against Russia and Iran. Saudi Arabia and Iran are bitter rivals in the Middle East. It is in the interest of the Saudi-led Middle East countries to see that Iran and its friend, Russia, do not make further inroads into the huge Indian market. Experts do not believe that Saudi and Kuwaiti interest in investing in India are discrete and isolated instances. India, they say, is moving closer to the US bloc, serving their geopolitical interests.

Bakhit Al-RashidiMeanwhile, Russia is laying a gas pipeline to Pakistan from Iran to sell its share of gas that it gets from Iran. (Russia had helped Iran out of a sticky situation after the West imposed debilitating sanctions against the Ayatollah Khamenei regime. Russia was paid in oil and gas which it is now trying to market).There is every possibility that this gas pipeline will enter India at a later stage, providing a conduit for Iran gas as well. Iran desperately needs the Indian market to peddle its gas. But this raises a big question: Will Pakistan be able to defy the US if asked to pull out of the gas pipeline project? Pakistan is now closer to China than to the US. However, the US still wields enough clout which can be used to destabilise any Pakistani leadership which goes against its interests. Pakistan’s growing closeness to China may also scuttle the possibility of Iran gas entering the Indian market, even at a later stage.

In fact, it was India’s reluctance to join the proposed Iran-Pakistan-India (IPI) gas pipeline that strained India’s relations with Iran. Iran firmly believes that India acted under US pressure and it must be said that there is considerable truth in that perception. India, which sought and got the US support for its civil nuclear deal during the tenure of George Bush, could not have acted in a manner that would compromise the interests of the US, which has been totally opposed to any such commercial deal with Iran. Equations in international relations are dictated by self-interest.

Iran lacks the flexibility to adjust to harsh realities. It has annoyed India on quite a few issues, especially in the development of Farzad B gas field which was discovered by India’s state-owned enterprises. In the emerging scenario, the Saudi-led Middle Eastern countries which are close to the US are making a determined bid to enhance their presence in the Indian market while Iran, which once enjoyed robust trade relations with this country, is gradually becoming distanced from India.

Kuwait’s presence in the Indian refinery sector will certainly give a further boost to the country’s petroleum sector. Its investment will not be as large as that of Saudi Arabia. But it will matter a great deal as Kuwait has traditionally been a major supplier of crude to India. With so many big players in the queue to enter its market, India has burnished its image as an attractive investment destination. Image matters because it minimises the scope for wrangling. Oil producers are facing the biggest threat to their business from electric vehicles and solar energy. They desperately need safer markets. India is reckoned to be the best bet because of its large appetite for crude oil and gas and the expectation that it will be slow to embrace the razzle-dazzle concept of electric automobiles.

 



To download the latest issue 'Volume 25 Issue 19 - January 10, 2019', click here
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Natural Gas In Indiaís Energy Basket
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Data Section
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Monthly Downstream Data
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Special Database
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Major End use of petroleum products in India
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Fuel & Loss In Indian Refineries: An Update
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Imported Crude & Domestic Crude Oil Processing
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