Policy
IOC May Acquire BPCL Refineries If Privatisation Works Out As Planned
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India Makes Progress In Diversifying Crude Import Sources
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Indian Oil PSUs Find Russia’s Vostok Oil Project Tantalizing
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India To Remain Invested In Vietnam’s Oil Sector
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Consistent Rise In Petrol Consumption May Create Problem For Refineries
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Regulation
Demand For LNG Depends More On Price Than Domestic Production
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First FSRU Becomes The Second, A Total Of Two Now
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India To Open Pumps To Supply Ethanol Blended Petrol?
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A Sensible Strategy To Promote Use of Natural Gas In North East
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Alternative Energy / Fuel
NTPC Renewable Energy Inks Pact To Sell Power From 150 Mw Solar Project
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New Projects
IOC To Use Drones To Check Fuel Thefts From Pipelines
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Brahmapuram, Nallalam Projects To Switch To LNG
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Mangala Field Celebrates 12 Years Of Prolific Production
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Market Watch
IOC Launches Branded Gasoline Fuels With Higher Octane Ratings
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Companies
Alphageo (India) Limited
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Wabag Secures Rs 840 Mn Order In Malaysia For Petronas Refinery
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Adani Green Energy Raises $ 750 Mn
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Press Release [FREE Access]
Petro Intelligence » India’s Business Ties With Saudi Arabia, UAE Call For A New Dimension

By R. Sasankan

Saudi Arabia and the United Arab Emirates have always shown tepid interest in India. In my fairly long stint as a journalist, I cannot recall ever coming across a petroleum expert who saw the possibility of Saudi Arabia funnelling a great deal of money into Indian ventures. India was no more than a blip in its radar and was generally regarded as a very average buyer of the crudes they produced. The UAE was equally disdainful of the investment opportunities that India presented and its relationship with this country rested purely on traditional commerce while viewing it as a steady source of cheap labour.

But things changed suddenly three years ago.

Back then, www.indianoilandgas.com came out with an exclusive report that Aramco had quietly commissioned a study on India’s petroleum market, more particularly petroleum retailing. The rest, as they say, is history. During these three years, Saudi Arabia and the UAE have dominated the discourse in the media on foreign investment.

What changed their perceptions about India? Their new-found interest in India had a lot to do with the anticipated surge in the country's demand for crude oil and natural gas with the estimates put at 2.5 times and 4.5 times respectively. This was one of the main reasons why they committed to jointly pick up 50 per cent stake in the proposed 60 MMTPA mega refinery in the state of Maharashtra -- and which now qualifies as a landmark decision. The Covid-19 pandemic wrecked so many petroleum projects the world over but not the mega refinery project. Saudi Crown Prince Mohammad bin Salman has already announced plans to invest $ 100 billion in the Indian market over the next two years. Saudi Aramco is keen to sell 1 per cent of its stake to Mukesh Ambani-controlled Reliance Industries Ltd (RIL) and, in turn, pick up 20 per cent stake in RIL’s oil-to-chemicals (O2C) project. Aramco’s chairman has already joined RIL's board as an independent director. RIL invests $ 2 billion in ADNOC's petrochem project in the UAE.

Clearly, India's business ties with Saudi Arabia and the UAE are poised to make a gigantic leap. I see a new dimension to this important relationship that will change the fortunes for the two Gulf nations and oil- starved India.

The petroleum industry can be broadly be classified into three segments: upstream, mid stream and downstream. The flurry of investment agreements that the three nations have signed with each other have been confined to the downstream sector. But India really needs something else. It is already an exporter of petroleum products, arguably the largest in Asia. These products, both for export and domestic consumption, are made from imported crude which accounts for 84 per cent of the total crude processed. Put differently, India imports roughly 41-42% of its primary energy consumption which could rise to the 60-62%, depending on how well India uses its biomass and renewable potential.

India’s sedimentary basins are not rich in hydrocarbon resources. Close to 40 years ago, Oil and Natural Gas Corporation floated a fully-owned overseas subsidiary called ONGC Videsh Ltd (OVL) which was mandated to acquire oil and gas assets in the quest for energy security. There are quite a few state-owned oil entities that are now actively acquiring such assets. Despite all the initial misgivings in some quarters, OVL's performance has been pretty impressive. In fact, it has performed better than the domestic oil PSUs. But it was never given the sort of financial heft it needed to exploit the myriad opportunities that arose because of the distress sale of assets that was taking place in the international market. The government was intensely concerned with its own fiscal problems and, therefore, prompted ONGC to buy out its stake in the oil marketing company, HPCL. And now, ONGC is starved of funds to acquire new assets.

Russia is the only country where Indian PSUs have a significant investment in a couple of projects. The PSUs actively engaged in the petroleum sector overseas, thus, present an appalling picture of too many players with very little resources involved in too many projects. It is high time that the government takes a fresh look at the overseas operations of Indian PSUs. One way out of this mess would be to merge all these investments by creating to a corporate heavyweight with a large pool of resources that could then command some respect in the international market? Quite a few of these investments are in geopolitically dangerous places. Together, they produced a total of 21.9 MMTOE in FY 2020-21. This is too small for a country of India’s size and energy demands.

It will not be easy to acquire oil assets in countries like Saudi Arabia and the UAE. Sometime ago, the UAE did part with a 10 per cent stake in a producing field to Indian PSUs and it offered a couple of exploration acreages as well. It was a modest offer but a significant, positive gesture by that country. Why can’t Saudi and UAE, the two leading oil producers, be persuaded to involve India in a significant way in their upstream and midstream activities?

Take a look at the gas sector. Saudi Arabia is not a major player in gas and is currently placed sixth in terms of gas reserves after Russia, Iran, Qatar, Turkmenistan and the US. Importantly, Saudi Arabia seeks to use gas internally and is not planning to be a major LNG player. The Saudis will definitely go in for LNG production. Once it starts to exploit its gas reserves, there will be scope to accommodate India in the project. But the back room boys need to start working now and India needs to mount a charm offensive in order to convince Riyadh that such an arrangement will yield mutual benefits. After all, India needs a lot more gas than oil at this stage of its development.

According to an acknowledged, energy expert, India should aggressively look for quid pro quo deals by tying overseas interest in investment opportunities in this country with the prospects for the acquisition of upstream hydrocarbon assets in those nations.

“This is what China has done. China’s current primary energy consumption is four times that of India. We should learn from China that you do not become an upper middle income country with a per capita energy consumption below 30% of the global average,” the expert added.

The idea is to start thinking out of the box - and there is no better time to do this than now.



To download the latest issue 'Volume 28 Issue 11 - September 10, 2021', click here
Petro Intelligence [FREE Access]
BPCL Selloff: Foreign Equity Players May Be Fronting For The Big Boys
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When Competition Comes A Cropper
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No Logic In Expanding Crude Storage Capacity
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India’s Business Ties With Saudi Arabia, UAE Call For A New Dimension
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Foreign Investment
Petronas To Expand Joint Venture With IndianOil
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Nayara Energy Ties Up Rs 40 Billion For Foray Into Petrochemical Biz
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Cairn Energy Proposes Capital Return Of US$ 700mn
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Overseas Investment
OVL, IOC Sign Pact With Russia’s Gazprom
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ONGC Videsh Relinquishes Israeli Oil Block
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Gas Scene
Sector-wise Consumption Of Natural Gas in July 2021
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Domestic Natural Gas Scene In July 2021
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Natural Gas Price Trends: Global And Domestic
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Sectoral Consumption of Natural Gas In June 2021
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Domestic Natural Gas Scene: June 2021
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Sector-Wise, Month-Wise Demand & Consumption of Natural Gas
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Growth In Import Dependency Of Natural Gas Halted
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Natural Gas Price: Global and Domestic
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Sector-Wise Consumption Of Natural Gas In May 2021
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Natural Gas Price Trends : Global And Domestic
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Sector-wise Consumption Of R-LNG, Domestic Gas Since FY 2018-19
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Natural Gas: India’s Increasing Import Dependency
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CGD Becomes An Attractive Business In India
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Data Section
Monthly Upstream Data
Monthly Downstream Data
Historical database
Data Archives
Special Database
Quantity And Value Of Indian Crude Oil Imports (FY 2017-18 to FY 2020-21)
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Specific Energy Consumption Of PSU Refineries
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Weightage of crude oil, natural gas and petroleum products in Wholesale Price Index (WPI)
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Share Of Imported Crude Drops In Oil Processing
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High Sulphur & Low Sulphur crude oil processing
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Profit After Tax (PAT) Of Oil Companies
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India’s Rig Count Marginally Up In July
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The Rise And Fall Of India’s Petroleum Products Export
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Global Oil Demand Is Poised To Rise
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Global Rig Count Up
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Indian crude oil basket price in August 2021
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Contribution of Petroleum Sector to Union and State Exchequers
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Retail Selling Price of LPG, Kerosene in India & Neighbouring Countries
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Petroleum Products: Industry Consumption Trend Analysis
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Petroleum Products Import Down, Exports Up In July 2021
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India’s Crude Oil Import Up in July, OPEC’s Share Edges Up
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Share Of Domestic Crude Shrinks, High Sulphur Crude Up In July
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Product-Wise Consumption In July 2021
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Passenger Vehicles ,Two Wheelers Register Impressive Sales
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PSU Oil Marketing Companies, Shell Expand Marketing Infrastructure During Covid-19.
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Self-Sufficiency In Petroleum Products
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Story Behind Downgrading of India’s GDP
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ONGC’s Short Term Action Plan
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Indian Drilling Rig Count Up
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Recovering Economic Activity To Boost World Oil Demand, But Problem Areas Persist
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Impressive Growth In Passenger Vehicles,2 Wheelers
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Global Rig Count Up
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Prices In Indian Basket Of Crude In July 2021
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Capital Expenditure of PSU Oil Companies Moves At A Fast Pace
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Industry Consumption Trend Analysis
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Petroleum Products: Marginal Increase in Import, Big Jump in Exports In June 2021
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Tenders [FREE Access]
Cairn India
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