New Delhi: State-owned ONGC Videsh Ltd, the overseas arm of Oil and Natural Gas Corp. Ltd (ONGC), plans to restart negotiations with Iraq for finalizing the contract for oil block 8.
In addition, Iraq has offered three discovered oil blocks in the Middle Furat oilfields to India on a nomination basis.
Iraq has replaced Iran as the second most important source of crude oil supplies to India’s energy basket. India buys 20 million tonnes per annum (mtpa) of crude from Iraq valued at $20 billion (around Rs.1.19 crore). Iraq has a production of three millions barrels per day (bpd).
“They will renegotiate with OVL for the finalization of the contract for block 8,” said petroleum minister M. Veerappa Moily, who led an inter-ministerial delegation to Baghdad for the 17th joint commission meeting on 7-8 July between India and Iraq.
While Iraq has also agreed to consider investment in the 15 mtpa Paradip refinery constructed by Indian Oil Corp. Ltd, the state-owned firm is also interested in participating in a refinery project in Iraq along with setting up a liquefaction facility.
“Iraq committed to meeting the long-term requirement of crude oil of India and was also open to consider more favourable commercial terms, including extending the interest free credit period from 30 to 60 days,” the petroleum ministry said in a statement on Thursday.
The International Energy Agency has projected that oil production from war-ravaged Iraq will reach 6 million bpd by 2020 and 8 million bpd by 2035, making it a key supplier to Asia and earning around $5 trillion in revenue from oil exports by then.
“We expressed our desire for more crude oil since our refining capacity is increasing. They are willing to satisfy our demand,” said Prabhat Kumar, joint secretary, energy security and investment and technology promotion, in India’s ministry of external affairs.
India also plans to set up an urea plant and phosphate fertilizer unit jointly with Iraq in the Al-Qaim/Al-Anbar area to cater to the growing domestic demand for fertilizer. India also plans to import sulphur from Iraq and an issue regarding $2.29 billion of dues from Indian companies was discussed.
The efforts are part of India’s larger strategy to increase its economic engagement with countries in West Asia because it sees them as a key source of energy resources.
“It was also agreed that a formal MoU (memorandum of understanding) on cooperation in the energy sector would be signed between the two sides during the forthcoming visit of the Iraqi Prime Minister to India later this year,” the petroleum ministry added.
India’s dependence on imports is as high as 80% for crude and 25% for natural gas. The country’s energy demand is expected to more than double by 2035, from less than 700 million tonnes of oil equivalent (mtoe) now to around 1,500 mtoe, according to India’s oil ministry.
In a separate development, to rope in anchor investors to share the risks involved in the Turkmenistan-Afghanistan-Pakistan-India (TAPI) project, Turkmenistan has agreed to offer stakes in its upstream sector to sweeten the deal.
The potential anchor investors had made their participation conditional to energy-rich Turkmenistan offering them stakes in its hydrocarbon fields. Turkmenistan does not allow such ownership rights and only offers service contracts and was earlier unrelenting on the issue.
“We have been asking for it,” said Moily, who also visited Ashgabat, Turkmenistan, to participate in the 17th steering committee meeting of the TAPI gas pipeline project.
The Asian Development Bank is the lead partner in the 1,680km pipeline project, dubbed the peace pipeline for bringing together nations that share complex and difficult relationships, and is expected to involve an investment of $9 billion. The pipeline is expected to have a capacity of 90 million standard cubic metres per day (mscmd) of gas from Turkmenistan’s Gunorta Yoloten-Osman fields. Of this, 38 mscmd is planned for India.
Regarding security risks associated with the project, Moily said, “We have packaged the agreement in such a way that the gas will be delivered at our border.” The pipeline, proposed in the early 1990s, has been delayed by political and economic issues. Construction of the project was earlier expected to start in 2012 with commissioning by 2016. The project is now slated to be completed by 2017.
“A positive ambience for the steering committee meeting was created by signing of the gas sales and purchase agreement (GSPA) that had, so far, been pending between Afghanistan and Turkmenistan, thereby completing the explicit commitment of all four countries involved in the project,” the petroleum ministry said in its statement.
“A shortlist of companies will be provided by the Turkmen Party to the Buyers by October/November, 2013 for consideration under competitive solicitation as the potential Consortium Leader for TAPI Limited,” it said.