Bhel deal to deepen India’s commercial ties with Iraq3 min read . Updated: 12 May 2011, 12:20 AM IST
Bhel deal to deepen India’s commercial ties with Iraq
New Delhi: Bharat Heavy Electricals Ltd (Bhel) signed a provisional ₹ 1,500 crore deal with the government of Iraq earlier this month, the latest of several efforts by state-owned companies to engage with oil and gas-rich countries in West Asia that have well over half of the world’s proven reserves of crude oil and a little over a third of global gas reserves.
The move is 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 for the Indian economy. The Bhel deal comes soon after the government took a strategic decision to revive energy ties with Iran. And it comes soon after the country decided to appoint an ambassador in Iraq after a gap of eight years. From Saudi Arabia to Iran to Qatar, India’s state-owned energy and equipment companies have struck several deals over the past few years. And it’s about time, said a government official.
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“We have plans for many refineries. Where is all this crude going to come from? Our traditional sources are Iran, Saudi Arabia, Iraq, Kuwait, the United Arab Emirates. Iraq is one of the countries we are looking at part of a strategy for further diversifying our energy sources. We are importing 10 billion dollars worth of oil from Iraq. These supplies have come despite uncertainties...it is a place of opportunities. We should have already have been big players there," added this official who is aware of India’s plans in the region and asked not to be identified.
The latest deal will see India’s largest power generation equipment manufacturer supply 10 gas turbines of 126 megawatts (MW) each to Iraq.
“The MoU (memorandum of understanding) has been signed recently," said B.P. Rao, chairman and managing director of Bhel, confirming the order, the largest for Bhel thus far in Iraq.
Though Iraq remains a flashpoint in West Asia with the US troops still battling insurgents, Bhel is keen on reconstruction contracts in one of the world’s largest oil producing nations. West Asia, Africa and Central Asia are the primary international markets for Bhel.
Rajab Hussain, commercial counsellor at the Iraq embassy in New Delhi, confirmed the order.
While the US has a huge influence in Iraq after it invaded the oil-rich country in 2003 and dislodged Saddam Hussain’s regime, India too has been working to re-engage the country and several others in the region.
“India will play a major role in Iraq’s power sector. The order size can also increase depending upon the scope of the work. In the case of it being an EPC (engineering, procurement and construction) order, its value may even go up to ₹ 4,000 crore," said a Bhel executive who declined to be identified.
India’s engagement in the region is driven by its energy security concerns, given that it imports 80% of its fuel. The consumption of petroleum products has grown at a compounded annual growth rate of around 4% in the last few years. By 2030, the country will import 90% of the fuel it needs.
Signalling the government’s thinking, finance minister Pranab Mukherjee, who has previously served as foreign minister, said in a speech to officials of Indian Foreign Service on Wednesday: “While anchoring our foreign policy primarily in the promotion of our national self-interest, we need to engage with our partners in a manner that we create strong mutual stakes in each other’s development process, in general, and economies in particular."
Arguing similarly, Ronen Sen, India’s former ambassador to the US, said the deal was a “welcome development". “Iraq has been a traditional supplier of oil. We have high stakes in Iraq and we should stay engaged there not only for economic, but also for our energy security. Diversification of supply sources is a very welcome development," he added.
Bhel has undertaken other contracts in Iraq such as the 250MW Rumailla project, which involved the supply, supervision, engineering and construction of gas turbines, generators and auxiliaries as part of the United Nations oil-for-food programme. The company supplied a gas turbine-based power plant to the 500MW Sulaymaniyah project in Kurdistan and gas turbines for power projects in Baiji and Rumaila as well. It is also supplying a 42MW gas turbine to UK-based Power Engineers Contracting Co., which is building the Nasiryah power plant in the country.
Graphic Ahmed Raza Khan/Mint