Quick deliveries top agenda for Indian energy hunters

State-run energy companies on the prowl for foreign assets will focus on projects that are already pumping oil and gas or are about to do so, two people aware of the plans said, after the endless wait for supplies from countries where India has made energy investments in the past prompts a rethink.

Though it is far cheaper to invest in foreign exploration and production (E&P) projects in their early stages, the timeline to production is lengthy, something India cannot afford given its galloping energy needs, the people said on the condition of anonymity.

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"The need for oil and gas for India is now. So, E&P projects with long gestation periods, although needed, are lesser in the radar for the national oil companies. They are now looking for more of near-producing and producing assets," one of the two people said, adding that of late, the focus has been on taking stakes in assets abroad and more such efforts are expected.

Queries sent to the Union ministry of petroleum and natural gas, ONGC Videsh Ltd and Oil India Ltd remained unanswered till press time.

Stake buys

In July, ONGC Videsh Ltd, the overseas investment arm of state-owned Oil and Natural Gas Corp. (ONGC), said it has acquired Norwegian firm Equinor's stake in an Azerbaijan oilfield and an associated pipeline for $60 million.

India's demand for oil and refined products is expected to start declining in a decade or two, even though it may remain higher than the fall in global demand.

S&P Global Commodity Insights projects India’s total petroleum product demand at 7.1 million barrels per day (bpd) by 2035, up almost 2 million bpd from 2023. The International Energy Agency says India, currently the world's third largest oil importer, will become the largest source of global oil demand growth by 2030, while growth in developed economies and China initially slows and then subsequently goes into reverse. India is already working on a plan to estimate the timeline for its peak oil consumption, as reported by Mint on 26 March.

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"It is always a good strategy to go for stakes in producing upstream assets. The Indian oil and gas companies have not had great results in terms of acquiring E&P assets abroad because of geopolitical issues in several countries and competition from other global companies as well including Chinese energy companies to expand their global footprint," said Prashant Vasisht, senior vice-president and co-group head, corporate ratings, ICRA.

Gaining momentum

The focus on acquiring assets and importing oil and gas gains momentum as the government aims to make India a refining hub and also needs to tap the global market before the demand slows. India has an installed capacity of about 254 million tonnes per annum. With the fourth-largest cumulative refining capacity in the world, the government plans to add around 56.6 mtpa of crude oil refining capacity till 2030, by starting new projects as well as expanding existing ones.

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Several E&P bets by state-run firms in Mozambique, Gabon and Myanmar have taken much longer than expected. In August, Mint reported that India’s wait for liquified natural gas (LNG) supplies from a $20 billion Mozambique project has lengthened, with any progress likely only after its presidential elections on 9 October. The long-delayed Rovuma Offshore Area 1 project in which an ONGC Videsh-led Indian consortium has a 30% stake has been beset with difficulties, with the suspension of operations following attacks by Islamic State terrorists in April 2021, after which force majeure was declared.

Production next fiscal

In Gabon, Oil India Ltd now expects to start oil production in the next financial year, following covid-related and regulatory delays. Oil India and Indian Oil Corp. own project with 50% stake each, while the former is the operator.

After Russia's invasion of Ukraine in 2022 and the resultant surge in oil and gas prices, India has deployed a multipronged approach to ensure energy security including looking at more long-term contracts, and now the focus is on acquiring stakes abroad.

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Energy security is key to India’s national security, as the country imports over about 87% of its oil requirements and 55% of its gas. India is particularly vulnerable, as any increase in global prices can affect its import bill, stoke inflation and widen trade deficit.

India's demand for petroleum products including petrol, diesel, liquefied petroleum gas (LPG), aviation turbine fuel (ATF) and naptha among others, is expected to touch a new high of 238.95 million tonnes.