India's burn rate going up
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Date: Sat, 31 Jul 2004 04:12:16 -0600
Subject: [energyresources] India's burn rate going up
Feeding India's energy hunger
NEW DELHI - ONGC Videsh Ltd (OVL), the overseas-investment arm of India's
state-owned Oil and Natural Gas Corp (ONGC), is furthering its status as
a major player on the global oil scene, so far having invested US$1.9
billion in oil ventures and gas fields in a number of countries.
India's Upper House of Parliament was informed on Tuesday of the
company's growing clout. "To enhance energy security of the country, OVL
is pursuing acquisition of equity oil abroad, as well as acquisition
abroad of oil and gas exploration acreages and producing properties,"
Petroleum Minister Mani Shankar Aiyar reported in a written statement.
OVL has stakes in an oil-producing field in Sudan and a producing gas
field in Vietnam, besides interests in exploration blocks in Russia,
Iraq, Myanmar, Iran, Libya and Sudan.
The company is already extracting 3 million tonnes of equity oil every
year from the 300,000-barrels-per-day Greater Nile Oil Project in Sudan,
where it has invested in a 25% stake valued at $669.1 million.
In Vietnam, of the $228 million investment planned for Block 6.1, OVL has
invested $162 million. Of the $1.74 billion investment planned to take a
20% stake in the Sakhalin-I oil and gas fields in Russia, an investment
of about $1.07 billion has been made until now.
In the Middle East, OVL has invested $1 billion each in Block 8 of Iraq
and a Farshi offshore block in Iran against its commitment of $15 million
and $10.8 million respectively. In A-1 block in offshore Myanmar, where a
4-trillion-to-5-trillion-cubic-foot gas discovery has been made, OVL has
so far invested $7 million out of the $27.5 million committed. On more
exploration, another 12 trillion cubic feet is expected. The company has
also acquired an oil block in Angola where production is set to commence
some time in 2006 and is expected to achieve a peak production of more
than 200,000 barrels of oil per day.
Linkages with other energy companies are in the works as well. OVL is in
talks to acquire Cairn Energy's stake in Bangladesh's Sangu gas field, an
acquisition that will help OVL finally set foot in the gas-rich nation.
ONGC officials have also said the company is in talks with Reliance
Industries to participate jointly in exploration and development projects
abroad, particularly in the United States and Africa.
Meanwhile, this month OVL signed a $194 million contract with the
Sudanese Ministry of Energy and Mining for construction of a
741-kilometer multi-product pipeline, an expenditure energy-deficit India
will be paid back for in crude oil. The 12-inch pipeline will evacuate
gas oil and gasoline from the 50,000-barrels-per-day Khartoum refinery to
Port Sudan. The pipeline throughput is expected to be 826,000 tonnes per
year (about 18,330 barrels per day) in Phase I and 2.54 million tonnes
per year in Phase II. The pipeline is expected to be ready for operation
in 14 months, company officials said, adding that ONGC has awarded the
contract for laying the line to Mumbai-based construction firm Dodsal of
The investments will help meet the needs of this energy-hungry nation of
more than a billion people, with company officials saying that that by
2007, OVL will have an oil equity abroad of at least 15 million tonnes.
India imports 70% of its crude-oil needs and produces only 65 million
cubic meters of gas a day, less than half its daily requirement.
India's oil safari adds fuel to the fire
By Raja M
MUMBAI - On April 20, British firm Cairn Energy declared its third
successive oil strike in India's desert state of Rajasthan, one of the
largest oil finds in the world this year. India, the world's
sixth-largest energy consumer, could do with similar buried treasures.
The country imports 70 percent of its crude oil demands.
As with other large economies, the energy question and hangs over India
like an edgy executioner's ax. The American Department of Energy's Energy
Information Administration (EIA) projects strong economic growth in Asia
doubling world oil prices to $51 a barrel in the next decade. China,
India and other developing countries will see a 91 percent jump in needs
as these countries pursue rapid industrial development, says the EIA.
India faces a shortfall of 300 million tonnes of oil by 2025, according
to estimates based on projections from the Hydrocarbon Vision 2025, a
prime ministerial paper to study India's future oil needs. India's
state-owned Oil and Natural Gas Corporation, ONGC, which owns 30 percent
of the Cairn finds in Rajasthan, produces 77 percent of India's domestic
crude oil. Oil accounts for over 30 percent of India's total energy
With domestic sources filling only 30 percent of demand, oil hunting
abroad has already landed India in dubious waters. Through ONGC Videsh
Limited (OVL), the overseas arm of ONGC, India has cut deals with a who's
who of controversial (we are being polite here) governments: Sudan, Iran,
Iraq, Libya and Myanmar. Besides those deals, India made its largest
ever-overseas investment of US$1.7 billion in Russia's Sakhalin Island,
and has interests in the South China Sea.
This April, India declared plans to buy 50 percent of financially
scandal-ridden Shell's stakes in Angola, a country facing a refugee and
food crisis after 30 years of civil war. The $600 million deal could be
finalized later this year. Given the complexity of oil exploration deals
in trouble spots abroad, such deals rarely receive sufficient public
discussion in India.
OVL, India's largest corporate with a market capitalization of $11.3
billion last fiscal, has nine overseas assets and wants more. India
invested nearly $1 billion in civil war-stricken Sudan, buying the
Canadian company Talisman Energy's 25 percent stake in the Greater Nile
Petroleum Operating Company near the Sudanese capital Khartoum.
India was making a "fateful mistake", warned rebels of the Sudan People's
Liberation Army (SPLA), when the deal was struck in 2002. About 2 million
people have died since civil war broke out in 1983 in Sudan. A report by
Brussels-based think-tank International Crisis Group said that oil
revenues allowed the Sudanese government to purchase more lethal weaponry
and increase its air power. A shaky peace accord, following an oil wealth
sharing agreement with the SPLA, crumbled earlier this April, with the
Sudanese Air Force allegedly using attack helicopters to bomb villages in
Darfur in northwest Sudan. The Sudanese government denied the charge of
ethnic cleansing in its villages. The United Nations, however, says that
over 10,000 people have been killed and approximately 1 million people
displaced, with 95,000 fleeing to neighboring Chad.
India, like Malaysia, has not allowed the question of human rights to
affect its oil business with a government accused of causing such
suffering. Indian petroleum minister Ram Naik blithely expressed, at the
announcement of the deal in 2002, that his priority was to get equity
oil. So never mind the United Nations accusing the Sudanese government of
"widespread atrocities" against its own people. Indian President Abdul
Kalam's visit to Khartoum last October boosted bilateral trade, during
what seemed to be a peace process. But the renewed violence in northwest
Sudan this month went largely unnoticed in India, a glaring omission
considering India had made its second largest ever overseas investment in
"We believe there are significant risks in the Indian government
investing heavily in countries like Sudan, Libya and Iran," says Sundeep
Bhandari, director of Petrodril, a consultant to Cairn. "Returns on these
projects will come after several years, and in some cases we are already
hearing that there will be overrun of capital costs. India may be better
off in buying in the spot markets and importing from sources that are
more cost efficient."
An OVL vice president telephoned this correspondent and ridiculed the
idea that India would be doing better in the spot market (where a
commodity is bought or sold for delivery immediately or in the very near
future). "It's better to be a producer of oil as ONGC is doing, rather
than shopping for oil," he told Asia Times Online, asking not to be
named, elaborating that investing in equity oil helps to tide over
Jephraim Gundzik, president of the California-based world market analysts
Condor Advisers Inc, agreed with the ONGC strategy. "Rather than sourcing
all its needs from the spot market, I think India would be better off
investing in projects overseas similar to China investing in Central
Asia," Gundzik said. "As India's oil demand will accelerate in a few
years, it's very sensible to invest in overseas projects despite the long
Three million tonnes of oil from Sudan reaches India, the senior OVL
official said, and declared that any problems in Sudan are the internal
matter of that country. "Don't write anything against OVL," he urged. "We
are bringing equity oil to India and we are certain that our investments
abroad are safe and secure." OVL aims to get 60 million tonnes of oil a
year from abroad as equity oil by 2025.
To increase domestic sources, ONGC on August 3 last year announced deep
sea project "Sagar Samriddhi" (sagar meaning ocean, samriddhi meaning
self-sufficiency) to hunt for hydrocarbon reserves in the Arabian Sea and
the Bay of Bengal. The $2.6 million-a-day mission hopes to find about 11
billion tonnes of oil. ONGC hopes that if it could produce one-fourth of
these reserves, India would have 1 billion tonnes of oil and oil
equivalent gas over 25 to 30 years.
Other state-owned Indian companies want to expand their overseas roles.
Last week, the Indian Oil Corporation (IOC) declared plans to invest up
to $2 billion for acquiring an overseas exploration company. Unlike OVL,
IOC has been restricted by a governmental norm that needs the Public
Investment Board and the Indian cabinet to approve any investment
exceeding $45.2 million.
An oil ministry official told Reuters that IOC was assessing medium-sized
exploration and production firms in Britain, Canada and Australia - more
credible options than cutting oil deals with military dictators and
despots accused of genocide. As India steps up a gear to quench its oil
thirst, this quest needs much closer public scrutiny, and more debate
than it seems to be getting.
Raja M is an independent writer based in Mumbai, India.
OVL signs contract to construct Sudan pipeline
NEW DELHI - ONGC Videsh Ltd (OVL), the overseas arm of Indian oil major
Oil and Natural Gas Corp (ONGC), has signed a US$194 million contract
with the Sudan government for construction of a 741 kilometer long
"This is the maiden engineering & construction Project of ONGC Group
abroad," a company release said here.
Sudan Pipeline Project envisages laying a 12-inch diameter pipeline from
Khartoum Refinery to Port Sudan for evacuation of petro-products from
Khartoum Refinery, capacity of which is being upgraded by Sudan.
The pipeline system is designed for a throughput of 0.826 million tonnes
per annum in phase I and 2.54 million tonnes per annum in phase II, of
gasoil and gasoline. The project is to be completed in 16 months.
The project will be undertaken by OVL with the design, engineering and
project management support of ONGC's Engineering Services, Mumbai, which
has experience in the construction and maintenance of its own existing
onshore as well as offshore pipeline network of over 10,000 km.
The consortium led by Dodsal Pte, Dubai, has been already selected as the
engineering, procurement and construction contractor.
"Discussions on Rehabilitation and Expansion of the Port Sudan Refinery
in Sudan are at advanced stage. A detailed feasibility report and various
options, keeping in view the local demands and export potential, have
been submitted to the government of Sudan," the release added.
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