February 13, 2018
The UAE is India’s fifth largest import source for fuel, accounting for about 6 per cent of total national crude imports, and the third largest source of LPG and petroleum products.
An Indian group led by ONGC VIdesh has acquired a 10 per cent stake in the Lower Zakum offshore oil field in the UAE for a period 40 years starting 2018 for proceeds of US$600 million.
An agreement has been signed between the state-run Indian Strategic Petroleum Reserves Ltd (ISPRL) and ADNOC to fill up a strategic petroleum reserve cavern in Mangalore, Karnataka.
This will be the first Indian upstream investment in a producing asset in the Gulf region and in West Asia; the UAE will be the first country to participate in India’s fuel reserves programme.
India and the United Arab Emirates (UAE) have entered into new agreements to bolsters bilateral trade and investment in energy and resources, according to a statement by Shri Dharmendra Pradhan, India’s Minister of Petroleum and Natural gas on February 13th. The new deals come as part of Prime Minister Shri Narendra Modi’s state visit to the UAE over February 10-11 at the invitation of the President of UAE, Sheikh Khalifa bin Zayed Al Nahyan. The UAE is one of India’s largest suppliers of crude oil, liquefied natural gas (LNG) and liquefied petroleum gas (LPG). The Arab state is the fifth largest import source and accounts for about 6 per cent of India’s total crude imports. It is also the third largest source of LPG and petroleum, oil and lubricants (POL).
The two leading agreements signed during PM Modi’s trip include – (I) A concession agreement between an Indian consortium and the Abu Dhabi National Oil Company (ADNOC) for a 10 per cent stake in the Lower Zakum offshore oil field for a period 40 years starting 2018 for proceeds of US$600 million; (II) An agreement between the state-run Indian Strategic Petroleum Reserves Ltd (ISPRL) and ADNOC to fill up a strategic petroleum reserve cavern in Mangalore, Karnataka. The consortium gaining access to Lower Zakum, includes ONGC Videsh Ltd, Indian Oil Corp Ltd and Bharat PetroResources Limited (BPRL). This is the first time that Indian oil and gas companies have been awarded a stake in the development of Abu Dhabi’s hydrocarbon resources.
This will be the first Indian upstream investment in a producing asset in the Gulf region and in West Asia. From a current production of 400,000 barrels/day, the production at Lower Zakum will peak at 450,000 barrels/day by 2025. Indian share of oil will be 10 per cent, or about 2.2 million tonnes/annum at peak production. Average share for India will be 1.75 million tonnes/annum for next 40 years. Meanwhile, ADNOC will invest about US$400 million by storing crude oil in one ISPRL underground rock cavern in Mangalore that has capacity of 5.9 million barrels for a period of 3 years with automatic extension of another four years. The UAE will be the first country which will participate in India’s Strategic Petroleum Reserves Programme.
PM Modi said that the offshore concession deal has taken India-UAE relationship to a new phase. The countries have progressed from a buyer-seller relationship to an era of mutual investments in the oil and gas sector. Strengthening of relationship with the UAE comes at a time when India is experiencing vast economic growth and along with it a steep rise in energy demand. India is already the third largest consumer of energy in the world. It is the third largest importer of oil and the fourth largest importer of natural gas. Propelled by an economy that is estimated to grow to more than five-times its current size by 2040, Indian energy demand is forecast by the International Energy Agency (IEA) to grow by more than any other country during the period.