India, which agreed with Saudi Arabia to hold frequent consultations in energy sector, has announced plans to buy more crude from Saudi Arabia in near future.
This was disclosed by Dharmendra Pradhan, Indian minister of state for petroleum and natural gas, in an exclusive interview with Arab News, at the Conference Palace here.
“India’s import of crude and LPG from Saudi Arabia is going to increase in coming years,” said Pradhan.
“The requirement of crude will increase in India with economic growth and with enhancement of refining capacity,” said the Indian minister following his talks with Ali Al-Naimi, minister of petroleum and mineral resources; and Prince Abdulaziz bin Salman, assistant minister.
These are highlights of the interview:
Kindly give me some specific details about your program in Saudi Arabia, and the talks that you had with your Saudi counterpart and other senior Saudi government officials?
We are here for the second round of ministerial level Saudi-India energy consultations, which is a very important mechanism for bilateral engagement as it provides an opportunity at the highest level to discuss issues of mutual concern in the most important sector of hydrocarbons. The first round of energy consultations was held in New Delhi in 2012. In the joint statement issued during the visit of Crown Prince Salman, deputy prime minister and minister of defense, to New Delhi in February 2014, both sides agreed to explore ways and means to transform the buyer-seller relationship in the energy sector into one of deeper partnership focusing on investment and joint ventures bilaterally and also in third countries. Both sides also agreed to hold further discussions on this during the next meeting of the annual India-Saudi Arabia energy consultations, which is being held now.
Please give me a brief overview of cooperation between India and Saudi Arabia in the oil and gas sector. What is the total oil consumption of India annually, and what about imports from Saudi Arabia?
I met with Ali Al-Naimi, minister of petroleum and mineral resources. I also had bilateral energy consultations with Prince Abdul Aziz bin Salman, assistant minister for petroleum and mineral resources. Saudi Arabia has been a major and reliable supplier of crude oil to India for more than three decades. Saudi Arabia supplied 38.08 MMT crude oil to India during 2013-2014, accounting for 20.12 percent of the total crude oil imports by us, making Saudi Arabia our largest supplier of crude oil. India seeks enhancement of the contracted quantities of crude oil from Saudi Arabia in the years ahead, in view of the significant increase in India’s refining capacity.
Did you propose any long-term strategic energy plan to the Saudi officials that calls for closer energy cooperation, facilitate investment and call for import of refined petroleum rather than crude? If yes, then please provide brief info.
As agreed during the visit of Crown Prince Salman to India in February 2014, both the countries are committed toward taking bilateral relationship in the energy sector to one of deeper partnership focusing on investment and joint ventures bilaterally and also in third countries. This was further discussed in detail during my talks with Al-Naimi and also with Prince Abdulaziz.
Is India inviting Saudi stakeholders to participate in its first Renewable Energy Global Investment Promotion Meet & Expo (REINVEST), which will be inaugurated by Prime Minister Narendra Modi on Feb. 15, 2015, in New Delhi?
We welcome stakeholders from Saudi Arabia to attend this mega event. REINVEST is proposed to be organised on Feb. 15-17 in New Delhi with the intent of providing a platform to the global investment community to connect with stakeholders in India. This event is expected be attended by over 200 global investors from various countries, international financial institutions, bilateral and multilateral financial institutions along with Indian banks, non-banking financial companies (NDFCs), state governments, PSUs concerned, renewable power developers and manufacturers, state renewable energy nodal agencies and other related stakeholders. The main objective of the meeting is to showcase India as an investment destination for renewable energy and to encourage investors for setting up projects and manufacturing facilities of renewable energy equipment and products in India.
Did you propose in any form India's participation in the petroleum and gas sectors in Saudi Arabia, both upstream and downstream, during your talks with Saudi officials? Will you also invite Saudi investors to Indian petroleum and gas-based mega industrial estates while talking to your Saudi counterpart?
Indian public sector oil companies seek opportunities to participate in development of gas blocks in collaboration with Saudi Armaco as well as to participate in the next round of offer of gas blocks. Gas Authority of India Ltd. (GAIL) is keen to participate in natural gas projects in Saudi Arabia as well as explore cooperation in mutual areas of interest along the natural gas value chain. In view of enormous natural gas reserve in Saudi Arabia, Indian Oil Corporation Ltd. (IOCL) is keen to participate jointly with Saudi Arabia in gas based petrochemical projects and downstream polymer and other petrochemical units located either in Saudi or in India. Indian petrochemical market is growing at a rapid pace and the petrochemical products targeted to be manufactured by the collaborative venture can easily be absorbed in the Indian market. IOCL has been in discussion with major Saudi petrochemical company, Saudi Basic Industries Corporation (SABIC). My Ministry has been taking up the issue of seeking Saudi investments in India and 3rd countries through JVs with Indian PSUs. India already offers level playing field in the hydrocarbon sector, including in petrochemicals. There is 100 percent FDI in the entire value chain of hydrocarbon except for setting up of a refinery where an Indian PSU partner with 49 percent equity is required. India has been seeking Saudi investments in the some specific projects the details of which have been handed over to the Saudi side in the past. These are Opal Petrochemical Complex, Gujarat; Petrochemical Complex at Mangalore; IOCL’s LNG project at Ennore; IOCL’s Paradip petrochemical Project and BPCL’s petrochemical project at Kochi.
India, which spent $143 billion to import crude oil last year, plans to diversify its purchases to guard against geopolitical risks in some of the world’s biggest suppliers. Are you planning to reduce or increase oil imports from the Kingdom?
I can categorically state that India’s import of crude and LPG from Saudi Arabia is going to increase in coming years. As you know, we are a rapidly growing economy and are looking forward to a double digit growth. The requirement of crude will increase in India with economic growth and with enhancement of refining capacity. The estimate is that crude requirement is going to double by 2030.
India and Saudi Arabia agreed to set up a $750 million joint fund to facilitate investments. The fund is, however, yet to be created. Don’t you think that such funds will help in strengthening strategic ties by transforming the "buyer-seller" relationship in the oil sector to one of deeper partnership focusing on investments and joint ventures (JVs) in third countries.
Both countries are working on the modalities for establishing Saudi India Investment Fund (SIIF). The creation of fund would be a step toward strengthening our strategic ties and help in transforming our buyer-seller relationship to one of deeper partnership.
Until today, India remains a non-preferred destination for Saudi and Arab investments in all sectors, including oil. The investors say that India's administrative complexities, lack of clear legislation, and rampant corruption at all levels are causing this reluctance on the part of investors. What are your comments please?
India has already become a major investment destination from around the world. There is sizable investment from Saudi Arabia as well. The government is committed to provide a more investor-friendly environment.
Back home in India, you have announced an ambitious plan to expand the natural gas pipeline network. What are the targets for short-term and long-term plans?
The government under the leadership of Prime Minister Narendra Modi has a vision to give a boost to gas-based economies. The plan is to develop a national gas grid by adding additional 15,000 km of gas pipelines to the existing capacity. This will bring economic development to various regions of India, which have been lagging behind in terms of development.
You have also announced to overhaul the oil exploration policy to attract investors and spur energy output. It's deplorable to note that only three out of the 252 blocks given out earlier have come to production stage. What magical measures you intend to take to streamline the sorry state of affairs and to boost investors' confidence?
Increasing domestic production is one of the areas of government’s priority. We are bringing series of reforms in the existing regulations to expedite exploration and production of hydrocarbons in blocks already leased. Last week, government introduced a new progressive gas price formula, which will incentivize production of gas in difficult geologies. Moreover, whenever we go for the new round of bids for exploration and production it will be a most advanced and investor-friendly regime. In the upstream sector, the ministry is looking to introduce a policy, which will allow for exploitation of all hydrocarbons, including conventional oil and natural gas, coal bed methane, shale oil and gas, and tight gas under a single contractual regime. The ministry is looking to improve on the existing contractual regime to enable greater operational flexibility to the E&P operator and minimum micro-management by the government.
The ministry is considering various incentives to be offered to the E&P Operators under the new contractual regime in order to encourage greater investment in the sector.
The Ministry has already initiated reforms in the E&P sector and introduced a policy framework giving extensions and relaxations to enable early monetization of discoveries.
The ministry is in the process of implementing a National Data Repository, which will help E&P operators in understanding the sedimentary basins of India and bidding for prospective blocks. It is being proposed to conduct 2D survey of about 1.5 million sq km of the Indian Sedimentary Basins to add/improve available geo-scientific data. A project has also been initiated to re-assess the existing geo-scientific/survey data of the sedimentary basins of India in order to have a better understanding of the geology of the basins. This information will be made available to prospective E&P operators for bidding for blocks.
What is your policy in terms of maintaining strategic oil reserves? How many storage facilities you are planning to finish during the tenure of your government and what will be their total capacities?
The government is committed to enhance the strategic reserves of crude in India. This is an important area of possible bilateral cooperation as well. We have started working on this project and we have gone ahead with the plan that will eventually help to fill up some storage facilities in the very near future.
In India, what is the thinking behind the recent reforms of fuel pricing. Diesel decontrol looks like a good idea now. What happens when prices shoot up?
The government is fully equipped to deal with such a probable scenario of higher international prices of crude.
Will you be visiting other Saudi cities or countries during this trip? Please share brief information about your itinerary in those cities or countries.
My delegation would visit Saudi Aramco headquarters in Dhahran and will have an interactive meeting with businessmen at the Sharqia Chamber in Dammam. Indian delegation highlighted the Make in India campaign launched by Prime Minister Narendra Modi in September 2014 offering investment opportunities in 25 key manufacturing sectors in India and the government’s thrust on improving business environment in India for investors. The Indian delegation and I have already visited Saudi Basic Industries Corporation (SABIC) and King Abdullah City for Atomic and Renewable Energy (KACARE) and held discussions on the issues of mutual interests.
It is believed that your visit to Saudi Arabia is a kind of first move by a member of the new Modi government to open up communication with Saudi government. What kind of relationship you foresee between the two countries, keeping in view the huge Indian diaspora's presence here?
India and Saudi Arabia enjoy historical cordial and friendly relations reflecting the centuries old economic and socio-cultural ties. In the recent times, the historic visit of Custodian of Two Holy Mosques King Abdullah to India in 2006 imparted a fresh momentum to the bilateral relationship and provided the framework for cooperation in all fields of mutual interest.
The reciprocal visit by the then Indian Prime Minister (Manmohan Singh) to Saudi Arabia in 2010 raised the level of bilateral engagement to ‘Strategic Partnership’ and captured the spirit of enhanced cooperation in political, economic, security and defense realms. Crown Prince Salman, deputy premier and minister of defense, visited India in February 2014. We look forward to further strengthening our bilateral economic, social and cultural ties and work toward transforming our buyer-seller relationship in the energy sector to one of deeper partnership focusing on investment and joint ventures bilaterally and also in third countries as envisioned during the visit of the crown prince to India earlier this year. I have invited Prince Abdulaziz bin Salman with a delegation to visit India in the first quarter of the next year to take forward the fruitful discussion held in Riyadh.
