Goa summit may clear major project

With less than a week left for the India-Russia bilateral summit at Goa on October 15, coinciding with the BRICS meeting, hectic negotiations are on to open up a new chapter in energy ties between India and Russia. Prime Minister Narendra Modi is understood to have given the green signal to the long pending Russian proposal for an energy bridge between two countries comprising among others the setting up of a gas supply pipeline.

The October summit has assumed special importance for its emphasis on energy cooperation. The Russian government seeks the extensive cooperation of the Indian public and private sector companies for participation in Russian oil fields. In light of western sanctions over Ukraine and the steep fall in oil prices, Russia needs the support of both China and India to maintain economic stability. 

While in the recent months, there have been signs of a pick-up in the Russian economy, the situation is still grim and the Russian government is determined to take the expansion of the country’s oil and gas fields development in association with the other countries which have resources as also expertise. Indian oil companies are cash rich and the ONGC has been dealing with the Russian oil fields for more than a decade. Indian private sector companies like the Reliance and Essar are also highly rated by the Russian companies for collaboration.

The Russian government has announced its privatisation programmes and this offers a big opportunity to the Indian public and private sector firms to collaborate with the Russian companies by purchasing equity stakes in the giant companies. Both the Indian government and big private sector companies have been assessing the potential and taking follow-up action. In view of Russian experience in dealing with the Indian companies and the problems with the European and US companies because of sanctions, President Putin has emphasised on Indian participation and investments in the Russian oil industry as a major component of his bilateral summit strategy.

The ambitious gas pipeline project from Russia to India is being pursued with urgency in view of the energy security of both the countries. Last month, as a part of the preparation for the bilateral summit, India and Russia launched an industry level working group with the participation of both Russian and Indian companies. Indian oil companies are looking at investment options in Russian oil fields in Baltic and Arctic regions which are being opened for foreign participation. Already, the Indian Cabinet has granted approval to a consortium of Indian energy companies to buy stakes in two Russian oilfields for more than US$3 billion, as a part of India’s bid to expand its oil assets abroad.

Indian petroleum ministry has been most active in pursuing the course of Indian collaboration with Russian energy companies. Petroleum Minister Dharmendra Pradhan has been in constant touch with his Russian counterpart and after clearance by the Prime Minister, ONGC last month agreed to buy an additional 11 percent stake in Vankorneft, owner of the Vankor oil and gas fields in Siberia, Rosneft’s second largest by output. Once the transaction is completed, ONGC Videsh, the overseas arm of ONGC, will have a 26 percent stake in JSC Vankorneft. The Russian government wants to make a big success of its oil industry privatisation programme but there are some restrictions. 

Foreign investors are allowed to participate on the condition that they register their subsidiaries in Russia and control over the strategic enterprises will remain with the Russian state. At present, Russia is expanding its relationship with China in the energy sector and India is coming next for collaboration. The Russian expectation is that this privatisation programme will bring one trillion roubles US$ 12.5 billion) into the state coffers within a period of two years. Much will depend on China and India’s participation.

For India, strengthening its energy security is of great significance and it has been an important constituent of her bilateral relationship with Russia. Accordingly, India is keen to secure long-term supplies of hydrocarbons and diversification of imports from Russia through LNG supplies. In the hydrocarbon sector, Indian chamber Confederation of Indian Industry (CII) has assessed that, apart from existing investments in the oil and gas sectors, there is considerable scope for corporate investments in Russia. 

The Indian private sector, according to CII, considers Russia a country of great opportunity and is keen to work with the two governments to develop sector partnerships which will benefit both economies. That way, the Goa summit’s prime agenda of energy collaboration has the full support of both Indian public sector and the private companies.