Indian stake in russian oilfields

The latest clinching of the deals by the Indian oil companies for purchasing stakes in the major Russian oilfields, is a major step for import dependent India in strengthening its energy security taking advantage of the present lower level of crude oil prices in the global market and the earnestness of Russia to expand its relations with India in the energy sector in view of the country being faced with western sanctions for its intervention in Ukraine. Russia has for long acted as a strategic partner for India in the oil sector and the then Soviet Union helped the Indian government in setting up the oil exploration agency the Oil and Natural Gas Corporation (ONGC) in 1956. In fact, the indigenous base of India’s oil industry was built with massive assistance of the Soviet regime.

After the fall of the Soviet regime in 1991, there was a setback to the oil collaboration efforts but in the last ten years, during Vladimir Putin’s regime, the focus has again shifted to close collaboration in the energy sector between the two countries since this has been found beneficial for the energy security of both India and Russia. As regards the Russian Federation, the latest global developments have forced the Putin government to lower its dependence of the oil and gas industry on the west and the Russian oil companies are seeking new reliable partners and investors mainly focusing on China and India. The Russian oil giant Rosneft is exploring all possibilities for tieing up with the Chinese and Indian companies to expand the areas of collaboration in oil and gas. The latest deals worth $ 4 billion between Indian companies and the Russian company, is a part of that Russian strategy to delink its ties from the western companies and focus on ties with the tested partners.

China is taking full advantage of this new Russian policy in the energy sector. Chinese companies have started entering into all of the major Russian regional oil and gas projects taking benefits from the sanctions hit Russian economy. Chinese companies are most active in the oil rich areas of the Russian Federation and they are investing in a big way to strengthen their energy position by acquiring maximum equity stakes in the Russian oil fields where the Putin government is seeking foreign investment. India is taking some advantage of this situation but still compared to China, the efforts are not adequate and India has to move fast to catch up with China since the Russian agencies have confidence in the Indian experience and expertise and they are really interested in having India as partners in many of the new oilfields.

In fact sources say that western sanctions against Russia provide a big opportunity to India to give a major boost to its oil assets overseas and Indian oil and gas companies, which are flush with funds, can get footholds in inaccessible projects in Russia which will earn for them big dividends in terms of massive oil production after development. Experts point out that India can have access to the Arctic Ocean’s huge oil and gas reserves by supporting Russian claims to the 1250 mile underwater Lomonosov ridge in the United Nations Commission on Limitation of Continental Shelf and other international organisations. Indian scientists are already working in the Arctic projects and if India gets an opportunity in participating in Arctic Ocean oil and gas deposits with its huge potential, that will be a major gain for the oil starved Indian Government. India will be able to give a new dimension to its long term energy security policy through participation in Arctic Ocean oil exploration programme with Russian collaboration.

Latest studies on global energy scenario show that the centre of gravity of global challenges and opportunities are shifting towards Asia. Asia Pacific region has become the focal point of India and Russia’s strategic concerns. Achieving global energy security lies deepening the interdependence of energy systems followed by complementary interest of energy producers and consumers and then ensuring stability in the markets. The global import dependency is estimated from the fact that the leading energy importing countries account for over 60 per cent of the world GDP but less than 10 per cent of the global energy reserve. The principal energy suppliers contribute around five per cent of world GDP while controlling almost 75 per cent of the global oil and about 65 per cent of gas reserves.

India is importing around 70 per cent of its energy needs and this level will be increasing much more as the indigenous crude oil production is not matching up with the rise in demand and consumption within the country. The oil prices might be  ranging at a low prices in early 2016 but the prices might rise and India cannot neglect its long term interests of oil self sufficiency by being complacent over the imperative of ensuring speedy oil production both inside and outside the country. India’s major sources which have foreign policy linkages are oil, natural gas and nuclear energy. Acquiring energy assets is the most sensible thing to achieve energy security. As part of energy security strategy, India has forged new ties with Russia, China, Iran as also with Burma and Venezuela. India has entered into relationships with several other countries in Middle East and Africa. Indian government, as a matter of policy, is encouraging the Indian oil companies in both public and private sector to buy oil assets abroad to give a big boost to the country’s energy security programme. Prime Minister Narendra Modi during his last summit with the Russian President Vladimir Putin gave special emphasis to collaboration in oil production and exploration. The latest deals are a follow up of that understanding but essentially this initiative has to be followed up in a big way by India through its innovative energy security strategy including participation in Arctic Ocean oil and gas exploration project.

Russia’s new Energy Security Plan guarantees security of supply to customer nations through diversification of export routes and long term agreements between producers and consumers. Russia has assured transfer of technology and uninterrupted nuclear fuel supplies to India’s nuclear reactors. India is better positioned now to reap the benefits of Russia’s increasing focus on India and China. The Government of India and the oil companies have to go the wholehog by expanding the areas of participation in the Russian oilfields as also in Arctic Ocean project to ensure the long term national interests in oil and gas supply.