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16-18 June 2020 • Moscow • Crocus Expo

India & Russia strengthen oil & gas relationship

Russia’s turn towards Asia isn’t just a pivot towards China. India, itself a massively populated country with an unquenchable thirst for energy and extensive buying power, is emerging as one of Russia’s chief energy partners.
India & Russia strengthen oil & gas relationship
Hydrocarbons trade between these growing economies is tightening day by day. Indian interest in Russian energy is increasingly healthy, as the nation of 1.3 billion people secures its energy future.

India’s energy consumption forecast to outstrip world average

Offshore oil rig in Mumbai, India

According to BP’s 2018 Energy Outlook, India’s energy consumption exceeding all the world’s major economies. Demand is rising 4.2% per year. If BP’s predictions are correct, then India will overtake China as the largest energy growth market by 2020.
Until 2040, BP is suggesting Indian energy demand will have soared by a colossal 165%. That is nearly three times higher than non-OECD country growth of 61%. It also knocks demand for energy products from the BRIC out of the picture too. For contrast, China will see 41% growth, whereas Brazil is on course for 60%.
Higher energy consumption rates mean a shift in global trade for India. To the north, Russia awaits, with its bountiful resources, impressive export infrastructure, and high project investment potential.

India invests in key Russian oil & gas projects

Russian LNG hub

Indian firms are quickly establishing a foothold in some key Russian oil & gas projects. Most investments and tie-ins are results of India’s energy policy, which seeks to improve long-term supplies of natural gas. India wants to improve gas’ current 6.2% share of its domestic energy mix to 15%. Investing in Russian oil & gas has been seen as a critical step by Indian authorities.
“Today, Russia is our largest investment destination in the oil & gas sector,” Indian Oil Minister Dharmendra Pradhan said at the India-Russia forum in September 2018. “Russia will always be a probity in India’s foreign and energy policy.”
Since the turn of the millennium, Indian Public Sector Undertakings (PSUs), essentially government-owned enterprises, have invested $15bn in Russian oil & gas projects. 
ONGC Videsh LTD bought a 20% stake in the Sakhalin-1 LNG hub in Russia’s Far East. Since then, the Indian conglomerate has been an active player in Russian energy. After purchasing Imperial Energy Corporation for a cool $2.1bn in 2009, ONGC acquired a 23.9% stake of Siberian-based operators Vankoreft in 2016. 
Via these deals, India now has a direct line to Russia’s bountiful Siberian gas fields.
India’s most recent acquisition came in 2016, when ONGC, alongside Oil India Ltd, Bhrat PetroResources Ltd, and Indian Oil Corp, purchased a $1.2bn, 29.9% stake in Tass-Yuryakh Neftogazdobycha. 
A reciprocal acquisition, 49% of India’s Essar Oil by Rosneft, took place in 2017, giving Russian firms access to India’s existing refinery capacity.
The future for both nations is one of closer collaboration and hydrocarbons trading, according to Minister Pradhan: “India has embarked on the path of becoming a gas-based economy. Russian supplies will help us in meeting price stability and energy security objectives. Our oil & gas PSUs are continuing to explore their participation in more Russian projects.”

First Russian LNG cargoes hit Russia

LNG carrier from above

As mentioned above, India’s investments in Russian gas fields and production facilities folds into a wider energy security policy. India is keen to ensure it has enough natural gas to cater to domestic demand. While this will be helped a range of domestic LNG terminal construction projects between now and 2021, imports will be vital.
Enter Russia.
In June 2018, India received its first LNG cargoes – the first shipment under a long-term supply struck by India’s GAIL and Russian gas monolith Gazprom.
Gazprom will be supplying GAIL with gas under a 20-year contract. Interestingly, this deal was first arranged in 2012, but has gone through significant modification in India’s favour since. Gazprom has slashed its first-year delivery commitments by 80% from the original 2.5m ton-per-year agreement. Annual deliveries will only reach that volume after four years.
Another intriguing aspect of the GAIL/Gazprom deal are price changes. What was originally calculated against the Japanese Custom Crude index has now switch to Brent formulae, dramatically lowering the end-price for Indian consumers.
Takeaways from the above deal are twofold. Firstly, Indian is greatly interested in securing vast volumes of gas from Russia’s majors. The second, perhaps most important point, is Russian firms are willing to negotiate with Indian counterparts on mutually-beneficial deals.

Indian imports of Russian oil reaching new post-Soviet highs

Blue oil barrels

In the first five months of 2017, something exciting happened in India. It imported over one million tons of Russian Ural-grade crude. That’s a twentyfold year-on-year increase in import volume compared with the same period in 2016.
This is very exciting news for Russian producers. Saudi Arabia’s production cuts, in line with OPEC production quotas, has pushed India away from the Middle East and towards more northerly climes to find oil. Russia just happens to be a world leader in oil production, and the prices of Ural crude currently make it too attractive for Indian buyers not to snap up.
According to Partha Ghosh, Executive Director at Indian Oil Corp, Indian oil demand is set to reach 500m tons per year by 2040. With global oil demand increasing by 15.8m bpd by the same date, India’s growth of 5.9bpd accounts for 24% of worldwide totals. Whichever way you look at it, that’s a lot of oil.
Russia is primed and ready to export petroleum goods to Asia.
One method has been by Russians making acquisitions in Indian energy firms. As mentioned earlier, Rosneft owns a 49% stake of India’s Essar Energy, effectively giving the Russian NOC full control. Via its own company, Rosneft now has a guaranteed Indian export route.
Rosneft will be the dominant decision maker in which grades are refined at India’s 400,000bpd Vadinar Refinery.

India holds untapped E&P potential

India is the world’s third largest consumer of crude oil and petroleum products, as well as the second largest refiner in Asia. It sits upon extensive resources of its own, including 635m tones of proven oil reserves, as we as 54 trillion cubic feet of natural gas. As much as 96tr cubic feet of shale gas has been discovered in offshore deposits too.
However, only 52% of India’s sedimentary areas have yet to be explored. There is extensive growth opportunities in Indian E&P, offering another market entry point for Russian firms.
Rosneft’s investment in Essor was India’s largest ever FDI deal, highlighting the major potential Russian firms have identified in India.
Mutual trade is something both parties are looking for – and MIOGE, the Moscow International Oil & Gas event, is where this can be achieved.

MIOGE 2019: Russia’s no.1 international oil & gas equipment exhibition 

The Moscow International Oil & Gas Exhibition is the meeting place for the international community and Russia’s oil & gas industry. Over 560 companies trust the show to let them meet and do business with representatives from across the value chain.
Here, you’ll meet the players behind the Russian oil & gas projects listed above, as well as getting details on Russia’s project landscape from to 2025 and beyond. 
Find procurement, engineering and purchasing specialists exclusively at MIOGE. 
Russian majors, including Gazprom, Tatneft, Rosneft and Lukoil, attend the show every year. Why? To meet new partners and suppliers of in-demand oil & gas equipment and technology. 
To reserve a stand, click here
Want more information on how MIOGE can help grow your business in Russia’s enormous oil & gas industry? Contact our team today.