India turns up energy diplomacy

Posted in India , Energy Security | 24-Nov-08 | Author: Siddharth Srivastava| Source: Asia Times

Russia's Prime Minister Vladimir Putin (L) shakes hands with India's Oil Minister Murli Deora in Moscow, November 5, 2008.

NEW DELHI - A double initiative by India indicates that the country is maintaining the high priority it has given over the past three to four years to securing the energy resources and export markets it requires to maintain fast economic growth.

In particular, it has sought alternatives, such as Japan, Russian and Iran, to the sometimes overbearing influence of the United States and to a lesser extent of China.

The initiatives to Russia and Iran in the first week of November were aimed mainly at securing oil and gas resources, with Foreign Minister Pranab Mukherjee visiting Tehran and Petroleum Minister Murli Deora headed for Moscow. The agenda for both was the same - to deepen ongoing energy projects while seeking leverage for the future. India is the third-largest hydrocarbon consumer in Asia and an energy-deficient economy.

India's relations with Russia date to the Cold War-era, notably involving defense purchases. It is more problematic to develop ties with Iran, given the tensions between it and the US, now also an important Indian ally.

New Delhi is keen for Russian companies to invest in new refineries and petrochemical developments in India while Indian companies want to become involved in projects in Russia. In a meeting with Russian Prime Minister Vladimir Putin, Deora discussed a joint venture between ONGC Videsh Limited (OVL), the overseas arm of the state-run oil explorer, and Russia's Rosneft for exploration and development of the Vankor oilfield in East Siberia.

Deora also sought to iron out details for Russia to give the go-ahead to OVL's acquisition of Imperial Energy, a Russia-focused British oil explorer company being acquired by OVL for US$2.59 billion. The OVL takeover is subject to clearance by the Russian government, as Imperial has a number of oil production licenses in Siberia.

Joint bidding for the Trebs and Titov oilfields in the Timan Pechora region of north Russia was also raised. Putin assured the Indian minister that Russia is willing to discuss India's participation in the Sakhalin-3 fuel project in the far east of the country.

OVL has a 20% stake in ExxonMobil, which operates the Sakhalin-1 oil and gas field in far east Russia. India wants to import 2 million tonnes of liquefied natural gas (LNG) a year from the Sakhalin LNG project. This could later be doubled to 4 million tonnes.

Petronet LNG, India's largest liquefied natural gas importer, is reported to be already doubling the capacity of its Dahej terminal in Gujarat to 10 million tonnes by next year. Russian gas monopoly Gazprom will decide on selling LNG to India and company level talks are expected to start soon.

Deora also held meetings with his Russian counterpart, Sergei Shmatko, on the Sakhalin-3 and other energy ventures in readiness for a visit to India by Russian President Dmitry Medvedev in early December.

Deora invited Shmatko to participate in the India-Commonwealth of Independent States (CIS) roundtable on hydrocarbons in Delhi at the end of this month, when energy ministers of most CIS nations are expected to attend.

Mukherjee's visit to Tehran in early November was the first high-level contact between the two countries following the conclusion of the India-US civil nuclear deal, which secured the approval of the US Congress on October 1.

Mukherjee co-chaired a two-day meeting of the India-Iran Joint Commission, the first such meeting since 2005. The minister highlighted that energy is the focus of Indo-Iranian bilateral economic ties, which have been strained as Indian-US relations have deepened over the past few years.

Signs that these relations may now be improving are visible at the India International Trade Fair 2008 in New Delhi, where more than 20 Iranian companies are taking part. That may lead to an increase in India-Iran trade, which at present runs at more than $13 billion annually. Mukherjee's visit entailed discussions on a range of issues related to agriculture, double taxation, civil aviation and port arrangements.

Energy, though, was a priority topic and arguably most contentious. Indian is seeking to access Iran's oil and natural gas reserves, the world's second-largest. The US has been opposed to energy exchanges between India and Iran due to Tehran's insistence on an independent nuclear program, which Washington fears involves building atom bombs. In support of the US, has voted against Iran on the issue at the International Atomic Energy Agency.

Mukherjee said during a joint press conference with Iranian Economic Minister Shamseddin Hossein that the agreement with the US allowing India to purchase nuclear fuel and technology would not be at the cost of energy relations.

"Iran is an energy-rich country, whereas India is an energy-deficient economy,' said Mukherjee. He said India shared a broad relationship with Iran, which would not be hampered by any single issue, such as a project to run a gas pipeline between the two countries.

Iran is pushing for action on the much-delayed $7.5 billion Iran-Pakistan-India (IPI) pipeline project, which India has been accused of delaying. Differences exist over pricing and on security where the pipeline traverses Pakistan's troubled region of Balochistan, but observers say it is US opposition due to strategic concerns that have held up negotiations.

The two sides have now decided to set up a trilateral mechanism at the petroleum ministers' level to resolve differences over the pipeline. A meeting of the petroleum ministers of both countries will be called soon to discuss the issue. Strains, however, remain, indicated by continued delays in putting into effect an agreement reached in 2005 for Iran to supply India with 5 million tones per annum of LNG.

Hossein conveyed to Mukherjee that financial and technical issues remain, while recent reports have quoted an Iranian official as saying Tehran has scrapped the agreement due to disputes over price and lack of approvals.

The deal was signed between National Iranian Gas Export Co and Indian companies GAIL, Indian Oil Corp and Bharat Petroleum Corp.

Siddharth Srivastava is a New Delhi-based journalist. He can be reached at

Siddharth Srivastava is WSN Editor India.