Russia is known to be India’s largest defense technology partner. But besides defense, the two states also cooperate in other areas which are no less important, such as oil and gas.
India is Asia’s third largest economy and the sixth-largest economy in the world. The country needs massive amounts of fuel to drive its economic growth, and the Indian energy and industrial sectors are developing rapidly. Russia, in turn, has the world’s largest hydrocarbon energy reserves. Moreover, the two countries share long-standing, stable and friendly relations. Anyone can see that there is clearly huge potential for cooperation between Russia and India in the oil and gas industry.
Russia’s largest petroleum company Rosneft is Moscow’s key player in this partnership. Rosneft plays an active role, working together with Indian partners engaged in all the global processes of oil and gas production: petroleum extraction, refining and the subsequent sale of refined petroleum products.
Rosneft is part of a group of companies who own Nayara Energy Limited, a company engaged in oil refining and fuel retailing in India. Rosneft owns a 49.13% stake in Nayara Energy (its major stakeholder), which Rosneft acquired after making a $12.9 billion Investment in Nayara Energy, which went down in history as one of the largest foreign direct investments in India’s economy ever made.
This has been a very profitable investment for Rosneft: Nayara Energy owns the Nayara Energy Refinery in Vadinar. This is India’s second-largest single-location oil refinery with a capacity of 20 million tons per annum, and it is technologically advanced, meeting the highest international standards.
Nayara Energy is also rapidly developing its own network of gas stations. There are currently more than 5.3 thousand of these Nayara Energy filling stations in India. Nayara Energy also owns a deep-water port which can accommodate Very Large Crude Carriers (VLCC), the supertankers used for transporting fuel.
India is also investing in Russia: in 2001, the Indian company ONGC Videsh Ltd. became a shareholder in the Sakhalin-1 project for oil and gas production on the northeastern shelf of Russia’s Sakhalin Island. The Sakhalin-1 fields are projected to yield more than 300 million tons of oil and 485 billion cubic meters of natural gas.
In 2016, a group of Indian companies bought a 49.9% stake in Rosneft’s subsidiary Vankorneft, which operates one of the largest oil and gas fields in Russia, the Vankor Field, which is located in Krasnoyarsk Krai (Eastern Siberia, Russia).
A consortium of Indian companies also acquired a 29.9% stake in Russian company Taas-Yuryakh Neftegazodobycha LLC, which develops part (ten license blocks) of the Srednebotuobinskoye oil and gas condensate field in Yakutia, Russia. In 2018, production at this field more than doubled compared to 2017, so India is probably pleased with their investments.
Through investment, Russia is not only actively developing the Indian petroleum industry, but it is also providing Indian partners with access to Russian resources, which is mutually beneficial and increases the level of confidence between the two countries.
There are also plans for India to take part in the Vostok Oil project Rosneft has put forward to extract resources from the Russian Arctic. Vostok Oil will operate fields that have already been developed as well as a number of new ones that have only recently been explored. It is believed that the Russian Federation’s Arctic oil reserves could provide more than 500 billion tons of oil equivalent, which is about two thirds of the world’s reserves.
Russian President Vladimir Putin and Indian Prime Minister Narendra Modi met on the sidelines of the Eastern Economic Forum, held on September 4-6, 2019 in Vladivostok, Russia, to discuss the general direction Russia and India should choose to continue their cooperation on oil and gas going forward.
On September 17, 2019, Rosneft CEO Igor Sechin paid a visit to India to discuss a more detailed roadmap. He met with Indian Minister for Petroleum and Natural Gas Dharmendra Pradhan in New Delhi. During the meeting, it became clear that India is interested in working with Rosneft to significantly increase the amount of Russian oil it imports, which would then be refined at Indian refineries.
India is exploring this avenue over fears of disruptions to India’s oil supply from Saudi Arabia, in light of the drone attacks on the major Saudi Aramco oil facilities on September 14, 2019, which Yemeni rebels claim responsibility for. According to some reports, oil production in Saudi Arabia has halved as a result of the attacks. This has naturally affected the supply of oil from Saudi Arabia to other countries, including India. A very large percentage of the oil India consumes comes from the Middle East, including Saudi Arabia, and this leaves the Indian economy vulnerable and dependent on the situation in this unstable region. Finding an alternative energy exporter to meet the energy demands that Saudi Aramco’s supply had satisfied is already a serious challenge facing the Indian economy. India needs to diversify its oil and gas imports in order to protect its energy sector, and the most reasonable option would be to increase the supply from Russia, which has proven a reliable partner for India.
India and Russia have common interests: Rosneft and its partners are going to significantly increase the share their company Nayara Energy has in the Indian fuel retail market and double the amount of oil refined at its Vadinar Refinery. In order to achieve this goal, the consortium is going to invest $850 million over the next two years to upgrade the Vadinar Refinery by building a petrochemical unit.
Minister Dharmendra Pradhan also spoke of India’s interest in participating in the Vostok Oil project during talks, which has been welcomed by the Russians.
The potential for Russia and India to develop their oil and gas partnership is there, waiting to be developed, and they have already achieved impressive results. India’s energy demands for oil and gas continue to grow, and Russia is simultaneously developing more ways to extract and supply energy. Given that these two countries have a long history of friendly relations, it is likely that they will continue moving in a positive direction by working together in this strategic area, which will steadily see both states benefit greatly.
Dmitry Bokarev, political observer, exclusively for the online magazine “New Eastern Outlook.”