India is expected to partner with Guyana in critical areas in the oil and gas sector, including refining crude oil, as the Prime Minister Narendra Modi-led Indian Government approved the signing of a Memorandum of Understanding (MoU) between the two nations.
According to a statement from the Indian Bureau of Information, the Indian Cabinet approved the signing of an MoU between the Indian Ministries of Petroleum and Natural Gas and Guyana’s Ministry of Natural Resources, which would have a five-year duration from the date of signing.
This MoU would see India sourcing crude from Guyana, an arrangement that it has previously done such as in 2021 when HPCL-Mittal Energy Ltd (HMEL), a joint venture between State-run Hindustan Petroleum Corp and Indian steel tycoon LN Mittal, bought Guyana’s crude.
It was also announced in January last year that India, where President Dr Irfaan Ali had led a delegation of Guyanese earlier that very month, had made an initial proposal on the direct long-term purchase of crude. At the time, it had been announced that Guyana was examining the proposal at a technical level.
The Union Cabinet chaired by the Prime Minister Narendra Modi approved the signing of a Memorandum of Understanding (MoU) between the Ministry of Petroleum & Natural Gas, Government of India and the Ministry of Natural Resources, Republic of Guyana on cooperation in the hydrocarbon sector.
Another area the MoU will cover is cooperation with Guyana for crude oil refining. Additionally, it will create opportunities for Indian companies to explore and produce oil in Guyana and for collaboration in natural gas.
At the Government bilateral level, the MoU allows for capacity building, strengthening bilateral trade, collaborating to develop oil and gas-related regulations and cooperation in renewable and clean energy, including biofuels and solar energy.
“The MoU on cooperation in the hydrocarbon sector with Guyana will strengthen bilateral trade, foster investment in each other countries and help to diversify the source of crude oil, thus augmenting the energy & supply security of the country,” the Indian Government said.
“It will also provide an opportunity for Indian companies to participate in the E&P sector of Guyana, gaining experience by working with global oil & gas companies in upstream projects, thus fostering the vision of Aatmanirbhar Bharat.”
Meanwhile, after the five-year period has elapsed, it will be automatically renewed every successive five years unless either side gives the other three months written notice three months in advance of its intention to terminate the MoU.
The Indian Government noted that with Guyana gaining significant traction as the world’s newest major oil producer, the discoveries of 11.2 billion barrels of oil equivalent amounts to 18 per cent of total global oil and gas discoveries and 32 per cent of discovered oil.
“As per OPEC World Oil Outlook 2022, Guyana is projected to see a significant ramp-up in production, with liquids supply growing from 0.1 mb/d in 2021 to 0.9 mb/d in 2027. Further, as per BP Statistical Review of World Energy 2022, India is the world’s 3rd largest energy consumer, 3rd largest consumer of oil and 4th largest refiner and the fastest-growing major economy with rising energy needs.”
“BP Energy Outlook and International Energy Agency estimate that India’s energy demand would grow at about 3 per cent per annum till 2040, compared to the global rate of 1%. Further, India is likely to account for approximately 25-28 per cent of the global energy demand growth between 2020-2040,” they further said.
According to India, it is focusing its attention on fostering new partnerships in oil and gas, to ensure access to affordable energy is expanded. The country committed to doing this both through diversifying where it sources its crude oil from and ensuring the crude is of high quality.
“This dilutes dependencies on a single geographical/economic unit and increases India’s strategic manoeuvrability. Noting the significance of Guyana and given the renewed momentum to the bilateral relationship in the hydrocarbon sector, and the number of possible areas of cooperation, it is proposed to enter into an MoU with Guyana on cooperation in the hydrocarbon sector,” India further explained.
Guyana, with US oil giant ExxonMobil as the operator, began producing oil on December 20, 2019, in the Stabroek Block. The oil-rich Stabroek Block is 6.6 million acres (26,800 square kilometres).
Exxon, through its local subsidiary Esso Exploration and Production Guyana Limited (EEPGL), is the operator and holds 45 per cent interest in the block. Hess Guyana Exploration Ltd holds 30 per cent interest, and CNOOC Petroleum Guyana Limited, a wholly-owned subsidiary of CNOOC Limited, holds the remaining 25 per cent interest.