Oil to dominate Modi-Putin talks

Oil to dominate Modi-Putin talks

Prime Minister Narendra Modi and Russian President Vladimir Putin are set to meet on Thursday amid expectations of increased bilateral cooperation between New Delhi and Moscow in the oil and natural gas sector.

Putin, who arrived in New Delhi on Wednesday night for the 15th bilateral Russia-India summit, revealed that his country has begun shifting its focus to developing countries in Asia.

“Historically,” he said, “Russia has exported most of its hydrocarbons to the West. However, European consumption is increasing too slowly, while political, regulatory and transit risks are on the rise. At the same time, the economies of Asian countries are growing rapidly. Thus, we are naturally interested in diversifying the destinations of our energy deliveries.”


Modi and Putin are expected to witness signing of a series of agreements, including one between Essar Oil and Russia’s biggest oil producer—Rosneft—for a supply of crude over the next 10 years.

What’s more is that Moscow has already expressed keenness to support India’s ONGC Videsh Limited (OVL) to expand its role in exploring hydrocarbons in the Arctic. “The issue of participation by the OVL in hydrocarbon exploration in the Arctic is being actively discussed (between Moscow and Delhi),” the Russian president said.

The OVL and Rosneft signed a Memorandum of Understanding at St Petersburg in May, which set the stage for cooperation between the two countries for hydrocarbon exploration in the Arctic Shelf of Russia. The Gazpromneft, the fourth largest oil producer in Russia, is also interested in networking with India’s oil and gas companies to implement projects in the Arctic, Putin said in a statement released by the Russian Embassy in New Delhi.

With both United States and European Union imposing sanctions on Russia in the wake of secession of Crimea from Ukraine, Moscow is now encouraging its public and private sector companies to divert their investments from western nations to countries like China and India. “We expect to secure ourselves a role of a reliable energy supplier to the Asian markets. At the same time, we intend to boost economic growth in Russia’s Eastern Siberia and Far East regions and build new infrastructure there,” Putin said.

He added that Moscow was interested in attracting new investment and technologies from India and other countries to implement large-scale energy projects in Russia. The OVL is already participating in oil production in Sakhalin 1 project in Russia, from where India receives over one million tons of oil.

Stumbling block

However, Putin did bring up issue of commercial feasibility while exporting to India. “As far as Russia’s natural gas supplies to India are concerned, that issue needs thorough consideration. A preliminary analysis has shown that the cost of pipeline transportation may significantly exceed that of liquefied natural gas supplies. So this is largely the question of commercial feasibility,” he said, adding: “For the time being, Russian liquefied natural gas transportation seems the best choice.”

A long-term agreement on LNG supplies signed between the Gazprom Group and India’s GAIL in June 2014 provides for delivery of 2.5 million tons a year for the period of 20 years.

 

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