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January 2014

Vol. 19, No. 4 Week of January 26, 2014

India getting serious

Oliver, Redford, meet with government, energy officials in New Delhi, Mumbai; no deal yet, cut Oliver says it could be substantial

GARY PARK

For Petroleum News

India and Canada are once more, after a decade of blowing hot and cold, on the brink of doing a deal over oil and natural gas investments.

Indian government sources say state-owned refinery Indian Oil Corp., IOC, will conclude a deal to buy a 10 percent stake in British Columbia 449 trillion cubic feet of Montney shale gas assets held by Malaysia’s Petronas by mid-March, while the Alberta government’s petroleum marketer has signed a tentative agreement to ship oil sands bitumen to India.

A long history of on-again, off-again negotiations showed their best hope yet in mid-January as Canada’s Natural Resources Minister Joe Oliver and Alberta Premier Alison Redford, plus teams of officials, met with Indian government and energy officials in New Delhi and Mumbai.

The reason for these high-level contacts was evident in BP’s annual global energy outlook, which forecast India’s energy demand could rise 135 percent by 2035, outpacing other members of the BRIC partnership — Brazil, Russia and China — by a wide margin.

Imports of oil to the subcontinent will grow 169 percent and of natural gas by 573 percent.

Over the past decade, various Indian state-owned companies have raised hopes of multibillion-dollar infusions into Canada’s energy sector, peaking in 2012 with word that a trio of companies was on the verge of bidding C$5 billion for ConocoPhillips oil sands properties.

By some estimates, India has invested US$100 billion in global oil and natural gas assets over the past two years.

No guarantees yet

“Nothing is guaranteed but I’m hoping we’ll see some substantial investments,” Oliver said in a Jan. 15 conference call from Mumbai. “And you know when they come they’re likely to be substantial.”

He said that optimism is based on talks with senior executives in India’s Ministry of Petroleum and Natural Gas, plus the stable of companies — IOC, ONGC, Essar Oil, Reliance and H-Energy (which is involved in an LNG export project in Atlantic Canada).

Oliver said the issue for India is whether “they can get projects built giving the rising costs of oil sands facilities and get the bitumen delivered top India within a particular time frame.”

But he stressed that the companies are uneasy about regulatory delays in building pipelines to the Atlantic and Pacific coasts.

Redford said India’s refinery operators are especially interested in the prospect of importing oil sands bitumen and in becoming strategic partners in developing the resource.

To that end, the “arrangement” between IOC and the Alberta Petroleum Marketing Commission, although “very preliminary,” could see Canada positioned to export its first crude by 2017-2018, assuming one or all of Enbridge’s Northern Gateway, Kinder Morgan’s Trans Mountain expansion and Transcanada’s Energy East gets government approval.

The commission currently markets 70,000 barrels per day of conventional crude and 300,000 bpd of bitumen that the government receives in lieu of cash royalties.

Test shipment in November

India’s Oil Minister M. Veerappa Moily told reporters Jan. 14 that his country is exploring ways to add Canada to the list of countries that qualify to provide feedstock to India’s state-owned refineries, which import 80 percent of their annual crude requirements of 4.32 million bpd.

India has asked Canada to create a national agency to execute term deals.

IOC has already tested its ability to process Canadian crude by receiving a shipment in November of 1 million barrels from Newfoundland’s offshore White Rose field, which Oliver said could set the stage for exports from the Energy East pipeline’s terminal in Saint John, New Brunswick.

He said Canada is hoping the larger export volumes would involve heavy crudes, which Indian refineries are equipped to process “economically.”






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