Vol. 18, No. 20 Week of May 19, 2013
Providing coverage of Alaska and northern Canada's oil and gas industry

India wants Canadian barriers lowered

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Gary Park

For Petroleum News

Over the past five years China’s national oil companies have invested C$33.3 billion in Canada’s oil and gas sector, about 43 percent of the C$77 billion in deals initiated by foreign buyers.

But of the 15 countries involved in M&A transactions there has been one notable absentee — India.

The subcontinent has talked for years about its desire to round up assets, or even entire companies, as it has looked outside its borders for oil and gas resources to offset declining production and reserves amid rising demand at home.

And there have been unconfirmed reports that Oil India Ltd. made a non-binding bid that is still being pursued of C$5 billion last year for ConocoPhillips’ 50 percent stake in six oil sands assets that hold about 15 billion barrels of bitumen resources.

However, India’s strategies have varied from those of its emerging Asian economic rivals for reasons that range from its financial resources, appetite for risk and both corporate and political aims.

Changes in rules

Now it finds that changes to foreign investment rules since last year’s takeover of Nexen by China National Offshore Oil Corp. have limited the ability of its state-owned companies to gain controlling stakes in oil sands producers.

From India’s standpoint, its reluctance to take the plunge in Canada has been compounded by what the head of a delegation from several companies said earlier in May is the lack of infrastructure needed to get Canadian production to overseas markets.

A.M.K. Sinha, director of India Oil Corp’s planning and business development, told reporters that until the barriers are removed India will be hesitant about signing term contracts to lift crude.

In addition, he said, the Indian government requires its state-owned companies to deal only with other national oil companies, or NOCs, of which there are none in Canada and the current administration of Prime Minister Stephen Harper is never likely to turn the clock back to the days of Petro-Canada.

Sinha said India is eager to diversify its sources of oil as it faces a projected increase in demand to 7.5 million barrels per day by 2035 from the current 3.5 million bpd.

He said India is importing 44 percent of its crude and 79 percent of its natural gas requirements from the Middle East, but is always seeking new options.

Sinha said India’s preference is to rely on energy imports rather than equity investments, making LNG the preferred way to gain a foothold in Canada.

Option with Nova Scotia

Coincidentally, H-Energy, a subsidiary of one of India’s largest privately held property developers, made a move in that direction by signing an option agreement with the Nova Scotia government to build a gas liquefaction facility and export terminal in the Atlantic Canada province.

That affirmed Sinha’s observation that Canada’s east coast offers quicker access to India’s west coast refining hub for crude oil, giving a boost to TransCanada’s tentative plans to move Western Canadian crude to Quebec and possibly the Atlantic coast.

Deepak Obhrai, parliamentary secretary to Canada’s Foreign Affairs Minister John Baird, said exports of 10 million metric tons a year from the Goldboro LNG project are proposed for Nova Scotia.

He said a second project could involve reversing the Canaport import LNG facility in New Brunswick.

Indian state-run utility GAIL is also exploring new LNG offtake deals with producers in North America, said Gajendra Singh, executive director for exploration and production.

He said GAIL wants up to 12 metric tons a year of LNG in additional long-term deals over the next four years to meet a sharp expected increase in India’s regasification capacity, which is forecast to climb to 48.5 million metric tons a year by 2017 from today’s 14.8 million metric tons.

Singh said two deals, with Cheniere Energy and Dominion Cove, have been signed in the United States and GAIL has opened an office in Houston to follow up on new opportunities.

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