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Indian Firms in Talks to Refine Venezuelan Crude At Home

  • With India importing more than 80% of its energy needs, government-owned firms have been scouting overseas for securing assets and have invested Rs. 64,832.35 crore in the effort. In what will help improve the country’s energy security, Indian firms that won two oil blocks in Venezuela as part of a global consortium are in talks with Reliance Industries Ltd (RIL) and Essar Oil Ltd to refine some of the crude in India.The Venezuelan blocks will have a peak production of 0.06 million tonnes per annum (mtpa). In comparison, India’s largest on-shore crude oil production at Barmer in Rajasthan has acurrent production profile of 0.023 mtpa.A helicopter flies over Oil & Natural Gas Corp. oil drilling platforms at Bombay High (Bloomberg)

  • The global consortium includes ONGC Videsh Ltd (OVL), Indian Oil Corp. Ltd (IOC), Oil India Ltd (OIL), Spain’s Repsol YPF SA and Malaysia’s Petroliam Nasional Bhd (Petronas). OVL, Repsol and Petronas each hold an 11% share in the joint venture, and IOC and OIL hold 3.5% each. The remaining 60% stake is owned by Corporación Venezolana del Petróleo, a unit of state-owned Petróleos de Venezuela SA.“Production from the Carabobo 1 Norte and Carabobo 1 Centro blocks in the Orinoco region will start from 2013 with an initial production of 40,000 barrels per day (bpd). This crude can come to India,” said an OVL executive requesting anonymity. “We’re in talks with Essar and RIL that have the new refineries. We’ve spoken to them.”

  • Experts welcomed the move.“Connecting the dots of the energy supply chain brings critical value to the Indian oil industry. India needs to own, operate multiple international acreages, leverage domestic downstream assets and over time also achieve trading and logistic value generation to India,” said Gokul Choudhri, partner at BMR Advisors.Essar’s Vadinar refinery and RIL’s Jamnagar refinery are among the few refineries capable of refining heavy oil from the region.

  • To process the heavy crude oil from Orinoco, integrated production and refining facilities are needed, including oil pumping and upgradation units. Half of the heavy crude will be upgraded to light crude. These units will improve the quality of the heavy crude in some of the wells and blend it with higher quality crude in the other wells.“The talks are in initial stages with the private refiners,” said the head of a consortium partner company, who did not want to be identified.India has made rapid strides in refining. The country has a refining capacity of 194 mtpa, the fifth largest globally and accounting for 4% of the world’s total refining capacity.

  • This is expected to reach 238 mtpa by 2013. India is also the world’s fourth largest oil importer after the US, China and Japan.While an Essar spokesperson declined comment, questions emailed to an RIL spokesperson on Wednesday remained unanswered.The Orinoco blocks are expected to hit a peak production of 400,000 bpd in 2016 or 2017.The total investment made by the consortium partners is expected to be around $13.63 billion (Rs. 72,650 crore). The consortium has a licence to develop the blocks for 25 years, which can be extended by another 15 years.

  • OVL has 39 projects in 16 countries, with nine producing assets in seven countries—Sudan, Russia, Vietnam, Syria, Brazil, Columbia and Venezuela. It has produced around 9.43 mt of oil and gas from its overseas assets.OVL has signed a memorandum of understanding with the Indian government for a production of 8.75 mt in 2011-12 and expects to maintain a production of 9 mt. But its producing properties in Sudan, Sakhalin and Syria are in decline.

  • OVL, though, is the only company among Indian state-owned firms with producing assets overseas and has a targeted production of 6.496 mt of oil and 2.254 billion cubic metres of gas in 2011-12.With India importing more than 80% of its energy needs, government-owned firms have been scouting overseas for securing assets and have invested Rs. 64,832.35 crore in the effort.According to the oil ministry, India’s energy demand is expected to more than double by 2035, from less than 700 mt of oil equivalent (mtoe) today to around 1,500 mtoe.

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