UAE signs first strategic oil deal with India
The UAE reached a strategic oil deal yesterday with India, which visiting leaders said is expected to be the first in a deepening relationship with one of the world’s fastest growing
oil consumers.
The deal signing, which coincides with the official visit of Sheikh Mohammed bin Zayed, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the Armed Forces, has been in the works for more than a year and gives state-owned Abu Dhabi National Oil Company (Adnoc) access to India’s new strategic oil reserves storage facility to store nearly 6 million barrels of crude.
Sheikh Mohammed and Narendra Modi, India’s prime minister, said they expect further energy sector investments as part of the initiative that began with
Mr Modi’s visit in late 2015.
That sentiment was echoed by Sultan Al Jaber, Adnoc’s chief executive and the Minister of State. The deal is "a new strategic energy partnership with India that leverages the UAE and Adnoc’s expertise and oil resources", he said.
"This mutually beneficial partnership will create opportunities for
Adnoc to increase its market share in delivering high-quality crude to India’s expanding refining industry, while also helping India meet its growing energy demand and safeguard its security."
India is forecast to be the world’s fastest-growing oil consumer over the next two decades, according to the International Energy Agency.
Its total oil consumption surpassed Japan’s in 2015 to become the third-largest in the world, behind the US and China. It is estimated to have grown last year by 11 per cent, to nearly 200 million tonnes, and is taking over from China as the most sought-after market for oil producers.
Adnoc has been in discussions with various Indian entities over strategic relationships, including talks for the sale of part of Abu Dhabi’s onshore oil concession – Abu Dhabi Company for Onshore Oil Operations (Adco) – to an Indian consortium led by ONGC Videsh, although those talks stalled late last year.
The storage deal with Indian Strategic Petroleum Reserves will allow Adnoc to store its crude at the new Karnataka underground facilities in the southern city of Mangalore.
Mr Al Jaber said this provides a springboard for further energy deals between the two countries.
"We will utilise the Mangalore facility to not only build on our existing business relationships across India but also to explore new downstream opportunities for Adnoc’s expanding range of refined and petrochemical products," he said.
Abu Dhabi has supplied about 8 per cent of India’s crude oil needs in recent years.
During a ministerial visit to the UAE last year, Dharmendra Pradhan, India’s petroleum minister, said the two countries were looking at potential refinery, petrochemical, pipeline and liquefied natural gas terminal joint investments.
Adnoc recently renewed a similar storage deal with the strategic petroleum reserves operator of Japan, which is Abu Dhabi’s largest oil buyer, taking nearly half of Abu Dhabi’s crude oil exports.
Adnoc also had a storage deal with South Korea, which expired last month and is under review for renewal.
The terms of the Indian deal were not disclosed but the Japan arrangement allows Adnoc to trade its oil freely, with some tax paid, but gives Japan first call in the event of emergency.
