India eyes Guyana’s oil to meet demand
3 min read 04 May 2023, 11:57 PM ISTLong-term supply contracts offer stability amid volatile energy markets. Exxon Mobil, the leading oil producer in Guyana, plans to boost the nation’s production capacity to 1.2 million barrels a day by 2027.
PremiumNew Delhi: India, the world’s third-largest oil importer, is looking to bolster its energy security with a plan in the works to source most of Guyana’s oil share from its oilfields at preferential rates through long-term contracts, two people aware of the development said.
Long-term supply contracts offer stability amid volatile energy markets. Exxon Mobil, the leading oil producer in Guyana, plans to boost the nation’s production capacity to 1.2 million barrels a day by 2027. As the Guyana government’s share accounts for about 11% of production, India seeks to purchase most of this portion through long-term contracts at preferential rates to ensure a steady supply from one of the world’s most significant recent oil discoveries.
India, which consumes 5 million barrels per day, has been eyeing the South American nation’s share of oil from its fields to meet its energy needs. In July 2021, Indian Oil Corp. Ltd, the nation’s largest refiner, bought its first crude oil cargo from Guyana to conduct a successful trial run and assess the feasibility of refining the oil.
“We can offtake their entire share. There is not much domestic demand in Guyana. So, we are asking for preferential rates, but it will all finally depend on commercial negotiations. In our talks, we have asked for long-term contracts," said an Indian government official, one of the two people cited above requesting anonymity.
India is leveraging its historical ties with the Caribbean nation to meet its growing energy demand. Indians are the largest ethnic group in Guyana, comprising about 40% of the population based on the 2012 census. Recently, Guyanese President Mohamed Irfaan Ali and Vice President Bharrat Jagdeo visited India, with the two countries discussing areas of cooperation, including the oil and gas industry.
India is actively seeking to diversify its oil supplies and secure long-term crude oil contracts to mitigate risk. The country is also looking to secure a long-term crude oil supply deal from Namibia, and last year, Indian Oil Corp. signed long-term supply contracts with Petrobras in Brazil and Ecopetrol in Colombia. India has added to its current major oil suppliers, including Iraq, Russia, Saudi Arabia, the UAE, and the US, by sourcing oil from new suppliers such as Colombia, Brazil, Libya, Gabon, and Equatorial Guinea.
Queries emailed to the spokespeople for India’s petroleum and natural gas ministry, Guyana High Commission in New Delhi, Indian Oil Corp. and ExxonMobil late Tuesday night remained unanswered.
In an earlier interview to Mint, Jagdeo said Guyana discussed oil supplies with India. He added that the two countries may sign a memorandum of understanding to boost cooperation in the oil and gas sector.
This assumes significance amid dwindling discounts on Russian crude oil supplies to Indian refiners due to soaring demand. Also, the Opec+ group, including Russia, has announced an additional 1.16 million barrels per day of supply cuts beginning this month. Furthermore, a global initiative led by the US has enforced a $60 per barrel price cap.
“Next year, ExxonMobil will have to give up 20% of their holdings. So, all of those will be available for some form of bilateral engagement, where we can actually see joint production or exploration-related activities," Jagdeo said in his interview.
Currently, two floating production storage and offloading (FPSO) vessels—Liza Destiny and Liza Unity—are operational in Guyana, with ExxonMobil’s plans to operationalize six FPSOs by end of 2027. The Stabroek block, covering 26,800 sq. km, is operated by Exxon Mobil affiliate Esso Exploration and Production Guyana Ltd, which holds a 45% interest.