Faced with soaring demand, stagnant output at home and a need to diversify from Iranian crude imports lost to Western sanctions, Indian oil companies are hungry for deals like ONGC's Kashagan buy that promise supplies sooner rather than later.
State-run ONGC Videsh has agreed to pay about $5 billion for 8.4% of the Kashagan field in Kazakhstan, the world's largest oilfield discovery in four decades — which could boost its output by about 16% within a year. The deal adds to a stable of assets that span some of the trickiest territories in the world - Sudan, Iran, Iraq, Syria and Libya among them - accumulated as parent Oil and Natural Gas Corporation struggled with domestic output.
But it's a drop in the ocean for the world's fourth-biggest crude importer — it buys in 3.5 million barrels per day (bpd) — where the energy gap triggers constant power cuts. Asia's third-largest economy plans to hit 8% growth in 2014/15 and by 2030 that could lift it to be third-largest in the world and also the No. 3 energy consumer, according to BP. Oil supplies have become more urgent as Western sanctions over nuclear projects squeeze Iran, once India's second-biggest supplier.
"Our priority is to look for discovered, developed and producing assets," TK Anantha Kumar, head of finance for Oil India said. While not all the oil bought overseas turns up in domestic refineries, it can give companies a stake in the global crude trade, enhancing their flexibility for supplies and potentially helping profits.