Despite the U.S. saying no to Atlantic drilling, the news wasn’t all bad for the oil and gas business this week.
Even as the Obama administration slammed the door shut on drilling in the U.S. Atlantic, operators in a different part of this ocean got some big breaks.
That was in the U.K. North Sea. Where the government announced a substantial reduction in taxes for the offshore oil and gas business. With producers here likely to see overall taxation drop to 40 percent, from current rates of up to 67.5 percent. Related: Despite Fundamentals, Oil Surges Above $40
That gives a glimmer of hope for a sector that’s still struggling with lower oil prices. And it wasn’t the only bright spot for oil and gas producers this week.
A couple of critical events also emerged in a different part of the world: India. Where it appears that local oil and gas firms are embarking on a potentially massive spending spree when it comes to overseas assets.
News here kicked off this past week when India’s minister of state for petroleum and natural gas, Dharmendra Pradhan, told the Wall Street Journal that Indian companies are “taking advantage of the changing geopolitical scenario” to secure international oil and gas fields. With the minister indicating that India’s firms are putting on a major push to identify new investments globally.
And a couple of follow-on points make it appear this isn’t just talk.
For one, India’s largest state-owned refiner, Indian Oil Corp (IOC), said this week it has set aside a massive budget for new projects. With IOC officials saying they have earmarked $26 billion for new investments over the next five to seven years.
The company said some of this capital will be deployed domestically. To increase refining capacity for an Indian gasoline market that is projected to grow at double-digit rates for at least the next few years. Related: Big Energy Discoveries Hold Huge Potential For Senegal
But the most interesting part was a report from IOC officials that some of this budget will be used to buy direct stakes in oil and gas projects overseas. With the company’s chairman B Ashok telling Platts, “We are looking for overseas assets in the upstream sector.”
That will reportedly be part of a strategy for IOC to diversify its crude supplies globally. And management suggested the first place they may look is Latin America — which could mean more direct investments from Indian companies in this part of the world, when it comes to both oil fields and oil exports.
If that wasn’t enough, one final happening this week from the Indian oil sector seemed to clinch this nation as the biggest rising source of oil and gas funding: a buy-in by a consortium of Indian firms into a major oil and gas development in northern Russia.
That deal was announced this week by Russian producer Rosneft. Which said it has sold a 29.9 percent stake in the Taas-Yuryakh project to Oil India, Indian Oil, and Bharat Petroresources.
The project is a large one, including the development of the Srednebotuobinskoye oil and gas condensate field in Siberia. A project that is currently pumping 20,000 barrels per day. Related: The Unexpected Threat To Our Economic Growth System
Rosneft said it will now seek to upgrade production here even further, with the aid of India’s development capital and potential offtake agreements for the supply.
The price tag for the deal wasn’t announced, but sources told Platts it was likely around $750 million — making this a prime illustration of the type of cash India’s oil and gas firms are wielding. And giving a clue as to the scale of investments that could be coming from Indian petro-firms in other parts of the world.
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All of which is good news oil and gas developers globally. The last several years, we’ve seen Chinese companies emerge as a major funding partner for energy projects around the world. And now we could be seeing another major pool of capital opening up for the right projects. Let’s see where it shows up next.
Here’s to an Indian summer,
Dave Forest
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