On Friday, the Union Cabinet approved the signing of a 5-year memorandum of understanding with Guyana for cooperation in the hydrocarbon sector, including crude oil acquisition.
The proposed Memorandum of Understanding covers the entire value chain of the hydrocarbon sector, including the extraction of crude oil from Guyana, Indian companies’ involvement in the exploration and production (E&P) sector in Guyana, and cooperation in the area of crude oil refining, according to government statements.
It also involves strengthening capacity, increasing bilateral trade, collaboration in the natural gas sector, collaboration in the development of a regulatory framework in the oil and gas sector in Guyana, cooperation in the clean energy sector, including biofuels, as well as the renewable energy sector, including solar energy.
India, the third largest consumer and importer of energy in the world, is looking to diversify its sources of oil imports, and the South American nation is one of the countries it is considering for this possibility.
The Memorandum of Understanding (MoU), which has been under discussion for over two years, will be valid for an initial period of five years, with the possibility of automatic renewal if both countries agree, according to the statement.
“The memorandum of understanding on cooperation in the hydrocarbon sector with Guyana will strengthen bilateral trade, promote investment, and help diversify the source of crude oil, thus increasing energy security and supply in the country,” stated.
It will also provide opportunities for Indian companies to participate in Guyana’s exploration and production sector, gaining experience by working with global oil and gas companies on upstream projects, thus promoting the vision of ‘Aatmanirbhar Bharat’.
In recent times, Guyana has gained significant relevance in the oil and gas sector, becoming the newest oil producer in the world. The recent discoveries of 11.2 billion barrels of oil equivalent represent 18% of the total global discoveries of oil and gas, as well as 32% of the discovered oil.
According to the OPEC 2022 World Oil Outlook report, it is projected that Guyana will experience a significant increase in production, with liquid supply expected to rise from 0.1 million barrels per day in 2021 to 0.9 million bpd in 2027.
According to BP’s World Energy Statistical Report 2022, India ranks third globally in energy consumption, third in oil consumption, and fourth in refining. Additionally, it is the fastest growing economy with increasing energy needs.
According to the BP Energy Outlook and the International Energy Agency, it is predicted that energy demand in India will increase by around 3 percent annually until 2040, compared to the global average of 1 percent. Furthermore, India is expected to account for 25-28 percent of global energy demand growth between 2020 and 2040.
India is focusing on promoting new partnerships in the hydrocarbon sector in order to further enhance access, availability, and affordability of energy for its citizens. This is supported by the country’s energy security. India aims to achieve this by diversifying sources of crude oil and acquiring high-quality assets overseas. This strategy reduces India’s dependence on a single geographic or economic unit and strengthens its strategic capacity.
Considering the meaning of Guyana and the renewed push for bilateral relations in the hydrocarbon sector, as well as the numerous potential areas for cooperation, the government suggests signing a Memorandum of Understanding (MoU) with Guyana regarding cooperation in the hydrocarbon sector, it added.
