India and Guyana have agreed to cooperate in the hydrocarbon sector, covering the complete value chain from exploration and production to refining and renewables. The Union Cabinet, chaired by Prime Minister Narendra Modi, has approved the signing of a Memorandum of Understanding (MoU) between the Ministry of Petroleum and Natural Gas, India and the Ministry of Natural Resources, Guyana, on January 5, 2024.
Scope of the MoU
The proposed MoU covers various aspects of cooperation in the hydrocarbon sector, such as:
- Sourcing of crude oil from Guyana, which has recently emerged as the world’s newest oil producer with significant discoveries of 11.2 billion barrels of oil equivalent.
- Participation of Indian companies in exploration and production (E&P) sector of Guyana, gaining experience by working with global oil and gas companies in upstream projects.
- Cooperation in the areas of crude oil refining, capacity building, strengthening bilateral trade, collaboration in natural gas sector, collaboration in developing regulatory policy framework in oil and gas sector in Guyana.
- Cooperation in the area of clean energy including biofuels as well as renewables sector including solar energy.
Impact of the MoU
The MoU on cooperation in hydrocarbon sector with Guyana will have several benefits for both countries, such as:
- Strengthening bilateral trade, fostering investment in each other’s countries and helping diversifying source of crude oil, thus augmenting the energy and supply security of India.
- Providing opportunity to Indian company to participate in E&P sector of Guyana, thus fostering the vision of “Aatmanirbhar Bharat”.
- Enhancing India’s role as a reliable partner in the global energy market and supporting Guyana’s development goals.
Implementation strategy and targets
The MoU shall enter into force on the date of its signature and will remain in force for a period of five years. It shall be automatically renewed thereafter on a quinquennium basis unless either party gives the other party a written notice three months in advance of its intention to terminate this understanding.
Background
In recent times, Guyana has gained significant salience in the oil and gas sector becoming the world’s newest oil producer. The new discoveries of 11.2 billion barrels of oil equivalent, amounts to 18% of total global oil and gas discoveries and 32% of discovered oil. As per OPEC World Oil Outlook 2022, Guyana is projected to see a significant ramp-up in production, with liquids supply growing from 0.1 mb/d in 2021 to 0.9 mb/d in 2027.
Further, as per BP Statistical Review of World Energy 2022, India is the world’s third largest energy consumer, third largest consumer of oil and fourth largest refiner and the fastest-growing major economy with rising energy needs. BP Energy Outlook and International Energy Agency estimate that India’s energy demand would grow at about 3% per annum till 2040, compared to the global rate of 1%. Further, India is likely to account for approximately 25-28 per cent of the global energy demand growth between 2020-2040.
With a view to give a further impetus to ensure energy access, availability, affordability to citizen underpinned by energy security of the country, India is focusing on fostering new partnership in hydrocarbon sector, both through diversification of crude oil sources and through acquiring quality overseas assets.