India needs to delve deep into LatAm

India's energy security has been predicated upon secure supplies, at prices that are as predictable as possible in the volatile hydrocarbons market

Prime Minister Narendra Modi has set a crackling diplomatic pace for his government. Barely two months after being sworn in, he was in Brazil in July 2014, where he met 12 Latin American leaders on the sidelines of the BRICS Summit. This triggered a more active engagement with a region benignly ignored by India despite its huge potential.

Minister of Petroleum and Natural Gas Dharmendra Pradhan made a landmark visit to Mexico and Colombia from May 17 to 22. Both countries are important sources of India's crude oil imports. Crude imports from Mexico in 2014 exceeded $3 billion. Imports from Colombia exceeded $2.6 billion. These figures are set to increase.

Mexico shares an undersea oil belt with southern USA in the Caribbean. Mexico's hydrocarbon resources are estimated at 115 billion barrels of oil equivalent (BOE). Three-fourths of these are identified as unconventional (shale oil, shale gas and deep waters). Colombia´s hydrocarbons sector shone bright earlier this decade. Production of oil and gas crossed the one million barrel per day mark in 2011.

The presence in both these countries of a delegation of the most powerful Indian oil and gas companies – three of them in the Fortune 500 list – was noted. High-level meetings with his counterparts, and the heads of the national oil companies, enabled the Minister to reiterate India's interest and reassure his interlocutors about India's commitment to invest capital and technology.

Over 20 per cent of India's crude oil imports worldwide come from five countries in Latin America: Venezuela, Brazil, Mexico, Colombia and Ecuador. India's energy security has been predicated upon secure supplies, at prices that are as predictable as possible in the volatile hydrocarbons market.

Term contracts concluded with the major Latin American suppliers by Reliance Industries, Essar and the state-run Indian Oil have been timely. In exchange for the mostly heavy, and cheaper, Latin American crudes, India exports petroleum products to that region. The strategy of Indian companies to invest upstream to secure oil equity has also been successful.

India's presence and weight in the global hydrocarbons industry was evident during the visit. Indian companies have a proven track record in offshore oil and gas exploration in the deepest waters. Massive refining capacities to process the heaviest Latin American crudes form the matrix for a mutually beneficial exchange of crude for diesel and other petroleum products.

Pradhan's visit was timely and seems to fit a pattern of engagement with the five oil and gas producing countries that matter in Latin America. A visit to Brazil is nevertheless on the cards when the situation stabilises. Close on the heels of Pradhan's visit, Minister of State for External Affairs V K Singh, visited Venezuela and Ecuador. This essential diplomatic thrust augurs well for India's energy security in a region whose hydrocarbon reserves rival those of the Gulf.

By Deepak Bhojwani