In May, shortly before he spoke to Congress in Washington, Indian Prime Minister Narendra Modi traveled to Tehran to sign a deal with the leaders of Iran and Afghanistan to develop a port on the Gulf of Oman, with India providing $500 million in financing. “Iran has prioritized expanding relations with those states that stood by its side when it was under sanctions,” Tehran-based political analyst Mostafa Khoshcheshm said on Iranian state television in May. India, though pressured to buy less oil from Iran, stayed close to the country during the sanctions. The port deal strengthens ties between Iran and India, which accounted for almost a third of Iran’s oil exports in March.
The prime minister is looking north, too. India’s largest oil company, state-owned Oil & Natural Gas Corp. (ONGC), completed a $1.3 billion purchase of 15 percent of Vankor, one of the biggest Russian oil fields to go into production in the past 25 years. Three other companies—Oil India, Indian Oil, and Bharat Petroleum’s Bharat PetroResources—on June 17 agreed to buy 23.9 percent of Vankor. The rest is owned by Russia’s top oil company, state-controlled Rosneft.
The Indians aren’t finished. Indian companies are considering buying a stake in Rosneft itself, Dharmendra Pradhan, the country’s oil minister, told reporters in New Delhi on June 23. With Indian investment in Russian oil projects reaching up to $6 billion, strong bilateral relations “will ensure India’s energy security for a long term,” he said. By taking stakes in overseas projects, India also ensures local companies benefit from the money spent on imported oil and gas.
For Modi, securing a reliable supply of oil and gas is a “foreign policy priority,” says Ashok Sharma, an international-relations fellow at the University of Melbourne’s Australia India Institute. India “can’t afford not to focus on energy security.” The previous government had similar goals, but Modi has made them a higher priority, says Dhruva Jaishankar, a foreign policy fellow at Brookings India, a New Delhi-based affiliate of the Brookings Institution. “You have seen the government be very aggressive,” he says.
Demand for oil is growing faster in India than anywhere else. It jumped 400,000 barrels a day in the first quarter, to 4.4 million barrels, accounting for almost 30 percent of the increase in worldwide consumption, the International Energy Agency said in May. Driving that thirst is India’s growing car market: Domestic vehicle sales rose 5.6 percent in the year ended in March, to more than 20 million, helping propel a 14.5 percent increase in gasoline purchases. The IEA expects the country to account for 25 percent of global demand growth from 2013 to 2040.
India imports more than three-fourths of its oil and about 40 percent of its gas, putting pressure on the rupee and the trade deficit. By 2022, Modi wants to reduce import dependence by 10 percent, so he’s offering attractive terms to foreign companies to drill off India. “Entrepreneurs who have capped their wells in Alberta or North Dakota will be looking at this kind of story with a greater amount of interest,” says Atanu Chakraborty, head of India’s oil-regulating Directorate General of Hydrocarbons. Even so, the country still needs imports. “India just doesn’t seem to be blessed, or cursed, with large deposits of oil and gas,” says Brookings India’s Jaishankar.
Modi has hunted for deals in Saudi Arabia, the United Arab Emirates, and Qatar. Energy security was on the agenda when he visited Mozambique on a trip scheduled for July 7. Indian companies including ONGC, Oil India, and Bharat Petroleum own 30 percent of a gas field off of Mozambique. Lead developer Anadarko Petroleum, a Texas-based exploration company, says the field has the potential to make Mozambique the world’s third-largest exporter of natural gas. Indian companies have already spent as much as $6 billion on it. State-owned gas distributor Gail India in April became the first Asian company to buy shale gas from the U.S. By 2018, India will be importing about 6 million metric tons of U.S. liquefied natural gas annually.
—With Golnar Motevalli
The bottom line: With more Indians buying cars, the country is expected to account for 25 percent of global oil demand from 2013 to 2040.