The great Indian oil hunt is traversing regions and Russia is going to be an important milestone in that journey. Sample this: India is willing to source 20 per cent of its rapidly increasing oil and gas requirement from Russia.
Assuming an annual gross domestic product (GDP) growth rate of 7-8 per cent over the next few years, India's oil and gas requirement is expected to rise to 5 million barrels of oil equivalent a day in the next 5-7 years.
"We are willing to source 1 million barrels a day from Russia and the target is achievable in 5-7 years," an official said.
Most of this is expected to come through the sea route either directly or through swap deals with Japan, China or South Korea. Oil and Natural Gas Corporation (ONGC), for example, is planning to bring in natural gas from Sakhalin I in a liquefied form.
This will be the first time that India will source oil or gas from Russia. Sakhalin I is expected to start gas production this year and crude oil next year.
Since Japan and South Korea were not open to buying natural gas from Sakhalin I through pipelines, a swap or direct export to India were the only plausible options for ONGC, said an official. ONGC has a 20 per cent participation in Sakhalin I, which is estimated to have a production capacity of 350,000 barrels a day.
Petroleum Minister Mani Shankar Aiyar has also conveyed to Russia that while India is interested in specific properties, an umbrella cooperation in the hydrocarbon sector will be ideal since the two sides shared strong bilateral ties.
Infrastructure and the user industry could be established in India within two years of reaching a cooperation agreement with Russia, the official said.
ONGC is also vying for a 15 per cent equity in Yugansk, the recently nationalised production unit of the troubled Russian oil company Yukos. It is in the race for Sakhalin III with Russia's state-owned Gazprom.
"Production from Sakhalin I cannot be brought to India through pipelines in the short term due to geopolitical reasons," said ONGC Chairman Subir Raha, adding that a pipeline would have been the least-cost option.
He said the company had ordered five ice-breaker tankers for bringing natural gas and oil to a warm water port of Russia. ONGC plans to transport both LNG and oil via the Pacific sea route. Besides, officials said Japan and Korea were not open to buying natural gas from Sakhalin I through pipelines.
In the event of swap deals, ONGC plans to target the Far East countries including South Korea, China and Japan but Raha said price would be a crucial factor as crude oil from Sakhalin was expected to be sweet, which has higher value.