HomeMediaLatest NewsThe global energy driver needs the Russian raw materials

The global energy driver needs the Russian raw materials

09 September 2021

Gromov Alexey I. Principal Director on Energy Studies, Head of the Energy Department

Alexey Gromov, Principal Director on Energy Studies of the Institute for Energy and Finance, commented to Oil and Capital on the prospects for cooperation between Russia and India in the energy sector.

Russia and India will face lengthy rounds of negotiations, since, despite the interest of both countries in joint energy projects, there are significant constraints.

Alexey Gromov believes that in the near and medium term, India is one of the most promising partners of Russia in increasing hydrocarbon supplies, and even more than China: “the main projects with China have already been implemented, we are only waiting for reaching its design capacity. While with India colossal prospects are visible for increasing energy trade, the participation of Russian companies in energy projects in India, as well as increasing presence of Indian capital in Russian mining assets,” the expert said.

According to him, in India itself, entire groups of projects are of interest to our companies: “One of such groups is the development of gas transportation infrastructure in India. That is, the connection of the Indian states with a single gas supply system on the model of the Russian one. Gazprom has tremendous experience in this area, and Russian contractors are ready to take part in the gasification of India. The second group includes the implementation of oil and gas production on the Indian shelf,” Gromov explained.

At the same time, the expert clarified that in India there are a number of restrictions that impede the work of foreign investors:

“The fact is that the internal energy market in India is regulated by the state completely. For example, oil and gas produced domestically are sold much cheaper than imported ones. This slows down the development of this industry.

In general, state-owned companies dominate in India, and to a greater extent than in the modern Chinese economy. That is, there is a high degree of regulation and low profitability of the business. This reduces the margin for any oil and gas projects with foreign capital if they are targeted at the Indian domestic market. At the same time, for example, one of the conditions for the development of shelf fields in the Arabian Sea is the clause on the supply of oil from these fields to the domestic market. When implementing such projects, not all companies will agree to work with low margins. This is one of the features of the Indian energy policy that hinders the attraction of foreign investments,” the expert recalled.

Answering the question about how Russian oil can compete with the Middle East on the Indian market, Gromov said that it is already successfully competing, even taking into account the logistics. “Russia has already entered the Indian oil refining market; Rosneft is a shareholder in the largest oil refinery in India. This project is being implemented on the basis of using the oil of the Russian company as a raw material. Therefore, Russia has good chances to compete with Middle Eastern oil suppliers to the Indian market,” the expert noted.

Touching upon the topic of gas supplies, Gromov clarified that now Russian liquefied gas is one of the most competitive LNG in the world: “It is more profitable to sell it in India than Australian or American LNG. Only Qatari liquefied gas will be cheaper than Russian raw materials, also due to the short logistical leverage. But the main constraint is India's reluctance to reform its energy governance. There are different prices for gas - “blue fuel” produced domestically is cheaper than imported one. If this problem is resolved, then the prospects for the development of Russian LNG exports can be characterized as the most optimistic,” Gromov emphasized.

Gromov Alexey I. Principal Director on Energy Studies, Head of the Energy Department
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