India is looking to invest more funds in overseas oil projects through its state-run refiners, a move that would help offset the impact of slow production rate from aging fields at home and reduce the overall dependence on imported feed stocks, government sources and analysts told S&P Global Commodity Insights.
The recent announcement by India to invest $1.6 billion in a project in Brazil for equity oil highlights the strategic interest of New Delhi to look for pockets of opportunities overseas, with analysts saying New Delhi is keen to explore such opportunities in other Latin American countries as well.
"Besides expanding strategic petroleum reserves and diversifying its crude supply sources, the government is making effort to bring oil from overseas equity assets in the event of a supply disruption," said Lim Jit Yang, advisor for Asia-Pacific oil markets at Platts Analytics.
"Supply security is becoming more important as global spare capacity has been uncomfortably low. In addition, India's ageing oil wells are struggling to keep their domestic oil production steady amid growing oil demand," he added.
Prime Minister Narendra Modi's cabinet in late-July approved a proposal to invest $1.6 billion to develop an oil block in Brazil in an attempt to procure equity oil overseas. The investment will be through Bharat PetroResources Ltd. or BPRL, which holds 40 % stake in the BM-SEAL-11 project, while the remainder is held by Brazil's state-run Petrobras, the operator of the block.
BPRL is the exploration arm of state-run Bharat Petroleum Corp. In 2008, BPRL had bought a stake in the Brazil project. The Brazilian oil block is expected to go on stream from 2026-27, the oil ministry said.