The Union Cabinet, under the leadership of Prime Minister Narendra Modi, has granted approval for the signing of a Memorandum of Understanding (MoU) between the Ministry of Petroleum & Natural Gas, Government of India, and the Ministry of Natural Resources, Republic of Guyana. This strategic agreement focuses on developing cooperation in the hydrocarbon sector, covering various aspects of the value chain.
The proposed MoU encompasses a comprehensive collaboration in the hydrocarbon sector, ranging from sourcing crude oil from Guyana to the participation of Indian companies in the Exploration and Production (E&P) sector of Guyana. Additionally, the agreement outlines cooperation in crude oil refining, capacity building, bilateral trade strengthening, collaboration in the natural gas sector, and joint efforts in developing a regulatory policy framework in the oil & gas sector in Guyana. Furthermore, the MoU includes a proposal to collaboration in the clean energy domain, spanning biofuels, renewables, and solar energy.
This collaboration is anticipated to have significant impact on both nations. The MoU is expected to fortify bilateral trade, encourage investments in each other’s countries, and contribute to diversifying the source of crude oil, thereby enhancing energy and supply security for India. Moreover, the agreement opens avenues for Indian companies to actively participate in the E&P sector of Guyana, fostering experience-sharing with global oil & gas companies involved in upstream projects. This aligns with the vision of “Aatmanirbhar Bharat” or self-reliant India.
The implementation strategy outlined in the MoU specifies that it will come into force on the date of its signature and remain effective for a period of five years, with automatic renewal thereafter on a quinquennium basis, subject to a three-month advance notice by either party for termination. Guyana has recently emerged as one of the significant players in the global oil & gas sector, marking its position as the world’s newest oil producer. With recent discoveries amounting to 11.2 billion barrels of oil equivalent, Guyana contributes to 18% of total global oil & gas discoveries and 32% of discovered oil. Projections from OPEC World Oil Outlook 2022 indicate a substantial increase in production for Guyana, with liquids supply expected to grow from 0.1 mb/d in 2021 to 0.9 mb/d in 2027.
On the other hand, India, as highlighted by the BP Statistical Review of World Energy 2022, is the world’s third-largest energy consumer, third-largest consumer of oil, and fourth-largest refiner. India’s economy, one of the fastest-growing among the major economies, exhibits rising energy needs, with estimates from BP Energy Outlook and the International Energy Agency projecting a growth rate of about 3% per annum in India’s energy demand until 2040, compared to the global rate of 1%. It is anticipated that India will contribute approximately 25-28% of the global energy demand growth between 2020 and 2040.
Given India’s focus on ensuring energy access, availability, and affordability, indicated by energy security, the country is actively pursuing new partnerships in the hydrocarbon sector. This involves diversifying crude oil sources and acquiring quality overseas assets to reduce dependencies on a single geographical or economic unit, thereby enhancing India’s strategic maneuverability.
Recognizing the strategic significance of Guyana and the renewed momentum in bilateral relationships within the hydrocarbon sector, the proposal for entering into an MoU with Guyana on cooperation in the hydrocarbon sector has been put forth. This move aligns with India’s vision to advance energy security, promoting international collaboration, and contributing to the sustainable growth of the hydrocarbon sector.
