The Reliance Petrochemicals plant in Jamnagar in Gujarat, western India. India presents new opportunities for energy companies from the region to invest in refining and partner with firms like Reliance Petroleum. Image Credit: Bloomberg

Abu Dhabi: Analysts see further strengthening of energy ties between India and the UAE as well as with other Gulf countries following the re-election of Narendra Modi as the Prime Minister of India for a second five-year term.

Prime Minister Modi visited UAE twice in the last five years and Indian firms signed a number of new deals with Abu Dhabi National Oil Company to boost ties between the two countries in the energy sector. The trend is likely to continue with oil exports as well as investments from the UAE and other countries in the region to increase in India’s energy sector in the coming years.

“India’s energy consumption is set to rise and Modi will have to deliver cheap energy to India’s farming sector and other industries. I think this means deepening of ties with GCC (Gulf Cooperation Council) notably Saudi Arabia, UAE and other countries in the region in import of oil as well as in investments,” said Jaafar Al Taie, managing director of UAE based Manaar Energy.

“Now with the exclusion of Iranian oil, there is even a bigger opportunity for GCC, India, energy bilateral ties. Saudi Arabia and the UAE is expected to partially replace Iranian barrels to supply oil to India.”

$ 44 b

Value of Aramco’s investment in Ratnagiri petrochemical complex

He also said India presents new opportunities for energy companies from the region to invest in refining and partner with firms like Reliance Petroleum and Hindustan Petroleum Corporation, among others to boost ties.

“There is also a big opportunity on the gas side too.”

UAE and Saudi Arabia are strengthening energy ties in recent times following high profile visits of leaders from both the countries to India.

In February this year, Saudi Arabia’s crown prince Mohammad bin Salman visited India and said there are investment opportunities worth $100 billion in various sectors in India.

Currently, Saudi Aramco is investing in India’s $44 billion Ratnagiri petrochemical complex on the west coast of India in cooperation with Adnoc. The two companies took 50 per cent stake in the project, with $22 billion investment coming from these two entities.

Adnoc, on the other hand boosted energy ties with Indian firms. Earlier this year, it awarded exploration rights for Abu Dhabi Onshore Block 1 to a consortium of two Indian oil companies, Bharat Petroleum Corporation Limited and Indian Oil Corporation Limited for a particpating fee of Dh626 million.

10 %

Stake taken by Indian consortium in Abu Dhabi’s Lower Zakum

It is also a stakeholder in one of India’s largest refinery and petrochemicals projects, to be constructed on India’s west coast and is the only foreign energy company to partner in India’s strategic petroleum reserves program.

In addition, in February 2018, for the first time, an Indian consortium of three companies, comprising ONGC Videsh, Indian Oil Company and Bharat PetroResources Ltd was awarded a 10 percent stake in Abu Dhabi’s offshore Lower Zakum Concession.

“India’s rapid economic growth will continue to drive demand for oil imports, due to India’s dependence on imported oil,” said Rajiv Biswas, Asia Pacific Chief Economist at IHS Markit.

“The UAE will therefore continue to be a key strategic economic partner for India, both as an important source of oil as well as a major source of foreign exchange remittances back to India from the large Indian expatriate community living in the UAE.”

He also said the economic outlook looks positive for the second term of the Modi-led BJP government, with GDP growth forecast to average around 7 per cent per year over the 2019-2023 period.

“With continued strong growth forecast for India, bilateral trade between the UAE and India is expected to continue to grow rapidly over the medium term, from the current level of $57 billion.”