Opinion
- Editorial
Nirmala Harrylal :
India, Latin America connect through energy
India
is emerging as a leading exporter of petroleum products.
Provisional data for production of petroleum products
for the year 2004-05 was placed at 120.47 million
tonnes, up from the previous year’s 115.78
million tonnes.
Middle
distillates, such as kerosene, high-speed diesel
and aviation turbine fuel accounted for the largest
chunk of total production, followed by light distillates.
Provisional figures of exports of petroleum products
in 2004-05 stood at US$6.8 billion.
The
exports of petroleum products have increased by
more than 90 per cent in 2004-05, over the previous
year. As a result, petroleum products increased
its ranking in India’s exports from eighth
position in 2000-01 to fifth position in 2004-05.
In
short, India has transformed itself into a surplus
petroleum producing nation in the last three years,
thanks to additional refining capacities created
in this sector.
Its
major export destinations for petroleum products
include Singapore (25.5 per cent), Iran (9.8 per
cent), United Arab Emirates (7.4 per cent), The
Netherlands (5.1 per cent), Sri Lanka (4.5 per cent),
Indonesia (4.4 per cent), Brazil (4.3 per cent),
Nepal (3.1 per cent), South Africa (3.1 per cent),
and Togo (three per cent).
These
ten countries together account for over 70 per cent
of India’s total petroleum products exports.
High-speed
diesel (39.4 per cent), light oils and preparations
(19.5 per cent), aviation turbine oil (13.8 per
cent) and fuel oil (eight per cent) are the major
petroleum products being exported from India. And
India is still keen to secure more resources in
order to meet its accelerating energy demands.
Latin
America, however, is emerging as one of the prominent
destinations of exports for Indian petrochemicals
products.
Though
the proximity to the US markets allows for US-based
petroleum products to flood the Latin American markets,
India’s contribution of exports has increased
over the years.
With
the steadying of the economic growth in Latin America
and the emerging currency stability across Latin
American countries, petroleum is emerging as an
important industry.
The
supply trend of crude oil has increased steadily
over the last five years and is slated to increase
substantially in the next few years, given the economic
stability in the region.
Central
and South America have an estimated 98.848 billion
barrels of crude oil reserves, spread across the
continent with Venezuela accounting for around 78
per cent of the total crude oil reserves.
India
has a tremendous opportunity to increase its stake
in Latin America and its exports in the energy sector
to that region.
India’s
largest export market for petroleum products in
Latin America is Brazil.
The
most important commodity exported in terms of value
to the Brazilian market is petroleum oils and extracts
of petroleum oils. Exports in 2004-05 to the Brazilian
market earned a whopping US$295.62 million, compared
to the US$22.84 million earned in the previous year.
By
virtue of economies of scale, the United States
is the leading exporter of petroleum products to
the Latin American region.
Free
trade agreements (FTAs) and regional trade agreements
(RTAs) between the US and the Latin American countries
have also contributed to this trend. Trade between
the Latin American countries is also significant
with oil economies like Venezuela finding ready
export markets within the Latin American continent.
According
to the India Brand Equity Forum Web site, Reliance
Industries Ltd (RIL) is in advanced negotiations
with Mexican oil giant Petroleos Mexicanos (Pemex)
for co-operation in exploration and development
of oil and gas fields in shallow and deep waters
off the Gulf of Mexico.
In
September 2004, the Venezuelan foreign minister,
accompanied by a high level delegation, visited
India to revive both political and trade relations.
The highlight of the visit was Venezuela’s
offer to India of five oil fields—three for
discovery and two for exploration.
As
a result of negotiations at the highest level of
the Government, India has begun investments in Venezuela.
The single largest Indian investment in Latin America
is the US$50 million project as a result of a memorandum
of understanding (MOU) signed between Oil Videsh
Ltd, a subsidiary of Oil and Natural Gas Corporation
(ONGC) and Petroleos de Venezuela (Pdvsa), the Venezuelan
State oil firm.
India
has also signed a preferential trade agreement (PTA)
with Chile on January 20, 2005.
According
to the agreement, India has offered to provide fixed
tariff preferences ranging from ten per cent to
50 per cent on 178 tariff lines at the eight digit
level.
Similarly,
Chile has offered tariff preferences on 296 lines
at the eight-digit level.
The
products covered in the agreement account for more
than 90 per cent of the value of total bilateral
trade amounting to US $447.54 million during 2004-05.
Though
the products covered under this PTA are not specifically
linked to petroleum, the possibility of extending
this PTA to cover petroleum products will facilitate
Indian petroleum exports to Chile.
One
of the most important preferential trade agreements
that India has signed is with Mercosur.
A
framework agreement was signed on June 17, 2003
and, as a follow up, a PTA was signed on January
25, 2004. The region holds significant potential
for Indian exports of petroleum products, as our
share is just 0.83 per cent of the global imports
of Mercosur.
In
conclusion, as India continues to grow so, too,
will her demand for energy. Undoubtedly, this will
call for enhanced exploration and development activity
to ensure greater self-reliance. Latin America is
well poised to capitalise on the opportunities that
will come its way.
Nirmala Harrylal
is senior associate, Centre for Leadership Assessment
and Development, Arthur Lok Jack Graduate School
of Business. Petroleumworld not necessarily share
these views.
Editor's
Note: This commentary was published by The
Trinidad Guardian,
on
July 20th 2006, Petroleumworld reprint this article
in the interest of our readers.
All
comments posted and published on Petroleumworld,
do not reflect either for or against the opinion
expressed in the comment as an endorsement of Petroleumworld.
All comments expressed are private comments and
do not necessary reflect the view of this website.
All comments are posted and published without liability
to Petroleumworld.
Petroleumworld encourages persons to reproduce,
reprint, or broadcast Petroleumworld Editorial articles
provided that any such reproduction identify the
original source, http://www.petroleumworld.com and
it is done within the fair use as provided for in
section 107 of the US Copyright Law
Internet web links to http://www.petroleumworld.com
are appreciated.
Petroleumworld
07 23 06
Copyright
© 2006 Nirmala
Harrylal/The
Trinidad Guardian.
All rights reserved
