Indian Prime Minister Narendra Modi’s recent visit to Guyana marked a turning point in energy relations between the two nations. Bilateral talks have highlighted the potential for long-term deals for the import of crude oil, as India seeks to diversify its energy supply sources.
India, which imports the majority of its oil, has seen its needs evolve with the decline of its dependence on the Middle East. In January-October 2024, this region accounted for 45% of Indian imports, up from 59% in 2021. The war in Ukraine accelerated Russia’s rise as a main supplier, but imports from new regions, such as Guyana, play a key role in this diversification strategy.
The opportunities offered by Guyana
Guyana, a small South American state, has become a major player in the oil industry since its crude production began in 2019. Its reserves estimated at 12 billion barrels of oil equivalent, combined with a projected production of million barrels per day by 2026, attracting the interest of major energy powers.
In 2021, test cargoes of Liza crude, a light, low-sulfur oil, were shipped to India. These first experiments demonstrated the compatibility of Guyanese crude with Indian infrastructure, but commercial exchanges have not progressed so far.
Challenges and competition
Despite the excitement about these opportunities, significant challenges remain. European competition for Guyanese oil remains strong, with European refineries suited to these types of light crude. Additionally, Indian refineries are primarily set up to process heavier, more acidic crudes from the Middle East.
The price differential for Liza crude, currently down compared to dated Brent, could however work in favor of Indian refiners. At $1.80 per barrel below Brent, this oil represents an economically viable alternative, provided that logistical and contractual conditions are favorable.
Exploration partnerships
Apart from import deals, India is also involved in oil exploration in Guyana. In January 2024, New Delhi signed a five-year agreement allowing companies like ONGC Videsh, the international arm of the Oil and Natural Gas Corporation, to bid for offshore blocks.
This collaboration in the upstream sector is crucial for India, which seeks not only to secure its supplies but also to strengthen its technological expertise and geopolitical influence. Ongoing discussions open up prospects for strategic partnerships in a region experiencing rapid energy growth.
A new strategic axis
As India reduces its reliance on traditional producers, Guyana is emerging as a key partner. This tie-up is part of a global strategy to secure reliable supplies while expanding India’s energy footprint globally. If the negotiations are successful, they could transform Guyana into a cornerstone of Indian energy policy.
