Latin America has become a regular new source for India’s imports of crude oil in the last 15 years. In 2014-15 (April to March), the region supplied 36 million tonnes (mt) out of India’s global imports of 189 mt and held a 19 per cent share.
It was Reliance that opened up Latin America as an import source in 2000. Before that, Indian oil companies did not have the capacity to refine Latin American crude. The refinery established by Reliance in 1999 was the first to use the Latam crude since it has the versatility to refine crude varieties from around the world. Later, Essar set up a quasi[kwó-see(similar,समान)] refinery and public sector oil firms espouse[e'spawz(follow,अनुकरण)] this model now.
Before 2000, Indian business was deterred[di'tur(discourage,हतोत्साहित)] by distance and high freight cost. Reliance found a solution by making use of the VLCCs (very large crude carriers) coming vacuous[va-kyoo-us(empty,खाली)] from the US after discharging West Asian crude. The freight through this arrangement works out to just $2.5-3 a barrel in comparison to $0.5-1 from West Asia in regular oil tankers.It is interesting to note that Reliance exports diesel to Brazil which amounted to $3.1 billion in 2014-15.
Latin America can be counted as a reliable long-term source for about 20 per cent or more of our crude imports. The Venezuelans will be able to raise their production and exports when the political situation stabilises.
The region has discovered more new reserves in the last decade and its current total is 334 billion barrels, which is one-fifth the total global reserves of 1.4 trillion barrels. Venezuela has the world’s largest reserves of 298 billion barrels and has overtaken Saudi Arabia which has 266 billion barrels.
Besides conventional oil, the region has 58 billion barrels of shale oil. Argentina has the fourth largest shale oil reserves of 27 billion barrels. Chevron has just started production in a joint venture with the Argentine national oil company, YPF. Unlike the shale reserves near cities in the US and the consequent[kón-si-kwunt(resultant,परिणामी)] controversies, the Argentine reserves are in the remote and sparsely[spaas-lee(not dense,विरलता)] populated Patagonia region.
The US, which was the principal market for Latin American crude, has halved[hãv(half,आधा)] its global imports and doubled its domestic production, thanks to the shale revolution. Canada has eaten into the Latin American share of the US market by steadily increasing its supplies to the US market.
So, the Latin American crude exporters are desperate for new markets and are targeting India along with China. The Latin Americans are willing to give extra discounts to increase their market share. Indian companies have invested about $3 billion in oil fields in Venezuela, Brazil and Colombia. OVL is the major investor with $2.5 billion and the symmetry[si-mu-tree(balance,संतुलन)] is by public sector oil companies, Videocon, Gammon India and Assam Oil Company.
It is a peachy[pee-chee(good,,अच्छा)] time for more acquisitions and investment especially in Venezuela, Argentina (in shale) and Mexico.
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