Guyana and India’s Fuel Security

Crude oil, also known as Black Gold, continues to be one of the most valuable commodities in the world as fuels like petrol, diesel, and jet fuel are made from crude oil. Countries rich in oil have built their economies on the sale of crude oil, while the rest of the world has to be dependent on these oil-rich nations. India comes in the ‘rest of the world’ category. We purchase 85% to 90% of our crude oil from other countries and spend billions annually.

However, there is much volatility in the international crude oil market that costs buyers like India a lot of time and money. Over the years, many of our governments have taken important steps in building India’s fuel security. One such step, taken by the current government, is the 5-year Initial Agreement with Guyana to improve oil ties in a mutually beneficial way.

5-year Initial Agreement

In January 2024, Guyana’s Ministry of Natural Resources and India’s Petroleum Ministry signed an MoU, approved by the union cabinet, to work together in the hydrocarbon sector. This MoU also covers the crude oil trade.

India has strong refinery capabilities and has a target of increasing its capacity to 6.2 million barrels per day, and this agreement with Guyana will play a significant role in helping India achieve this. This will also help India diversify its supplier list which reduces dependency on a particular source.

The Russian-Ukraine War created a major disruption in the crude oil market. Though India was in an advantageous position in this conflict, as India bought crude oil from Russia and supplied it to European countries, this volatility created an urgency in the country to find new suppliers.

Why Guyana?

After a discovery of 11.2 billion barrels of crude oil, Guyana became one of the newest oil producers in the world. This was a huge jump in their oil production which now stands to reach almost a million barrels per day. And India, owing to its new MoU, will be in the right place to take advantage. But this deal is equally beneficial to Guyana as they will receive significant investment in their upstream and downstream sectors. India will help Guyana improve its crude oil refining capabilities, develop a regulatory policy framework, and develop clean energy.

What does it mean for Investment in India?

This collaboration is going to have a drastic impact on India’s energy sector. So, as an investor, you should closely watch out for the following sectors for profitable investment.

• Oil Refineries – Public and private oil refineries in India are some of the best in the world. Their stocks and value are going to see substantial growth once the MoU comes into effect.
• Clean Energy Sector – This MoU is primarily a deal for the hydrocarbon sector, so the companies in India that work in clean energy will also stand to gain from this deal. They too will become a lucrative investment opportunity for investors.
• Foreign Investment – There will be large-scale foreign investment happening in both countries which will drive up the related sectors and the value of companies that will be a part of the MoU, so investors can take advantage and see their money grow as well.
• Aatmanirbhar Bharat – This will be a huge step towards fuel security and will succeed the current government’s motto of an Atmanirbhar ‘Bharat’.

Though the MoU is for 5 years, it will be renewed at the end of the 5 years unless either country backs out. The likelihood of this becoming a long-term collaboration is high as India and Guyana have always been on excellent terms politically and economically.