NEW DEHLI (Dow Jones Newswires), September 5, 2008
India signed an agreement with oil-rich Colombia Friday, potentially expanding the South Asian nation's role in exploration and production efforts in South America.
The agreement said the countries expected to jointly participate in exploration and production efforts, as well as refining, marketing and liquefied natural gas projects.
The agreement could have an impact beyond the two nations, as they vowed to enable their national oil companies to jointly participate in exploration ventures in other countries as well. To implement the plan, the countries will form a joint working group to "monitor the progress of objectives set out in this agreement."
The memorandum of understanding was signed by India's Minister for Petroleum and Natural Gas, Murli Deora, and Hernan Martinez Torres, Colombia's Minister of Energy and Mines.
Torres said the agreement would allow an exchange of technical knowledge between the two countries.
"There's a significant opportunity for us Colombians to benefit from Indian expertise in engineering," he said.
Indian oil giant ONGC Videsh Ltd. already operates in Colombia, and the agreement may open up the country to further involvement by ONGC and other Indian companies. ONGC has operated in Colombia since 2006, in a joint venture with China's Sinopec.
Colombia has the fifth-largest oil reserves in South America, with about 1.5 billion barrels of crude reserves and 525,000 barrels of oil production a day.
The agreement is the latest in a long line of joint ventures between countries with national oil companies. In the past few years, national oil companies have increasingly played the role previously played by integrated oil companies like Exxon Mobil Corp. and Royal Dutch Shell PLC, developing oil and gas resources internationally.
Colombia's Torres said the deal could pave the way for collaboration between the two countries, particularly in the mining sector, in which two Indian companies already participate.
The eagerness to do business with India is indicative of a new, more open, way of doing business in Colombia, according to Jose Armando Zamora, director general of Colombia's hydrocarbon agency.
"There is a shift," he said, adding the result will be an increasing ability for other companies to enter Colombia directly, without having joint ventures.
But as Colombia's ability to produce its reserves grows, the country is likely to try to refine the crude domestically and is not seeking a deal to export to Reliance Industry's giant new refinery in India, said Torres. The country's refinery in Cartagena is currently undergoing expansion.
The country is also seeking outside investment in its biofuels resources, according to Torres.
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