India keen to join Baku oil hunt

Oilmen have always called Baku the next Kuwait, and it now appears that this nation of 8 million people is finally on the cusp of raking in the oil dollars. Cranes dominate the skyline of this elegant city, as an unprecedented real estate boom shows no signs of abating.

Azerbaijan’s economy is driven by the flurry of pipelines that will disgorge Caspian Sea oil to buyers in Europe and the rest of the world. The assets are phenomenal: with reserves of 5.4 billion barrels, just one oilfield, the Azeri-Chirag-Gunashli is among the largest in the world.

And then, there’s the showpiece pipeline — the BTC, or Baku-Tblisi-Ceyhan — which will come onstream in the next quarter, and become the single-point pipeline from the Caspian Sea to the Mediterranean Sea. With a capacity of 1 million barrels per day, the BTC will be crucial to the region’s development.

Where does India fit into all this? Petroleum Minister Mani Shankar Aiyar agrees that there is no current connection between Caspian output and India, but is playing the Asian card in the hope of expanding sources of energy for an economy that desperately needs energy to fuel its growth potential.

Aiyar’s first gambit in Baku — suggesting that an oil ‘‘Suez Canal’’ from near the Mediterranean port of Ceyhan would help reach oil to South Asia — was intended to provoke rather than be taken seriously. The Eilet-Ashkelon pipeline is in Israel and is reportedly not in tip-top condition.

Anyway, Aiyar hit the mark with a presentation in an initially-sceptical Baku, followed by encouraging meetings with President Ilham Aliyev and Energy Minister Majid Karimov. ‘‘The first drops of oil would reach us in 2005-06,’’ he claimed.

The outcome is obvious: greater energy cooperation between the two nations, to start with. For one, India will begin the process to import crude from Azerbaijan. A Joint Working Group (JWG) will be set up between the two nations to craft a more comprehensive energy dialogue. While the first meet will be in Delhi soon, the energy ministers will pay bilateral visits in the next six months. ‘‘We have an open policy towards enhancing our oil economy. Oil globalisation would benefit both nations,’’ says Majid Karimov, Azerbaijan’s energy minister.

Over and above the proposed purchase agreement via IOC, there will also be talks with the local oil major SOCAR to explore the possibility of using Indian expertise to upgrade their refineries. Aiyar has also invited Azerbaijan to invest in Indian refineries. Gail is in talks to bid/search for gas in the Caspian Sea, along with the prospects of onshore gas processing.

Azerbaijan’s energy economy is dominated by crude, and gas plays a marginal role though a big gas development at Shah Deniz will change all that when it comes onstream a couple of years later. Finally, India has also sought an entry into the Baku-Turkmenbashi development, which could be a bridge into the increasingly important Turkmenistan-Afghanistan-Pakistan pipleine it seeks to join.

All in all, India’s objective of marking its presence in one of the most exciting oil economies of the world has begun. As Baku waits for its change in fortunes — one estimate puts the gains to Azerbaijan over the next twenty years at a staggering $128 billion — India’s first step will have to be diligently followed through.