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Indian oil and gas companies should look at hydrocarbon assets in regions such as the North Sea (UK) and East Mediterranean, which have the potential to create value over time, S&P Global Commodity Insights Senior Vice President and Chief Energy Strategist Atul Arya said.
Arya, who has in the past worked with oil major BP for over 20 years in various capacities, emphasised that it is important to analyse the value that asset will create over the long term.
“I think Indian companies need to kind of expand their horizons. I think what needs to happen is and also not to look at the bargain right now, because the tendency is (that) the price will go down and we will jump in. But deals are happening today. In fact, in the US, there were two big consolidations with Chevron buying Hess and ExxonMobil buying Pioneer (Natural Resources) in the last two to three months. They were not looking at the price, they were looking at the value, which is very important,” he elaborated.
India acquiring assets abroad
When asked about the regions where Indian oil and gas firms can explore acquisitions, Arya said that this is a long term game.
Referring to Harbour Energy’s around $9 billion deal in the North Sea recently, he said that the North Sea is a really good example. Located in northern Europe, the North Sea is part of the Atlantic Ocean. It is bordered by the UK, Norway, Denmark, Germany, the Netherlands, Belgium and France.
“These are very high quality assets. They’re mature assets. And remember, the UK is pretty stable, taxes are stable, the government is stable and (has) good relationship with India. So I think Indian companies need to kind of expand their horizon,” Arya explained.
Of course, do business with countries that India has good relationships with, but think broader than that because sometimes these relationships can then come back and create more challenges such as in Venezuela, Sakhalin-I, etc, he warned.
Arya said that Alaska is another good example, but added that it is “difficult” to work there considering the weather conditions.
“You have to be creative. The other great province is the Eastern Mediterranean. East Med is one of the largest gas provinces today in the world because of Egypt, Cyprus and Israel, all the countries with which India has good relationships,” he suggested.
According to the US EIA, the Oil & Gas Journal (January 1, 2022) said that Egypt has the largest crude oil reserves in the Eastern Mediterranean, holding about 3.3 billion barrels in proved reserves. Turkey is the second largest, holding 371 million barrels. Greece, Israel, and Jordan hold relatively small volumes.
In the case of natural gas, Egypt again has the largest reserves in the Eastern Mediterranean, followed by Israel, albeit they are significantly smaller volumes than the proved reserves in Egypt. Greece, Jordan and Turkey all hold below 1 trillion cubic feet (Tcf) of proved natural gas reserves.
Arya stressed that the question that firms need to ponder is “Where can I have more stability (but) may have to pay a higher price and do I get my value?”
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