By RAJESH ROY, BIMAN MUKHERJI and SAURABH CHATURVEDI
NEW DELHI -- India and Iraq on Friday signed an
energy-cooperation agreement spanning oil exploration and refining as well as work toward
establishing a 10-year crude oil supply agreement from the
Middle East nation.
Iraq is eager to boost oil supplies to India, one of the
largest oil consumers, in the face of shrinking demand from the
US, which has been getting more of its oil and gas from
domestic shale deposits in recent years.
India also wants to increase imports from Iraq, its
second-largest oil supplier after Saudi Arabia, as a
replacement for dwindling shipments from traditional supplier
Iran amid the West's sanctions on Tehran.
Indian Prime Minister Manmohan Singh said the
energy-cooperation agreement "will provide a very strong
framework to further diversify our cooperation in this sector
and we look forward to concrete progress in the near
Neither side said how much additional oil India is likely to import under the
long-term agreement. India's crude-oil imports from Iraq are
currently estimated at about $20 billion annually.
Earlier in the day, Indian Trade Minister Anand Sharma said
that the two countries would explore the possibility of a
trade-payment mechanism in their local currencies as the
nations seek more partnerships in various sectors.
Last year, India introduced a rupee
trade-payment mechanism with another major oil exporter, Iran.
However, the international sanctions have made it tough for
shippers to secure insurance for carrying Iranian oil to
The trade talks with Iraq follow a dispute with Iran over
its detention of an Indian oil tanker carrying crude oil from
Iraq. Iran has denied any political motive and alleged that the
Indian tanker was polluting, but the Indian side says the
vessel was compliant with laws.
Indian oil companies, which so far haven't actively
participated in Iraq, now appear more interested in tapping
more oil from the country.
Iraqi Prime Minister Nouri al-Maliki said his country will
seek partnerships with India in pharmaceuticals, chemical and
As part of the discussions, Iraq also offered state-run
Indian companies exploration of three oil and gas
blocks in Middle Furat Oil Field.
It also allowed three Indian oil companies -- ONGC Videsh
Ltd., Mangalore Refineries & Petrochemicals Ltd. and Reliance
Industries -- to bid for the Nasiriya oil and gas project.
An analyst said that India needs to strike a balance between
Iran and Iraq for its energy needs.
Sanjay Kaul, president at University of Petroleum and Energy
Studies, said for India's energy needs, Iran is a "current
solution" while Iraq offers a future potential.
India would probably need time to
arrive at a rupee payment mechanism with Iraq similar to Iran,
which essentially works like a barter trade agreement.
Dow Jones Newswires