Kuwait agrees to a longer credit period; will take equity in ONGC projects

The longer credit period would help state-owned Indian refineries

Kuwait has agreed to extend the credit period on crude oil sales to India from the current 60 days to 90 days. After a meeting on Tuesday, the two countries agreed to put in place the new system soon. This would help state-owned Indian refineries that face tight cash flow problems due to time lag in disbursement of government subsidy.

Kuwait is the fourth largest oil importer to India, after Saudi Arabia, Iraq and Venezuela. India bought around eight million tonnes (mt) from that country till recently.

But with India deciding to lower its crude oil imports from Iran by 15 per cent  to 9-9.5 mt next year, from an estimated 11 mt in 2013-2014, its dependence on other countries is expected to increase.

Besides, in a first step towards taking in Kuwait as a equity partner in its two major projects, Oil and Natural Gas Corporation (ONGC) Ltd also signed a memorandum of understanding with Kuwait Petroleum Corporation for collaboration across the petroleum value chain. The state-run Kuwaiti company will take stakes in ONGC Petro Limited (OPaL) and ONGC Mangalore Petrochemicals (OMPL).

Interestingly, the MoU, which extends to upstream, downstream, sales and marketing segments, also saw ONGC offering services of its 5,000 retired employees to the national oil company of Kuwait. “It is just the start of a relationship. In two projects, we are becoming strategic partners,” said Nizar Al-Adsani, deputy chairman and chief executive officer of Kuwait Petroleum Corporation (KPC).

For OPaL project at Dahej special economic zone, ONGC was looking for a foreign participation of about 25 per cent. ONGC holds 26 per cent in the venture, in which GAIL and GSPC are also partners.

ONGC Chairman and Managing Director Sudhir Vasudeva said, “We have offered about 26 per cent stakes in both the projects, which would see an investment of $200 million each. We have come out with a directory of 5,000 retired employees of ONGC yesterday (on Monday). We are providing it to KPC to make use of their expertise and would also give additional expertise if required.”

While the OPaL petrochemical venture would see an investment of Rs 21,000 crore, OMPL would be in the range of Rs 5,700 crore. ONGC holds 26 per cent stake for OPaL. It has formed a joint venture with Gujarat State Petroleum Corporation and GAIL India for the remaining 15.5 per cent. The special purpose vehicle is yet to rope in a partner for the remaining equity. Kuwait has also shown keenness in Bharat Petroleum Corporation Ltd’s proposed chemical unit at Kochi.

India has also welcomed Kuwait’s investment in the upcoming liquefied natural gas terminals at Visakhapatnam, Mangalore and Padur.