India and the UAE Sign Oil Pact
Indian Minister of Petroleum and Natural Gas Dharmendra Pradhan signed a deal with the United Arab Emirates (UAE) on January 25 to build strategic oil reserves in southern India. The 14 agreements enacted by the two nations delineate that India will lease part of its strategic storage facility to Abu Dhabi National Oil Corporation (ADNOC) in return for first rights to the stored oil in the event of an emergency. India maintains one of the fastest growing economies in the world, with GDP growth of 7.6 percent in the last fiscal year. It is also the world’s third-largest oil consumer. The UAE has partnered diligently with India, helping to spur its recent growth. This culminated in the joint announcement in 2015 of the establishment of a $75 billion infrastructure fund focusing on enhancing India’s infrastructure. Indian Prime Minister Narendra Modi spoke of his appreciation for the relationship between the two nations, saying, “We regard the UAE as an important partner in India’s growth story. I particularly welcome the UAE’s interest in investing in India’s infrastructure sector.”
India’s pact with the UAE, which was India’s fifth largest crude oil supplier from 2015 to 2016, will ensure India’s energy security and enable better supply to match India’s increasing demand for energy. Meanwhile, the UAE will benefit from increased cargo mobility to help meet shifts in demand. 36.87 million barrels of the Gulf nation’s crude oil reserves will be held in underground caverns in Mangalore, a city in the south of the subcontinent. This volume is equivalent to ten days of India’s average daily oil demand as recorded in 2016.
The two nations began talks for the leasing of strategic storage space in 2014, and the agreement was finalized on January 25 during a meeting between Prime Minister Modi and the Crown Prince of Abu Dhabi Sheikh Mohamed bin Zayed al-Nahyan. Elevating the bilateral relationship between the UAE and India to a Comprehensive Strategic Partnership is of importance to the neighboring nations, and Prime Minister Modi believes that the “convergence can help stabilize the region” and that the “economic partnership can be a source of regional and global prosperity.”