Source: KA Badarinath, Siddhartha P Saikia May 06 2010 , New Delhi
Venezuela has offered to partner with India to set up a $100 billion
sovereign wealth fund to jointly acquire energy assets globally.
While India is not averse to the idea, New Delhi has asked Caracas to come up with a formal proposal to explore possibility of bidding for oil and gas assets.
The wealth fund will also be leveraged to mine gold, diamonds and iron ore in Venezuela and other Latin American countries.
“India has asked for a draft of the proposal. It will be discussed with concerned ministries and companies dealing in energy sector,” said an external affairs ministry official, requesting anonymity.
The fund would be set up with an initial corpus of $10 billion and scaled up over five years. To sweeten the deal and re-launch economic as well as trade relations with India, Venezuela has offered to supply an additional 100,000 barrels crude oil on daily basis at pre-determined rates irrespective of crude markets fluctuations globally. India sources about 150,000 barrels crude from Venezuela per day. Venezuela has garnered $4 billion worth revenues in oil trade during 2009. “We are ready for extra supplies to other refineries that are duly equipped to receive Venezuelan crude with special characteristics," Venezuela's vice minister for foreign affairs Temir Porras Ponceleon said on Wednesday.
The fund was first proposed by Venezuelan president Hugo Chavez to prime minister Manmohan Singh in 2006. This proposal was pursued by Ponceleon in his summit-level talks with foreign secretary Nirupama Rao on Wednesday. The proposal also figured at Ponceleon’s meeting with oil minister Murli Deora. India is the only Bric nation that does not have a sovereign wealth fund. China, Singapore, Saudi Arabia, Norway, Kuwait and Russia are among top countries that have large wealth funds to make investments abroad. Chinese firms spent $32 billion last year to buy energy and metals assets abroad. China Investment Corporation, set up in 2007 with a corpus of $200 billion, is one of the largest sovereign wealth funds in the world.
India’s energy consumption may more than double by 2030 to 833 million tonnes of oil equivalent, based on present trends, driven by population growth and an industrial build-up, as per International Energy Agency (IEA) projections. When contacted, R S Sharma, CMD, ONGC, refused comment. “Such a fund would be very helpful to compete with the Chinese companies,” Sharma had earlier told Financial Chronicle. The government is already weighing the option to set up a sovereign wealth fund to help Indian oil and gas companies to compete for overseas energy assets.
Oil ministry has asked finance ministry to consider setting up a fund using a part of India’s $254 billion forex reserves. “So far, we have not received any communication from the government on creating a sovereign fund with Venezuela,” said T K Ananth Kumar, director (finance), Oil India.
“The government is planning to create a sovereign fund for sometime now. It is at a preliminary stage. India shares good relations with Venezuela. But, several factors have to be analysed before joining hands for a fund of such big size,” Kumar said.
“We will have to analyse several factors such as investment opportunities, kind of assets where we will focus and how both the countries would contribute before creation of such a fund,” said S V Narasimhan, director (finance), IOC.
Meanwhile, Deora and chief executives of top oil companies will leave for Venezuela next week to seal the largest energy deal of $2.2 billion. OVL, IOC and OIL have jointly picked up a significant stake in oil assets at Carabobo –1 block in Venezuela’s Orinoco belt.
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