Diplomatic tension unlikely to impact IndianOil’s Canada gas assets

New Delhi: The diplomatic tension between India and Canada may not impact the operations of Indian oil marketing and refining major Indian Oil Corp. Ltd's (IOC) Canadian subsidiary IndOil Montney Ltd, with dividend inflows to continue, said two people in the know of the developments.

IndianOil through its wholly-owned affiliate IndOil Montney Ltd, Canada had in 2014, bought 10% stake in shale gas assets in Canada’s British Columbia province and the country's West Coast from Malaysia’s Petronas in a $1.1 billion transaction.

“There would not be any impact on the operations. Dividends are coming from the stakes held by IndOil Montney. That will continue. We don’t see any hindrance there,” said one of the two persons mentioned above.

The statement comes as the diplomatic ties between the two countries hit a new low with both countries expelling each other's diplomats and India recalling its high commissioner from Canada last month. These moves were triggered as the Canadian police disclosed details about the alleged link between the "agents" of the Indian government and the killing of Hardeep Singh Nijjar, an alleged Khalistani leader and a Canadian citizen. Nijjar was a Khalistani separatist who was gunned down on Canadian soil in June 2023. He was a Canadian citizen but a designated terrorist in India.

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The India-Canada tussle

The relationship has soured over the past one year and India has accused Canada of resorting to "vote-bank politics'.

Another person in the know of the development also said that business ties between the two countries are unlikely to be hit despite the diplomatic tussle.

In 2014, IndOil Montney had signed transaction agreements with Progress Energy Canada Ltd (Progress Energy Canada), PETRONAS Carigali Canada BV (PCC BV), wholly owned affiliates of Petroliam Nasional Berhad (PETRONAS) for the acquisition of a 10% interest in Progress Energy Canada’s LNG-destined natural gas reserves in northeast British Columbia and in the proposed Pacific NorthWest LNG Ltd (PNW LNG) export facility on Canada’s West Coast.

LNG supply 

The initial plan was that as part of the transaction, IndianOil shall also offtake 1.2 million tonnes of liquefied natural gas (LNG) per annum (mrpa), which represents 10% of the LNG facility’s production, for at least 20 years.

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IndianOil's annual report for FY24 said: "The company has entered into Master Guarantee Agreement, on behalf of its subsidiaries viz. Indoil Global B.V. and Indoil Montney Ltd. for all of its payments and performance obligations under the various Project Agreements entered by the subsidiaries with PETRONAS Carigali Canada B.V. and Progress Energy Canada Ltd. (now renamed as Petronas Energy Canada Ltd.)."

It noted that the board of directors sanctioned a total amount of Canadian $3,924.76 million.

Although efforts have been underway to source LNG from Canada, supplies have not materialized so far, in the absence of adequate infrastructure, such as ships or a pipeline, said the second person mentioned above.

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On Wednesday, Mint reported that the bilateral trade between India and Canada which climbed steadily over the last few years largely has held up this fiscal year despite a diplomatic standoff. Trade between the two nations rose from $5.65 billion in FY21 to $8.40 billion in FY24.

Queries sent to the Union ministry of petroleum and natural gas, and IOC remained unanswered till press time.