The union cabinet has accorded its approval to ONGC Videsh Ltd, the overseas investment arm of ONGC, India’s largest oil explorer, to go ahead with World’s largest refining companies the acquisition of UK-listed Imperial Energy.

The cabinet committee on economic affairs met recently this week to approve the deal. There is no official word on the government’s decision as yet. People who are in the know of the deal said that the cabinet clearance was taken so that OVL could meet the Tuesday midnight deadline set by UK authorities.

This would pave the way for OVL to make the open offer to the UK listed shareholders. The agreed $2.1 billion deal will be one of the bigger deals by ONGC in recent times. Imperial Energy has oilfields in Russia. OVL had sought to delay making the open offer but the request was rejected by the Takeover panel on Monday.

Analysts say the deal works out to around $2 to $2.5 a barrel for OVL given Imperial’s declared reserves of 900 million barrels and will help improve India’s energy security. India meets almost 70% of its oil demand through imports.

ONGC is being advised by Deutsche Bank. Merrill Lynch is advising Imperial.

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Eastern European leaders met in the Azerbaijani capital Baku on Friday for a summit aspired at boosting energy supply routes from the Caspian region to Europe that bypass Russia.

Leaders of the Baltic nations, Azerbaijan, Georgia, Poland, and Ukraine were joined by Turkish President Abdullah Gul for the first time to talk about joint energy projects, including proposed oil and gas pipelines.

Turkey has become a major participant in the Middle East and Caucasus energy trade and has campaigned for a bigger diplomatic role in the volatile Caucasus region, scene of an armed conflict between Russia and Georgia in August.

A United States delegation led by Energy Secretary Samuel Bodman also attended. On Thursday, he said Washington desired to boost diversity of supply and said that there were troubles with a Russian plan for a new gas pipeline to Europe.

Bodman said that Russia’s South Stream project to build a gas line under the Black Sea to Bulgaria and on to southern and central Europe “is a very complicated project and requires more financing.

“We support projects which are being implemented by suppliers, transit countries and energy consumers that will contribute to global energy security,” Bodman told reporters in Baku.

Washington has powerfully endorsed routes for delivering Caspian oil and gas to Europe that bypass Russia including the European Union’s flagship Nabucco gas pipeline and a projected gas pipeline under the Caspian from Central Asia.

Russia has long asserted it is the dominating power in the Caucasus and campaigned a brief war with Azerbaijan’s neighbor Georgia in August, raising concerns about the security of supplies through the Caucasus.

The summit follows the introduction by the European Commission on Thursday of a new plan to boost energy supply security and cut back EU dependency on Russia.

The European Union’s executive body said it wanted to fortify crisis mechanisms and advance oil and gas stocks to respond to any disruption in supply.

The plan accentuated evolving a “southern gas corridor” to transport supplies from the Caspian Sea and Middle East regions, bypassing Russia, as well as an energy ring linking Europe and southern Mediterranean countries.
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Access to cheap energy has become essential to the functioning of modern economies. However, the uneven distribution of energy supplies among countries and the critical need for energy has led to significant vulnerabilities. Threats to global energy security include the political instability of several energy producing countries, the manipulation of energy supplies, the competition over energy sources, attacks on supply infrastructure, as well as accidents and natural disasters.

It is also the limited supplies of the most common forms of primary energy, i.e. Oil and Gas that changes perceptions on this topic. Although plenty of coal, up to 155 years worth, is readily available, coal is not the fossil fuel of choice for many more advanced countries because of its highly polluting nature. The potential need to change our primary energy sources in the foreseeable future is the crux of the energy security question, leading to higher prices, more limited access to sources of energy, competitions and political troubles, which in turn make the threat even larger.

One of the leading threats to energy security is the significant increase in energy prices, either on the world markets – as has occurred in a number of energy crises over the years – or by the imposition of price increases by an oligopoly or monopoly supplier, cartel or country.

In recent developments on the energy front of the US Government, Federal Energy and Resources Minister Martin Ferguson announced that energy security is just as important as reducing greenhouse gas emissions.

The electricity industry is concerned some power generators could be forced to close, depending on the carbon price in an emissions trading scheme. The Federal Government released its carbon pollution reduction scheme, but it did not include carbon prices.

According to Ferguson, energy security will be a major consideration when the Government decides on a price for carbon.

“One of the biggest priorities is not only to reduce CO2 emissions, it’s also about guaranteeing energy security. That’s why we have to put in place a process that puts a price on carbon which, for example, is very important in encouraging a growth in the use of gas. We’ve also got to facilitate technological change,” he said.

Long term measures to increase energy security have to center on reducing dependence on any one source of imported energy, increasing the number of suppliers, exploiting native fossil fuel or renewable energy resources, and reducing overall demand through energy conservation measures.

He further announced that a possible way of simultaneously contributing to international energy and climate security is by investing in decentralized energy. By building electricity generating capacity close to the source of demand one can improve combustion efficiency (by capturing waste heat) and reduce imports of natural gas and other fuels. Using on-site renewable powered energy can go even further in reducing and fuel imports and emissions responsible for climate change and air pollution.

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