India to double US oil imports to cut reliance on others

India is heavily dependant on oil imports from West Asia. Its top three suppliers in 2018-19 are from the area: Iraq, with about 46.6 million tonnes (MT) in 2018-19, is the number one supplier, followed by Saudi Arabia (40.3 MT) and the UAE (17.5 MT). Kuwait supplied 10.8 MT.

India plans to double crude oil imports from the US as part of its effort to reduce dependance on the volatile West Asia region, three officials with direct knowledge of the matter said.

Oil purchases from the US, which started in 2017-18, have already crossed about 6 million tonnes a year. India is also keen on long-term oil supply contracts with Russia and oil producing countries in Africa, the officials said on condition of anonymity.

“We can easily double our crude oil imports from the US to 12 million tonnes. We are in talks with the US government and private oil firms as petroleum is an unregulated business in that country. We expect good rates and better terms from American firms that would compensate for our transportation costs. In return, we can offer them an assured market,” one of the three officials said.

India is heavily dependant on oil imports from West Asia. Its top three suppliers in 2018-19 are from the area: Iraq, with about 46.6 million tonnes (MT) in 2018-19, is the number one supplier, followed by Saudi Arabia (40.3 MT) and the UAE (17.5 MT). Kuwait supplied 10.8 MT.

Together, these countries supplied about 51% of the total of 226.5 MT of oil worth $111.9 billion or Rs 7.83 lakh crore that India imported in 2018-19, they said. According to the Petroleum Planning and Analysis Cell (PPAC), the data-keeper of the oil ministry, India’s crude oil import dependency on the basis of consumption was 83.8% in 2018-19.Put otherwise, 8.38 of every 10 litres of crude consumed in the country was imported.

Officials said the diversification of India’s crude basket is necessary because unlike other importers, it neither has its own resources nor has bought significant oil and gas assets abroad. India is the third-largest consumer of oil after the US and China. India’s efforts in recent years have resulted in diversification of energy sources with the focus on secure, stable and predictable supplies, a third official said, also on condition of anonymity. Efforts have also been made to change the energy mix, with a push for including more renewable sources, he added.

Besides increasing oil and gas purchases from the US to diversify imports, there have also been shifts among traditional sources, especially in the case of supplies from Venezuela and Iran because of US sanctions and other domestic factors, the officials said.

Importance is being given to Russia as an energy source, especially after the meeting between Prime Minister Narendra Modi and President Vladimir Putin at Vladivostok last September, the third official said. The two also signed a road map for cooperation in hydrocarbons for 2019-24.

A joint statement issued after the meeting welcomed the success in cooperation between Russia’s JSC Rosneft Oil Company and the Indian consortium of state-owned oil and gas firms. Modi and Putin said they would forge cooperation in joint development of oil and gas fields in Russia and India, including offshore fields, and develop ways to deliver energy resources from Russia to India, including a long-term agreement for sourcing Russian crude.

“Our key interest is securing long-term supplies though there could be spot (purchases) in the European markets. We are also helping Indian oil companies to acquire stakes in offshore operations,” the third official said. “Work is also being done with players such as Saudi Aramco to create strategic reserves.”

The US’ dependence on West Asian countries for energy needs is negligible due its huge domestic reserves, and China has significantly diversified its sourcing in terms of domestic reserves and equity oil abroad.

A report of the International Energy Agency (IEA), titled “In-depth Review of India’s Energy Policies” that was launched by petroleum minister Dharmendra Pradhan on Friday, said: “The rate of growth of India’s oil consumption is expected to surpass that of...China in the mid-2020s... As proven oil reserves are limited compared with domestic needs, India’s import dependency (above 80% in 2018) is going to increase significantly.” “We are meeting in the backdrop of rising tensions in West Asia and its impact on stability and security in the region,” Pradhan said.

Experts said India has almost stopped importing Iranian crude due to the US pressure, even as the country had been a reliable supplier of the best quality of crude at cheapest rate under most favourable terms and conditions. “We, therefore, need its replacement,” said an energy analyst who asked not to be named. India imported little over 27 MT Iranian crude in 2016-17.

Former chairman & managing director of Oil and Natural Gas Corp (ONGC), RS Sharma said diversification of crude oil import is crucial to India’s energy security. “We are already importing from countries like Nigeria, Angola, USA and Venezuela. Russia could be an important supplier depending on resolution of transportation issues. But, at the same time, we cannot wish away the West Asian countries because they supply us cheapest crude. Transportation is also cost effective,” he said.