India keeps its options open on oil imports
Recycling a relationship. An employee rides a bicycle next to oil tanks at Saudi Aramco oil facility in Abqaiq, Saudi Arabia. India no longer keeps all its eggs in one basket when it comes to the import of fuel.Courtesy: Reuters

India keeps its options open on oil imports

Indian oil refiners could reduce imports from Saudi Arabia by a fourth. But keeping the growing strategic relationship in mind, New Delhi may not want to go the whole hog down this route. It is, however, keeping its options open while negotiating purchases from Iraq, US and Nigeria.

India is planning to flex its economic muscle vis-à-vis the Organization of Petroleum Exporting Countries (Opec). Following Saudi Arabia’s refusal to consider the Indian government’s request to ease supply cuts to help bring crude prices down, India’s public sector refiners could cut oil imports from the Gulf monarchy by up to a quarter in May.

New Delhi wields a $102-billion heft

India is the world’s third largest oil importer and accounts for 10 per cent of global imports. The country spent $102 billion in fiscal 2020 on imports of about 225 million tonnes of crude, which is 83 per cent of its total requirements. It is this with this heft that India hopes to bring Saudi Arabia around.

India is the world’s third largest oil importer and spent $102 billion in fiscal 2020 on imports. It is this with this heft that India hopes to bring Saudi Arabia around.

On average, the four large state-owned Indian refiners, Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL), Hindustan Petroleum Corporation (HPCL) and Mangalore Refinery and Petrochemicals Ltd (MRPL) import a shade less than 15 million barrels of crude from Saudi Arabia every month. They could cut this by a quarter to a little less than 11 million barrels in May, a source in India’s Ministry of Petroleum said.

These four government-owned refiners own about 60 per cent of India’s 5 million barrels per day (bpd) oil refining capacity.

Indian oil imports from the US, which has emerged as the world’s leading oil producer, jumped by as much as 48 per cent to 545,300 bpd in February. The US now accounts for 14 per cent of India’s oil imports.
Indian oil imports from the US, which has emerged as the world’s leading oil producer, jumped by as much as 48 per cent to 545,300 bpd in February. The US now accounts for 14 per cent of India’s oil imports.Courtesy: Reuters

India no longer dependent on one source

A few years ago, Riyadh ceded its position as India’s largest source of crude to Iraq. Last month, it was overtaken by the US as Indian buyers boosted purchases of cheaper North American crude.

A Reuters report said Indian oil imports from the US, which has emerged as the world’s leading oil producer, jumped by as much as 48 per cent to 545,300 bpd in February, compared to the figure for January. The US now accounts for 14 per cent of India’s oil imports.

Simultaneously, India cut oil imports from Saudi Arabia to a one-decade low of 445,200 bpd, a 42 per cent decline from the previous month. As a result, Saudi Arabia slipped to the fourth spot among India’s oil suppliers for the first time in 15 years.

A few years ago, Riyadh ceded its position as India’s largest source of crude to Iraq. Last month, it was overtaken by the US as Indian buyers bought cheaper North American crude.

This follows Saudi Arabia's decision to voluntarily cut its output by an extra 1 million bpd on top of an agreement by (OPEC+ to maintain lower production. Iraq retained its position as India’s top supplier despite a 23 per cent decline in purchases to a five-month low of 867,500 bpd. In keeping with its commitments to reduce global oil supplies to shore up prices, Iraq, too, has slashed annual supplies of crude to Indian refiners by up to 20 per cent in 2021.

A worker fills diesel in a container at a fuel station in Kolkata, India. Output cuts by Saudi Arabia have affected the prices of fuel prices in India given the rally in global crude.
A worker fills diesel in a container at a fuel station in Kolkata, India. Output cuts by Saudi Arabia have affected the prices of fuel prices in India given the rally in global crude.Courtesy: Reuters

Domestic fuel prices at all-time high

India’s domestic fuel prices have hit record highs as a result of rising global crude prices. To bring the situation under control, India’s Oil Minister Dharmendra Pradhan has repeatedly requested the Opec and its allies, known as Opec+ to ease supply curbs. In particular, he has blamed the additional voluntary output cuts by Saudi Arabia for the rally in global crude prices. OPEC+ decided this month to extend most cuts into April.

Prince Abdulaziz bin Salman, Saudi Arabia’s Energy Minister, told India to dip into its strategic reserves, which have stores of cheaper oil bought last year. India's oil ministry responded by asking refiners to speed up their diversification of crude sources and reduce reliance on the Middle East.

There is a growing strategic relationship between New Delhi and Riyadh, which is planning to invest $100 bn in India. So, it remains to be seen how much India will push Saudi Arabia.
- An official said.
Indian prime minister Narendra Modi with Saudi Arabian Crown Prince Mohammed Bin Salman. The two countries have embarked on a course of strategic collaboration and solidifying ties.
Indian prime minister Narendra Modi with Saudi Arabian Crown Prince Mohammed Bin Salman. The two countries have embarked on a course of strategic collaboration and solidifying ties.Courtesy: ANI

Strategic ties restrict India’s wiggle room

However, a senior official speaking on condition of anonymity told India Global Business that there is a limit to which India can play hardball with Saudi Arabia.

“There is a growing strategic relationship between New Delhi and Riyadh. Then, in February 2019, Crown Prince Mohammed bin Salman (MBS) announced that the Kingdom would invest over $100 billion in India in petrochemicals, refining, infrastructure, mining, manufacturing, agriculture and several other sectors. And of course, there’s the personal chemistry between MBS and Indian Prime Minister Narendra Modi. Given these dynamics, it remains to be seen how much India is willing to push Saudi Arabia,” he said.

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