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India’s Petroleum Minister Dharmendra Pradhan has said Africa will play a central role in the country’s oil import strategy in the years to come. India, with its huge buying heft, is scouring the world for alternatives to Middle Eastern oil.
India continues to actively reduce its dependence on the Middle East for its crude oil supplies. Following Saudi Arabia's refusal to reverse its decision to cut back on crude supplies, thereby reducing global availability, India is increasingly turning to the US, Africa, South America, Canada, Mexico and Russia for its energy needs.
Now, the first Guyanese crude cargo is on its way to India, in another signal that while New Delhi respects its close ties with Riyadh, it will not let friendship come in the way of pursuing its economic interests. This has come even as the US has replaced Saudi Arabia as India’s second-largest crude supplier and New Delhi has stepped up oil imports from Nigeria and other African nations.
India is the world’s third largest oil consumer and depends on imports for as much as 83 per cent of its crude oil requirements. As the third largest importer, it accounts for 10 per cent of global oil imports. In fiscal year 2019-20, it had spent $102 billion on importing oil from various countries to meet its domestic needs.
The first Guyanese crude cargo is on its way to India in another signal that while New Delhi respects its ties with Riyadh, it will not let friendship come in the way of its economic interests.
Saudi Arabia, with which India enjoys a close and growing strategic convergence, has cut back on its oil production by an additional 1 million barrels per day (bpd) over and above an agreement by the Organization of the Petroleum Exporting Countries and its allies (OPEC+) to lower production to shore up global prices.
Riyadh has refused to accede to India’s request to reverse its voluntary production cut to bring global prices down and has, instead, advised India to dip into its strategic reserves, which were bought when prices were lower.
As a result, India, with its huge buying heft, is scouring the world for alternatives to Middle Eastern oil. “As India seeks to further diversify sourcing of crude oil and LNG, Africa has a central role, largely due to its proximity and absence of any choke points in trans-shipments," India’s Petroleum Minister Dharmendra Pradhan told an industry summit recently, adding: “Therefore, we would naturally be seeking commercial partners in Africa to meet India's growing energy needs through imports of crude oil, LNG and other petroleum and energy products.”
Saudi Arabia has cut oil production by an additional 1 million bpd over and above an agreement by OPEC+ to lower production to shore up global prices.
India bought 34 million tonnes, or 15 per cent of its oil imports, from Africa last year. India’s traditional oil partners in Africa are Nigeria, Angola, Algeria, Egypt and Equatorial Guinea. In recent years, though, it has widened its net further afield and imported oil from Cameroon, Chad, Ghana and Côte d'Ivoire also, Pradhan said.
Incidentally, Indian public sector companies have invested $8 billion in Africa’s oil sector.
Meanwhile, Guyana, which began exporting crude only last year, has become India’s latest oil supplier. Its first cargo of crude departed this month for India and is likely to land in Mundhra Port in the western Indian state of Gujarat in the first week of April.
It was purchased by HPCL-Mittal Energy Ltd (HMEL), a joint venture between the public sector HPLC and Arcelor Mittal Chairman L.N. Mittal, media reports in India said. HMEL runs a 226,000 bpd refinery in Bathinda in the northern state of Punjab.
A Reuters report quoted Vickram Bharrat, Guyana's Indian origin Natural Resources Minister as saying the oil cargo en route to India had been allocated to New York-based Hess Corp, one of the companies producing crude in Guyana. The report added that the minister did not know the identity of the cargo's ultimate buyer.
With this cargo, India returns to South America as a buyer of crude after a gap of almost two years. It used to import large quantities of Venezuelan crude oil before US sanctions brought volumes down to almost zero from 2019 onward. In fact, India has not received a single barrel of Venezuelan crude since December 2020.
Experts feel India will continue to diversify its sources of oil and look to strike one-on-one deals with non-OPEC nations with whom it can better use its huge buying muscle to bargain for additional price and supply concessions.
However, even as this trend will gain momentum in the months to come, India cannot diversify totally away from the Middle East, given the close security and convergence that is emerging between India and important Gulf Arab states such as Saudi Arabia and the United Arab Emirates (UAE).