New Delhi: As part of India’ effort to shield its consumers from any spike in global prices, petroleum minister Dharmendra Pradhan met Saudi Arabia’s energy minister Khalid A. Al-Falih in New Delhi on Thursday.
With the tensions escalating in the Persian Gulf, India, the world’s third-largest oil importer, has upped its diplomatic efforts to ensure energy security and is closely monitoring the Strait of Hormuz situation. Saudi Arabia is a crucial source of energy for India and the NDA government is trying to impress the Gulf Kingdom in maintaining global oil balance and supplies.
“Raised my concerns on the recent increase in Asian Premium, disturbances in the Strait of Hormuz impacting the movement of oil/LNG tankers and the decision of OPEC Plus members on extending production cuts leading to oil price volatility & its adverse impact on the Indian economy," Pradhan said in a tweet.
This comes in the backdrop of the Organization of the Petroleum Exporting Countries (Opec)-plus' arrangement extending its compact for production cuts, at a time when supplies from Iran and Venezuela are drying up. With the global energy landscape evolving rapidly, India is particularly vulnerable as it is the world’s third-largest oil consumer — importing more than 80% of its oil requirements and around 18% of natural gas.
India has also been trying to persuade the Opec oil cartel, including Saudi Arabia, to pare the premiums placed on oil sold to Asian nations.
“Met Saudi Energy Minister, H.E. @Khalid_AlFalih & discussed the ongoing developments in the global oil markets. Also discussed about elevating India-Saudi Arabia hydrocarbon cooperation to become a stronger pillar of the existing strategic partnership between the two countries," Pradhan said in a tweet.
With a fifth of global oil supplies passing through the strategic Strait of Hormuz, the IEA’s stand holds importance given that its member countries maintain emergency oil reserves equivalent to at least 90 days of net imports. This came after Iran said it seized the Stena Impero British oil tanker vessel in the Strait of Hormuz after it collided with an Iranian fishing boat. Tehran said the British vessel failed to respond to the boat’s “distress call".
“Requested Saudi Arabia to continue its leadership role in maintaining oil market balance. Urged H.E @Khalid_AlFalih to address the issue of Asian Premium for transparency in global oil market, also advocated for responsible pricing in the larger interest of all nations," Pradhan added in another tweet.
Al-Falih is also Saudi Arabia’s industry and mineral resources minister and chairman of world’s biggest oil producer, Saudi Arabian Oil Co. (Saudi Aramco).
“Saudi Arabia has been India's long term energy partner.Invited @Saudi_Aramco to participate in India’s Strategic Petroleum Reserve Program.I also reviewed with H.E @Khalid_AlFalih the progress on mega Saudi investments in the Indian oil & gas sector, including West Coast refinery," Pradhan said.
While Saudi Aramco partnered Indian state-run oil companies for setting up the world's largest oil refinery and petrochemical complex in Ratnagiri, the BJP-led Maharashtra government recently announced its decision to relocate the $44-billion project, after protests from farmers and ally Shiv Sena. Saudi Aramco also plans to enter fuel retailing in India and, apart from investing in the Ratnagiri refinery project, will also supply crude oil.
As part of India’s evolving energy security architecture, the NDA government is also working on the second phase of strategic petroleum reserves. Such reserves will help India manage short-term supply disruptions. Member nations of the International Energy Agency (IEA) maintain emergency oil reserves equivalent to at least 90 days of net imports. India has an existing storage capacity of 5.3 million tonnes. The government in June approved construction of an additional 6.5 million tonnes of strategic crude oil reserves. These facilities together will help support 22 days of India’s crude oil requirements.
Opec on Monday said it was closely monitoring the situation would act if needed.
The cost of the Indian basket of crude, which averaged $47.56 and $56.43 per barrel in FY17 and FY18, respectively, was $62.39 in June 2019, according to data from the Petroleum Planning and Analysis Cell (PPAC). The average price was $62.53 a barrel on 23 July. The Indian basket represents the average of Oman, Dubai and Brent crude.
