Govt plans crude sourcing playbook to boost energy security2 min read . Updated: 04 Jan 2021, 05:32 AM IST
- Energy security is key to India’ national security as the country imports over 80% of its oil requirements
- India is particularly vulnerable as any increase in global prices can affect its import bill, stoke inflation and increase its trade deficit
In a big push for India’ energy security efforts, the Central government is working to help state-owned oil refiners and private sector companies draw up a coordinated approach for sourcing crude oil, said two government officials aware of the development, seeking anonymity.
The first such calibrated strategy, involving public and private firms, may not only help save on oil import bills, but may also be able to counter China’s dominant global position as the world’s second largest oil importer that helps it land better terms for oil imports. India is third largest oil importer globally. The ministry of petroleum and natural gas held preliminary meeting to discuss the way forward.
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Energy security is key to India’ national security as the country imports over 80% of its oil requirements. Large refiners include Indian Oil Corp. (IOC), Bharat Petroleum Corp. Ltd (BPCL), Hindustan Petroleum Corp. Ltd (HPCL), Nayara Energy Ltd (formerly Essar Oil) and Reliance Industries Ltd (RIL).
“There was a discussion on the coordinated approach with a meeting called by the petroleum and natural gas ministry. This is about a calibrated and coordinated approach that will help the country as well as the firms involved," said one of the officials cited above.
India is particularly vulnerable as any increase in global prices can affect its import bill, stoke inflation and increase its trade deficit. India spent $101.4 billion on crude oil imports in 2019-20 and $111.9 billion in 2018-19. It is a key refining hub in Asia, with an installed capacity of over 249.36 million tonnes per annum (mtpa). It has 23 refineries and plans to grow its refining capacity to 400 mtpa by 2025.
“We want our companies to talk and work together. We are working on that. We are working out the coordination for public and private sector companies buying crude oil," the official added.
India has been recalibrating its crude sourcing strategy amid growing uncertainties to buffer consumers from any spike in global prices. The new playbook may have a major bearing on the global energy architecture and help bargain for crude oil purchases.
“Joint sourcing of crude oil is neither possible nor desirable. However, given the expanse of India’ oil sourcing network, mutual information sharing can help refiners evolve a calibrated approach that can result in significant savings," said a second official cited above.
Queries emailed to the spokespersons of the petroleum and natural gas ministry, IOC, BPCL, HPCL, Nayara Energy and RIL late on Thursday remained unanswered.
While covid-19 had hit global energy demand, the announcement of several successful vaccine candidates, international crude oil prices witnessed a spike.
Experts however remained wary of the move. “India used to import oil at over $100 per barrel five years ago—now the price is less than $50 per barrel. This reduction has happened not because of joint sourcing of oil, but because of new oil production from the US and Canada resulting in a better supplied market. If we want oil to remain cheap, we need to invest in upstream oil production in places such as the US," said Amit Bhandari, fellow, energy and environment studies programme, Gateway House, Mumbai.
India, which is a major energy consumer, has been calling for a global consensus on “responsible pricing". Every dollar increase in the price of oil raises India’s import bill by ₹10,700 crore on an annualized basis.