India in talks with Equinor for crude reserves, long-term LNG deals

Norwegian energy giant Equinor said on April 25, 2024 that its net profit dropped by 46% during the first quarter, dragged down by falling gas prices. (Photo: AFP) / Norway OUT
Norwegian energy giant Equinor said on April 25, 2024 that its net profit dropped by 46% during the first quarter, dragged down by falling gas prices. (Photo: AFP) / Norway OUT


  • To bolster energy security, India is negotiating for strategic petroleum reserves and long-term LNG contracts amid Opec production cuts

The Centre is in discussions with Norwegian energy giant Equinor to secure its participation in India’s strategic petroleum reserves (SPR), as part of efforts to enhance the energy security of the world’s third-largest energy consumer.

In a related move, negotiations are also ongoing for long-term deals for supply of liquified natural gas (LNG) from Equinor’s extensive portfolio in the US and Qatar, according to two people aware of the development.

“We are asking Equinor to come in our SPR, and also participate in our E&P (exploration and production) programme," one of the two people cited above said, requesting anonymity. "The discussions are ongoing. We are talking with Equinor for sourcing long-term LNG from their portfolio in the US and Qatar."

If talks are successful, it would mark the second commitment to India’s SPR programme, following a deal with Abu Dhabi National Oil Co (Adnoc). Such deals allow India to have large amounts of crude oil in reserve for emergencies.

These negotiations come against the backdrop of continued production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, which have put global supply chains under pressure.

Queries sent to India’s ministry of petroleum and natural gas and Equinor on Thursday evening remained unanswered at press time.

Energy security is pivotal for India, which imports over 85% of its oil and 55% of its gas requirements. Fluctuations in global prices can significantly impact India’s import bill, stoke inflation, and widen the trade deficit.

In fiscal year 2023 (FY23), India’s import of crude oil and petroleum products surged 29.5% to $209.57 billion, official government data show. LNG imports also rose by 17.5% year-on-year in FY24, reaching 23.5 mmtpa.

The strategic reserve

Strategic petroleum reserves are developed to store fossil fuel to be used in times of supply disruption or emergency, when normal supplies are impacted due to exigencies such as war. The idea behind allowing foreign companies to hold stock in the the strategic reserves is that they can store oil for sale to domestic refiners, as in the case of Adnoc. However, the Indian government has the first right to the oil in case of an emergency.

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In January 2017, Adnoc had joined Phase-I of India’s SPR programme to store its crude in Mangalore SPR. In 2018, it signed another MoU with ISPRL (Indian Strategic Petroleum Reserves Limited) to explore the possibility of storing Adnoc’s crude oil at ISPRL’s underground oil storage facility at Padur in Karnataka, which has a 2.5 million tonne capacity.

India currently has a crude storage capacity of 5.3 million tonnes, distributed across Visakhapatnam, Mangaluru, and Padur. An additional 6.5 million tonnes of strategic crude oil reserves are under construction in Chandikhol, Odisha, and Padur, Karnataka. 

These reserves are critical for energy security, as evidenced by India’s coordinated release of 5 million barrels of crude oil in November 2021 with other major consumers to stabilize global prices. India had bought crude oil at $19 a barrel in 2020 to fill up the reserves, and in the process, saved $685.11 million.

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A recent S&P report highlighted that in addition to India’s strategic petroleum reserve capacity, state-run oil companies maintain storage facilities for crude oil and petroleum products sufficient for 64.5 days of total net imports. This brings the current total storage capacity for crude oil and petroleum products to 74 days of total net imports.

Equinor, meanwhile, is no stranger to India, having partnered with state-run Oil and Natural Gas Corp. (ONGC) on carbon capture, utilization and storage (CCUS), offshore wind, and green hydrogen projects. Equinor-backed Scatec ASA has also joined forces with India’s Acme Group for a $6 billion green hydrogen and green ammonia project in Oman, which aims to supply emission-free fuel to Europe and Asia.

In February, Equinor signed a 15-year agreement to supply LNG to Indian fertilizer and petrochemical company Deepak Fertilisers.

Bolstering LNG imports

The proposed LNG deal with Equinor is part of India’s strategy to fortify its LNG imports. State-run Indian Oil Corp. (IOC) recently inked a long-term LNG contract with France’s TotalEnergies to supply 1 million metric tonnes per annum (mmtpa) for around 10 years. 

There are plans to sign another long-term contract with Adnoc for a similar volume.

Indian Oil had previously signed an agreement with Adnoc for the supply of 1.2 mmtpa of LNG starting in 2026. Petronet LNG extended its contract with QatarEnergy LNG in February, securing a long-term deal for 7.5 million tonnes of LNG per annum. 

Adnoc has also offered India a stake in its upcoming LNG liquefaction terminal at Ruwais, marking what could be India’s first equity stake in an overseas LNG terminal.

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