Both are considering upstream investments, joint collaboration in petrochemicals
India spent $101.4 billion on crude oil imports in 2019-20 and $111.9 billion in 2018-19
India, the world’s third largest oil importer, is leaning on its old energy partner Russia to buffer its consumers from a sharp spike in crude oil prices. As part of a new playbook, the two countries are exploring ways to protect both the buyer and the seller from sharp swings in prices, according to a top Indian government official.
India is also eyeing more long-term crude oil contracts from Russia, with the two countries working on a multi-pronged approach that involves energy sourcing and supplies, upstream investments in Russia and India, and joint collaboration in petrochemicals.
With India recalibrating its crude sourcing strategy, the playbook may have a major bearing on the global energy architecture and help the country land better terms while negotiating crude oil purchases.
“We also want to evolve a synergy wherein the price volatility gets controlled. Such an approach will ensure price stability and energy security for India, and also assure a stable and large market for Russian crude oil," said the Indian government official cited above.
Global crude oil prices have shot up after the Organization of the Petroleum Exporting Countries (Opec)-plus grouping’s decision to continue with supply curbs. Transportation fuel prices in India are at a record high.
“Both India and Russia agree that there should be no volatility in the energy markets," said a second person, who is a petroleum ministry official, also requesting anonymity.
Diversifying its energy basket with crude oil supplies from non-Opec sources is part of India’s energy security strategy, which has seen it increase oil imports from the US. India signed the first term contract for crude oil sourcing from Russia in February last year, with state-run Indian Oil Corp. (IOC) and Rosneft inking the agreement for 2 million metric tonnes (mmt) of Urals grade crude. India is also looking to invest in Rosneft’s Vostok project.
“We want to do long-term and short-term contracts with Russian energy suppliers. The idea is to develop an understanding. This is what we are exploring. There is a lot of volatility with oil prices skyrocketing and sometime taking a steep dive. This is not good for either the buyers or the sellers," the first government official cited above said.