New Delhi: The world's largest oil company Aramco will provide additional crude oil to domestic oil refiners to meet shortages arising from the US decision to lift Iran sanction waivers from major oil importing countries, including India.
Sources in state-run oil companies said that the Saudi Arabian oil giant has offered to increase crude oil supplies to India by 200,000 barrels a day (bpd) that would meet almost half of the country's oil imports that was coming from Iran.
On an annual basis, 200,000 bpd of oil equals about 10 million tonne (mt) of oil per year. India imported 23.9 mt of crude oil from Iran in FY19, making the Gulf country the third biggest exporter of oil after Iraq and Saudi Arabia.
Aramco's offer to Indian oil companies is for deliveries starting June. The oil situation is also expected to get clearer from June when the full might of US sanctions would come into play. Though US sanction waiver was lifted from May 2, India is still getting some oil from Iran on contracts reached earlier.
Sources said that while the Saudi offer of increased oil quantity has generally been welcomed by domestic oil companies as it will help alleviate the squeeze driven by US sanctions on Iran and Venezuela, the supply is unlikely to be made on terms given by Iran. In fact, refiners would face a heftier bill on Arab light crude.
Iran used to offer Indian refiners 60 day credit for oil deliveries and also gave discounts on freight and insurance. Saudi Arabia on the other hand charges an Asian premium for its crude oil exports to India.
It is for this reason that India has been expanding the list of oil source markets to prevent disruptions in one part of the world from affecting its supplies.
India imports more than 80% of its oil requirements and it is thus imperative for it to ensure that supply lines are maintained at all times.
With Iran and Venezuela, which is the fifth largest supplier of crude to India, coming under US sanctions, India has also started exploring higher oil imports from other Latin American countries such as Brazil and Mexico with which it has shared a healthy economic relationship.
Indian oil companies are also exploring raising imports from African countries and looking at the US shale oil option.
According to data from the Directorate General of Commercial Intelligence and Statistics, Iraq sold 46.61 mt crude oil to India during FY19, which is 2% more than the 45.74 mt it had supplied in FY18. This helped Iraq to become the top oil exporter to India.
India provisionally imported 207.3 mt of crude oil in FY19, down from 220.4 mt in the previous financial year.
Saudi Arabia has traditionally been India's top oil source, but it came second in FY19. In 2018, Saudi Arabia exported 40.33 mt oil, up from 36.16 mt oil sold in the previous year. Iran on the other hand sold 23.9 mt of crude in FY19, up from 22.59 mt in the previous year.
UAE topped Venezuela to become India's fourth-largest crude supplier. It sold 17.49 mt of crude oil to India in FY19 against 17.32 mt of oil coming from Venezuela.