NEW DELHI: Concerned about rising international crude oil prices; India, the world’s third-largest oil importer has raised the issue with Saudi Arabia, during the visit of Gulf kingdom’s energy minister Khalid A. Al-Falih.
This was articulated by India’s petroleum minister Dharmendra Pradhan in a meeting on Saturday. Saudi Arabia is a crucial source of energy for India and the second largest supplier of crude and cooking gas to India. India imported 36.8 million tonnes of crude oil from Saudi Arabia that accounted for 16.7% of total imports in 2017-18.
“During the meeting, Shri Pradhan referred to Saudi Arabia’s pre-eminent role as a leading producer of crude oil in the world, and in maintaining global oil market balance," India’s petroleum and natural gas ministry said in a statement on Sunday.
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). Al-Falih’s visit follows the first state visit of Saudi Arabia’s crown prince Mohammed bin Salman bin Abdulaziz Al Saud in February this year and comes in the backdrop of piqued tensions between India and Pakistan. Also, India will be holding general elections in seven phases, with polling starting on 11 April and ending on 19 May.
“He (Pradhan) raised concerns about increasing trend in global crude oil prices. He also pointed to the need for uninterrupted supplies of crude oil and LPG to India in view of the OPEC+ cuts. Both Ministers also discussed about possible adverse impact of recent geopolitical developments on global oil market," the statement added.
Indian strategic planners have been worried over short-term supply disruptions, given that the country’s energy needs are primarily met through imports. Any spike in international crude oil prices will affect India against the backdrop of factors such as the Organization of the Petroleum Exporting Countries (Opec) of which Saudi Arabia is a prominent member, and Russia cutting supplies. Also, the US administration has imposed sanctions on state-owned oil company Petrуleos de Venezuela SA (PDVSA), and President Donald Trump has pulled the US out of a historic 2015 accord with energy-rich Iran that was signed to curb the Islamic Republic’s nuclear programme in return for ending sanctions.
The cost of the Indian basket of crude, which represents the average of Oman, Dubai and Brent crude, was $66.03 a barrel on 7 March, according to the Petroleum Planning and Analysis Cell. The cost of the Indian basket of crude, which averaged $47.56 and $56.43 per barrel in 2016-17 and 2017-18, registered an average of $64.53 in February. International crude oil prices had reached a record high of $147 per barrel in July 2009.
“This visit also reflects the intensifying engagement between the two countries in the hydrocarbon sector," the statement added.
This comes in the backdrop of Saudi Aramco’s growing interest in India, driven by its energy demand that is expected to grow at 4.2% over the next 25 years. This has prompted other global majors such as Russia’s Rosneft PJSC, to invest in India, thereby ensuring offtake security.
Saudi Aramco is also in talks with Mukesh Ambani-controlled Reliance Industries Ltd (RIL), and others, for more projects in India, Mint reported on 21 February. While Saudi Aramco partnered with 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 said it has decided 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.
“The ministers also reviewed various Saudi investment proposals in the Indian oil and gas sector, including the urgent steps to be taken to expedite the implementation of the first Joint Venture West Coast Refinery and Petrochemical Project in Maharashtra, estimated to cost US $ 44 billion, which will be the largest greenfield refinery in the world. Saudi Arabia’s participation in Indian Strategic Petroleum Reserve (SPR) Program was also discussed," the statement added.
As part of India’s evolving energy security architecture, the National Democratic Alliance (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.