NEW DELHI: US secretary of state Michael Richard Pompeo on Wednesday night promised India of adequate crude oil supplies even as India, the world's third-largest oil importer, has been trying to buffer its consumers from the spike in global prices.
“We’re doing everything we can to ensure you have adequate crude imports. We appreciate your help in pushing these regimes to behave like normal countries, and the Venezuelans to take care of their people," Pompeo said at India International Centre on 26 June, according to a US State Department statement.
India was among Iran’s top oil buyers with imports of 23.5 million tonnes in 2018-19. However, with the US’s conditional waiver for Iranian oil imports to eight countries, including China and India, expiring on 2 May, India has stopped all oil imports from the Persian Gulf nation. While sourcing crude from other suppliers is not an issue, the price at which it is bought will impact the Indian economy.
“You’ve made hard choices to cut off oil imports from Iran, and move away from purchasing Venezuelan oil. We know these decisions weren’t without cost," Pompeo added.
India has tied up with oil producers in West Asia as well as in other geographies to bridge a supply gap caused by the exit of Iran from its energy basket. The situation has been exacerbated due to the increasing tensions in the Strait of Hormuz and production curbs by the Organization of the Petroleum Exporting Countries (Opec) and Russia.
India’s external affairs minister S. Jaishankar on Wednesday spoke about US and India finding common ground on energy to ensure “predictable and affordable" supplies.
Since India imports over 80% of its crude needs and 18% of natural gas, higher energy prices stoke inflation and hurt the country’s economic growth. In a first, Indian Oil Corp., the country’s largest refiner, has inked two term contracts totalling 4.6mt of US crude oil for 2019-20 from Norway’s Equinor ASA and Algeria’s state energy company Sonatrach. India is also sourcing liquified natural gas and oil from the US, with Indian firms investing $4 billion in US shale gas assets.
However, it is difficult for India to come up with options offering terms as attractive as those offered by Iran, including 60-day credit, free insurance and shipping. India has also been trying to impress upon Saudi Arabia its concerns on volatility in crude oil prices and its impact on Indian consumers. It wants the Kingdom to play an active role within Opec and Opec plus (Russia) discussions for keeping oil prices at a reasonable level.
With Opec accounting for around 40% of global production, any decision will have a wide-ranging impact on energy markets. India’s energy needs are mainly met through imports, and Opec accounts for around 83% of the country’s total crude oil imports.
“In past weeks, the Islamic Republic of Iran has attacked tankers from Japan, Norway, Saudi Arabia, and the United Arab Emirates. In recent years, China has sought dominance in the South China Sea. Can America and India strategize more comprehensively on how to safeguard free and open seaways all throughout the world?" Pompeo said in the statement.
The prices in the Indian basket of crude, which represents the average of Oman, Dubai and Brent crude, have been firming up. Any spike in global crude prices will impact India’s oil import bill and trade deficit. Every dollar increase in the price of oil raises the import bill by around Rs10,700 crore on an annual basis.
Pompeo also expressed US’ interest in partnering with India in providing clean energy.
“Look, India has a chance to contribute robustly in the energy security region as well. We want that to happen. Can we work together to provide clean energy for all of the Indian people?" Pompeo said in the statement.
India is running the world’s largest renewable energy programme and plans to achieve 175 gigawatts (GW) of renewable energy capacity by 2022 as part of its climate commitments. It is also trying to transition to a gas based economy.
“And can we help wean your industries off reliance on partners that don’t share our common, strategic set of interests?" Pompeo added.
While India currently has an installed renewable energy capacity of around 80 GW, most solar power developers were sourcing solar modules and equipment from China, where they are cheaper. To counter this, the National Democratic Alliance (NDA) government last year imposed a safeguard duty on solar cells and modules imported from China and Malaysia.
US’ interest also come in the backdrop of India on Tuesday announcing an ambitious aim to set up 500 GW of renewable energy capacity by 2030 in what could potentially help the country reshape the global energy market dynamics.