India will keep its strategic and economic interests in mind while sourcing crude oil: Dharmendra Pradhan

While articulating India’s position, petroleum and natural gas minister Dharmendra Pradhan said India will take a decision while keeping its strategic and economic interests in mind. He was speaking at Times Network India Economic Conclave.

He added that India’s oil marketing companies are free to source oil from any part of the world.

“Whichever country will provide favourable business terms, whether it is America or Iraq or UAE or Saudi Arabia. India’ common man’ interest is paramount in our decision,” Pradhan said.

This comes in the backdrop of US crude oil exports to India jumping to 2.11 million metric tonnes in February, helping it dislodge Saudi Arabia as the second largest supplier to India. The Indian government is working on diversifying the country’s energy basket with crude oil supplies from non-Organization of the Petroleum Exporting Countries (Opec) sources, after the Opec-plus grouping’s decision to retain supply curbs.

“Its not the issue of we are going to be closer to whom. The issue is who is going to serve our interests. Today Iraq is the number one supplier of our requirement. We are taking substantial amount from UAE (United Arab Emirates) also. UAE is a very reliable partner for India in crude oil supply. We have some offtake conditions from Kuwait also, from certain African countries also. We are open, we are a free market,” Pradhan said.

With domestic petrol and diesel prices at record highs, India had expressed its displeasure to Opec for ‘backtracking’ on its commitments. Saudi Arabia on its part had asked India to use the crude oil bought at low prices and stored in its strategic crude oil reserves.

Pradhan termed the response as an “undiplomatic answer from some of our close friends.”

India bought crude oil at an average price of $19 per barrel to fill its strategic crude oil reserves, and in the process saved $685.11 million. India leveraged the depressed prices and lack of demand on account of the coronavirus pandemic to make this saving and filled its existing storage capacity of 5.3 million tonnes (mt) at Visakhapatnam (1.33mt), Mangaluru (1.5 mt) and Padur (2.5mt).

“I politely disagree with that kind of approach. Certainly, India has it sown strategy when and how to use our own storage and we are conscious about our interests,” he said.

While there was a moderation in global crude oil prices after maintaining an upward trajectory, the prices have spiked again with the blocking of the Suez Canal.

India is particularly vulnerable as any increase in global prices can affect its import bill, stoke inflation and widen trade deficit. The cost of the Indian basket of crude, which comprises Oman, Dubai and Brent crude, was at $62.12 a barrel on 25 March. Following the covid outbreak, crude prices for Indian basket of crude had plunged to $19.90 in April before recovering to $61.22 a barrel in February, data from the Petroleum Planning and Analysis Cell showed.

“Whoever offers us the cheapest and easily available (oil), we will take oil from them. That is our priority. Whichever that country may be and for that whatever needs to be done, we will do,” Pradhan said.

This also comes at a time when India is leaning on its old energy partner Russia to cushion its consumers from price shocks, with the two countries exploring an approach to protect both the buyer and seller from the sharp volatility in global prices as reported by Mint earlier. India is also eyeing more long-term crude oil contracts from Russia.

India spent $101.4 billion on crude oil imports in 2019-20 and $111.9 billion in 2018-19. It is a key refining hub in Asia, with an installed capacity of over 249.36 million tonnes per annum (mtpa). It has 23 refineries and plans to grow its refining capacity to 400 mtpa by 2025.