Table of Contents
What?
- India to cut crude oil imports from Saudi Arabia in response to sustained production cuts by the OPEC+ countries amid rising crude oil prices.
OPEC+
- OPEC’s 13 members control 35% of global oil supplies and 82% of proven reserves.
- With the addition of 10 Non-OPEC nations (notably Russia, Mexico and Kazakhstan), those shares increase to 55% and 90%
- It was formalized in late 2016 under a joint pledge to cut production by 1.8 million b/d .
- The objective was to reinvigorate oil prices suffering from a global economic slowdown and a deluge of U.S. shale oil.
Backdrop
- OPEC+, a group of 23 major oil-producing countries that had cut crude oil production levels during the peak of the Covid-19 pandemic as the price of Brent crude fell to below $20 per barrel, have decided to maintain lower production levels through April despite crude oil prices recovering to pre-pandemic levels.
- Saudi Arabia alone has extended a 1 million barrel per day production cut through April contributing to elevated crude oil prices.
India’s Situation
- India imports over 80% of its crude oil
- Prices of petrol and diesel reaching record high level across India with the price of petrol crossing Rs 100 per litre in some parts
- Hampered the economic recovery
Alternates
- Oil Diplomacy => A reduction from Saudi Arabia would likely lead to increased imports from other gulf countries and the United States.
- Saudi Arabia was displaced by the United States as 2nd largest source of crude oil after Iraq in Feb 2021.
- Diversifying sourcing can also get a better discount on procurement which is generally difficult in a rising crude price environment.
- Saudi energy minister Prince Abdulaziz bin Salman has said that India should use its strategic petroleum reserves.
India’s Oil Diplomacy
Acquisition of assets abroad:
- acquiring equity participation in developed fields
- obtaining exploration and production (E&P) contracts
- Entering into long-term LNG supply contracts;
- pursuing transnational gas pipeline proposals
- promoting partnerships with foreign entities in downstream sector both in India & abroad
Strategic Petro Reserves
- ISPRL has established SPR facilities with total capacity of 5.33 MMT at
- (i) Vishakhapatnam, (ii) Mangaluru and (iii) Padur.
- As per the consumption pattern of 2019-20, the total capacity is estimated to provide for about 5 days of crude oil requirement.
- 2 more in pipeline (i) Chandikhol in Odisha (4 MMT) and (ii) Padur in Karnataka (2.5 MMT) => +12 days
- In addition, OMCs have storage facilities for 64.5 days, thus the current total national capacity for storage of crude oil and petroleum products currently is 74 days.
- (i) Vishakhapatnam, (ii) Mangaluru and (iii) Padur.