India To Cut Oil Imports From Saudi Arabia – Free PDF Download

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 2^nd 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

1. Entering into long-term LNG supply contracts;
2. pursuing transnational gas pipeline proposals
3. 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.

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