As India’s oil and gas demand continues to grow, the South Asian country is looking to any supplier offering a low-cost product, regardless of how controversial they may be. India’s refiners are diversifying their supply, in response to recent OPEC oil quota cuts, and turning to sanctioned states, such as Russia and Iran, to ensure their crude supply. With little support from the West to support the country’s burgeoning renewable energy industry, India’s partnership with controversial oil suppliers is likely to continue. In October, India announced it would be speeding up the diversification of oil imports to mitigate the risk of potential OPEC+ oil cuts. The country’s oil minister, Hardeep Singh Puri, explained that OPEC cuts would “hurt large importers like India, who spent around $120 billion last year on the import of petroleum products.” OPEC introduced oil production cuts of 2 million bpd for the coming months in anticipation of a decrease in global demand for crude due to growing economic pressures worldwide.
India is the third-largest consumer and importer of oil worldwide, purchasing around 85 percent of its oil demand from abroad. Puri has previously pointed towards India’s intention to diversify its crude suppliers to ensure its energy security stating, “Some diversification has already happened and we will further diversify... there are many sources and we will not hesitate to take actions.” He also suggested that OPEC cuts may send several countries into a deeper recession than already being experienced, as fuel prices are pushed upwards.
In recent weeks, India’s oil refiners have been racing to establish new partnerships and further diversify their oil supply to ensure they are not negatively affected by the OPEC cuts. Refiners are also concerned about the potential for the West to impose stricter sanctions on Russian energy in the coming months, which could further hinder India’s oil supply. Indian Oil Corp and Bharat Petroleum Corp are both trying to establish new deals with a range of oil-rich countries including the U.S.
An official from a state refiner explained: “We are preparing for a backup plan. When the world is uncertain because of the Russia-Ukraine conflict we need to have all options open.” A separate source from another refiner stated, “Due to the Russian-Ukraine conflict, we expect a possibility of tight oil markets and a change in flows with most Middle Eastern crude going to meet the need of European markets so we need to diversify our oil sources.” India’s refiners are making it clear to the rest of the world that they will diversify their oil supply to any country willing to offer them reliable and low-cost crude, regardless of whether the U.S. and Europe approve of its new partnerships.
India has turned to Iran as one of its potential suppliers, with Iran’s ambassador, Iraj Elahi, expressing the country’s willingness to provide India with the crude supply it needs to ensure its energy security. Elahi stated, “We always express our readiness to increase our economic ties with India. It’s up to India, we are ready to deliver oil.” Iran was one of India’s primary oil suppliers before sanctions were introduced on Iranian energy in 2019.
Despite the ongoing sanctions imposed on Iranian crude by the U.S. and United Nations, Iran has been steadily rebuilding its oil supply and establishing export partners for its crude. As governments worldwide felt the gap created by the introduction of sanctions on Russian oil and gas, as well as from strict OPEC production quotas, many turned towards controversial oil powers, such as Iran and Venezuela, to provide them with vital oil resources. Iran announced a 580 percent increase in its oil and condensates income from March to July compared with the same period in 2021, as it showed a clear disregard for U.S. sanctions on its oil industry. Both Turkey and Afghanistan enhanced their partnerships with Iran in a bid to boost their oil imports.
Perhaps more worrying than its partnership with Iran is its ties with Russia, which has become one of India’s top oil suppliers in recent months, offering the Asian state low-price oil after losing many of its Western energy partners after it invaded Ukraine. In October, Russia became India’s main supplier, providing it with 946,000 bpd, according to energy analytics firm Vortexa. Before the Russia-Ukraine conflict, India imported little oil from Russia, however as the U.S. and EU introduced sanctions on Russian oil and gas, it has become an obvious partner for India that is looking to boost its low-cost oil supplies. Russian oil prices have been highly competitive with Middle Eastern and African crude, leading India, and several other countries, to deepen ties with the oil giant.
India has seen one blow after another, with the U.S. introducing sanctions on several oil and gas suppliers and OPEC+ introducing oil production cuts. In response to this threat to India’s energy security, its oil minister and refiners have made it clear that India will establish new partnerships with any country that will provide it with low-cost, reliable oil supplies. This has led it to deepen ties with Iran and Russia, offering the sanctioned states an opportunity to continue exporting their oil and gas.
By Felicity Bradstock for Oilprice.com
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