India’s government decision to ask it refiners to jettison supply of crude oil from Saudi Arabia on account of high prices is set to creates opportunities for companies like Nigerian National Petroleum Corporation (NNPC)and other companies in Africa, Russia and elsewhere to fill the gap.
Indian Oil Minister, Dharmendra Pradhan recently said African nations could play a central role in India’s oil diversification.
India is one of the major customers of Nigeria where her sweet crudes are high patronized by refiners.
The Indian government few weeks ago asked refiners to speed up diversification and reduce dependence on the Middle East – days after OPEC+ said it would maintain production cuts – it sent a message about its clout and foreshadowed changes to the world’s energy maps.
It was a move that had been in the works for years, fueled by repeated comments from Indian Oil Minister Dharmendra Pradhan, who in 2015 called oil purchases a “weapon” for his country.
When the Organisation of Oil Exporting Countries and Major Producers (OPEC+) extended the production cuts into April, India unsheathed that weapon. Indian refiners plan to cut imports from the Kingdom by about a quarter in May, sources told Reuters, dropping them to 10.8 million barrels from monthly average of 14.7-14.8 million barrels.
Oil secretary Tarun Kapoor, the top bureaucrat in the ministry, told Reuters that India is asking state refiners to jointly negotiate with oil producers to get better deals, but declined to comment on plans to cut Saudi imports.
“India is a big market so sellers have to be mindful of our country’s demand as well to keep the long-term relationship intact,” he said.
The Saudi state oil company Saudi Aramco and the Saudi energy ministry declined to comment.
Pradhan, who sees high oil prices as a threat to India’s recovering economy, said he was saddened by the OPEC+ decision. India’s fuel import bill has rocketed, and fuel prices – inflated by government taxes imposed last year – have hit records.
The International Energy Agency forecasts India’s consumption to double and its oil import bill to nearly triple from 2019 levels to more than $250 billion by 2040.
An oil ministry official, who declined to be named because of the sensitivity of the matter, said the OPEC+ cuts have created uncertainty and made it difficult for refiners to plan for procurement and price risk.
It also creates opportunities for companies in the Americas, Africa, Russia and elsewhere to fill the gap.
If India is successful, it will set an example for other countries. As buyers see more affordable choices and renewable energy becomes increasingly common, the influence of big producers like Saudi Arabia could wane, altering geopolitics and trade routes.
India has reduced the share of crude oil imports from the Middle East in recent years: