The conflict between India and Saudi Arabia over crude oil continues. India has asked the oil producing units in the country to increase production in order to reduce their dependence of crude oil on the Middle East. This move of India is being considered as a message to OPEC +, an organization of oil producing countries, that they will have to change the way of production of oil.
When the oil producing and exporting countries continued to cut production even in April, India took a strict stance. Recently, Union Oil and Gas Minister Dharmendra Pradhan objected to the statement of Saudi Arabia’s Oil Minister Abdul Aziz bin Salman Al Saud. India had appealed to reduce the price of crude oil, but Abdul Aziz bin Salman Al Saud said that India should use its strategic oil reserve, which it has accumulated during the last year during the falling oil prices.
News agency Reuters quoted that India’s oil producing units are planning to cut fuel exports from Saudi Arabia by a quarter. India plans to import an average of 10.8 million barrels of oil every month compared to 14.7-14.8 million barrels previously.
Union Oil and Gas Ministry Secretary Tarun Kapoor said that India has asked oil producing refineries located in the states to jointly negotiate with oil producers so that a better deal can be done. However, he declined to comment on plans to cut imports from Saudi Arabia. Tarun Kapoor said, “India is a big market, so oil sellers have to be vigilant to keep the long-term relationship intact along with the demand of our country.” On the other hand, Saudi Arabian government oil company Saudi Aramco and Saudi Energy Ministry refused to comment on this.
However, Dharmendra Pradhan, who sees rising oil prices as a threat to India’s booming economy, says he was disappointed with the OPEC + decision. Fuel prices in India are skyrocketing and last year, oil prices registered a record increase due to various taxes being imposed. Although, OPEC has now said to increase oil production but when India requested it, OPEC countries did not accept it.
The International Energy Agency has forecasted India’s consumption to double and said that India’s oil imports could increase by nearly three times by 2019 to US $ 250 billion by 2040. Considering the sensitivity of the case, an oil ministry official, on the condition of anonymity, said that OPEC cuts have created uncertainty and fear in the minds of the people. This has made it difficult for refineries to plan procurement and price risk.
Interestingly, this approach of Saudi Arabia has provided opportunities for companies in America, Africa, Russia and elsewhere to fill this gap. If India succeeds in its plan, then it will also become an example for other countries of the world. It is obvious that buyers are always looking for more economical options and renewable energy is becoming increasingly common. Therefore, the geopolitics of big producers like Saudi Arabia can change the direction of influence and affect the way they do business.
India has cut crude oil exports from the Middle East in recent years. It is true that India’s oil demand has increased by 25% in the last seven years more than any other major buyer. India has overtaken Japan as the world’s third largest oil importer and consumer. But it is also true that India has reduced its dependence on Middle East by 60% in 2019, with more than 64% import in 2016.
However, this trend reversed in 2020, when fuel demand soared during the Corona epidemic and Indian refineries were forced to buy Middle East oil under conditions. But the official said that after Dharmendra Pradhan’s call to increase oil production, India’s stance has changed.
Now India’s refineries are considering a new route for oil supply. To fulfill this objective, expensive Indian refineries are upgrading themselves in terms of processing. This has encouraged importers to look for long-term alternatives. This is the reason why HPCL-Mittal Energy Ltd. bought the country’s first cargo from Guyana this month, and Mangalore Refinery and Petrochemicals Ltd. imported Brazilian Tupi crude for the first time.
Over the past few years, refineries have jointly negotiated oil deals with Iran facing a host of sanctions, offering free shipping and price discounts here, and now plan to do the same with other producers.
After tensions with Saudi Arabia began, Dharmendra Pradhan took on the UAE Minister of State and the Chief Executive Officer of Abu Dhabi National Oil Company (ADNOC), Sultan Ahmed Al Jaber and US Energy Minister Jennifer Grahamholm to strengthen the energy partnership Have meetings. Dharmendra Pradhan recently said that African countries can play a central role in India’s oil diversification. India is exploring options to sign a long-term oil supply agreement with Guyana and increase imports from Russia.