INSUBCONTINENT EXCLUSIVE:
India's oil demand has risen by 25 per centin the last seven yearsWhen the government asked refiners last month 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, fuelled 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
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
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
and the country has surpassed Japan as the world's third-largest oil importer and consumer.The country has already curbed its reliance on
pummelled fuel demand and forced Indian refiners to make committed oil purchases from the Middle East under term contracts, shunning spot
purchases.As India shifts gears again after Pradhan's call for faster diversification, refineries are looking for new suppliers, the oil
ministry official said.Costly refinery upgrades that allow for the processing of cheaper, heavier oil grades have encouraged importers to
seek out far-flung sources
HPCL-Mittal Energy Ltd bought the country's first cargo from Guyana this month, and Mangalore Refinery and Petrochemicals Ltd just imported
meetings with United Arab Emirates' minister of state and chief executive of Abu Dhabi National Oil Co (ADNOC), Sultan Ahmed Al Jaber, and
energy secretary Jennifer Granholm to strengthen energy partnerships.Pradhan recently said African nations could play a central role in
India's oil diversification
The country is looking at signing long-term oil supply deal with Guyana and exploring options to raise imports from Russia, the oil ministry
source said.A separate Indian government source said the government expects Iranian sanctions to ease in three to four months, potentially
offering India a cheaper alternative to Saudi oil.Two traders agreed that Iran stood a good chance to benefit from India's shift, as did
Venezuela, Kuwait and the United States
An Indian refinery source said the U.S., Africa, Kazakhstan's CPC Blend and Russian oil would probably get a look too.Although Indian
importers will scoop up increasing volumes of attractively priced global grades, most analysts expect the Middle East to remain India's
primary oil supplier, mainly because of lower shipping costs
India's oil ministry is working with refiners on a framework to jointly negotiate terms with suppliers."Buyers have alternatives in today's
market and these alternatives are going to multiply going forward," Kapoor said
"There are so many companies in India that do buying at their own level, so these companies coming together also becomes quite a big
bloc."On Thursday, Saudi Arabia and OPEC+ agreed after discussions with U.S
officials to ease oil curbs beginning in May.Saudi energy minister Prince Abdulaziz bin Salman conceded that the production cuts had put
over into broader strategic ties in other sectors, including defence
"Until recently, the balance of power was skewed towards Saudi Arabia, but increasingly, India is using access to its market and the
diversity of options to put pressure on Saudi Arabia," consultancy Eurasia said in a note
"For Saudi Arabia, losing market share in a global environment in which most developed economies are already seeing their oil demand decline
due to green policy implementation, would be a blow."Abdulaziz confirmed that Aramco had maintained normal April oil supplies to Indian
refiners while cutting volumes for other buyers - a sign Saudi Arabia is concerned about India's search for new sources.Saudi Arabia is
India's fourth-biggest trade partner, importing a slew of items, including food
Saudi Armaco is looking at buying a 20% stake in Reliance Industries' oil and chemicals business
It is also a part of a joint venture to build a 1.2 million barrels per day refinery in India.But Amitendu Palit, senior research fellow at
National University of Singapore, said it would be difficult for Saudi to find a stable alternative buyer if India continues with reduced
purchases for too long."This bilateral relationship should not be impacted due to any decisions on one commodity
However in a global surplus, market buyers have a lot of negotiating power and sources," Palit said.
