India looks to Russia for crude after drone strike on Saudi oil facilities

Minister says volatility in international pricing a cause of concern for India

India is looking to diversified crude oil sources such as Russia amid concerns over continued supply from Saudi Arabia, following a drone attack on the country’s oil facilities last week.

The attack on September 14 affected production of about 5.7 million barrels of oil per day (mbpd), which is half of Saudi Arabia’s exports and about 5 per cent of the global supply. During 2018-19 financial year, around 40.3 million tonne (mt) of the 227 mt crude oil imports worth Rs 7.83 trillion by India came from Saudi Arabia.

Petroleum Minister Dharmendra Pradhan indicated on Tuesday the country was now looking to Russia as an alternative source as part of a strategy to have a diversified oil basket. “There is enough diversity in our crude oil sources. I met Rosneft’s Chief Executive Officer (CEO) Igor Sechin today (on Tuesday) and we discussed in detail about crude oil imports from Russia,” Pradhan added. 

In the previous financial year, India’s crude oil imports from Russia were a mere 2 mt. Experts indicate that it may not be possible for the country to take Saudi’s position immediately, but the government may be mulling long-term deals. 

The minister said volatility in international pricing was a cause of concern for consumers like India. At one point on Tuesday, Brent crude prices were seen $68.02 a barrel. The minister said Indian companies had continued to lift crude oil from Saudi on Monday and Tuesday. The Middle East nation had ensured its suppliers on Monday that there would be no supply shortage as it had higher inventories in place. 

According to the ministry of petroleum, Rosneft CEO has indicated the company’s readiness to intensify cooperation aimed at the strengthening of energy security in India and in supplying of high-quality feedstock and crude oil. A government official said a consortium of four Indian companies — Indian Oil Corporation (IOC), Bharat Petro Resources (BPRL), ONGC Videsh (OVL) and Oil India (OIL) — are likely to increase their investments in Russia, which was one of the key talking points in Tuesday’s high-level meeting. The companies and Rosneft have exchanged a non-binding cooperation agreement showing interest in the Eastern Cluster project.  The ongoing joint projects in Russia between Indian oil and gas public sector undertakings and Rosneft, including Sakhalin-1, Taas-Yuryakh and Vankor fields, were also reviewed. 

Early this month, Prime Minister Narendra Modi had issued a joint statement with Russian President Vladimir Putin, ensuring increased hydrocarbon co-operation between 2019 and 2024. Another area of discussion was the plan of the consortium of foreign investors, including Rosneft, for the further development of Nayara Energy. 

The consortium is reviewing an option of a twofold increase of the refining throughput at the Vadinar Refinery. The first stage consortium commits to an investment of $850 million towards the building of a petrochemical unit in Vadinar within two years. 

The consortium is also planning to expand Nayara Energy’s retail presence, which has over 5,300 retail outlets across the country.