KOLKATA (miningweekly.com) - The US administration’s decision to end sanction waivers for Iranian oil imports by India and seven other countries will trigger a surge in India’s oil import bill even as it scurries to secure new energy sources.
The government’s preliminary estimates for 2018/19 estimate the Indian oil import bill at $115-billion, an increase of 30% over the previous year. The surge in the import bill surpasses the 27% increase that a government agency forecast at the start of the year.
The US administration’s actions have led to a flurry of activity in the government, with the Petroleum and Natural Gas Ministry, backed by the External Affairs Ministry, seeking new sources of crude imports as the timing of the end of the waiver poses a political risk with Indian national elections under way.
The government is looking at options such as increasing crude import volumes from Mexico and Brazil, while simultaneously banking on higher shipments from traditional sources like Saudi Arabia and the UAE, government officials say. However, they add a note of caution that supplies are already tight from the Organisation of the Petroleum Exporting Countries (Opec) and the Opec has still committed to production cuts to support global prices.
While the exact impact of the end of the sanctions waiver for Iranian crude imports is yet to be determined, a section within the Indian government has speculated that factoring in rising global crude prices, supplies ending from Iran and higher costs involved in alternative sourcing, the growth in India’s oil import bill in the current fiscal could range between 40% to 45%.
It has also been pointed out that Iranian crude oil supplies are contracted with the added benefit of 60-day credit terms which might not be available from alternative sources, which will have an additional impact on import costs.
The situation has been further aggravated by US sanctions against Venezuela and the halting of shipments from Petroleos de Venezuela (PDVSA).
Government officials say that Brazil and Mexico will be the most obvious alternative choice to Venezuelan crude but whether imports from these countries can be increased will depend entirely on the quality of crude made available and its suitability for Indian refineries as well as whether terms of supply can match erstwhile agreements with Venezuela State-owned PDVSA.
India is the third largest crude-oil-import-dependent country and the second largest buyer of Iranian crude. India’s imports of crude from Iran during 2018/19 were 23.5-million tonnes.
Venezuelan crude accounted for about 11% of total Indian imports.