Import of crude oil, decreasing dependence on OPEC, increasing share of Russia, what it means for India

India Crude Oil Import: India is largely dependent on imports to meet its energy needs. To meet the energy requirements, India has to import a large amount of crude oil, natural gas as well as coal.

If we talk about crude oil, then we were able to produce only 12 to 14 percent of our requirement and rest of the crude oil is imported from other countries. Earlier, India’s dependence on the import of crude oil was on the member countries of the Organization of Petroleum Exporting Countries ie OPEC, but since the war between Russia and Ukraine, the situation has completely changed on this front.

OPEC’s stake at lowest level

OPEC’s share in our crude oil imports is gradually decreasing and Russia’s share is increasing rapidly. If we talk about April this year, OPEC’s share in India’s crude oil imports has reached its lowest level ever. In April 2023, OPEC’s share has come down to 46 percent. According to Vortexa, which monitors energy shipments, OPEC’s share in India’s imports has come down to its all-time low.

Russia’s share has grown sharply in 7 months

The other aspect of this is that Russia’s share in the import of crude oil has increased rapidly in the last 7 months. Talking about April 2023, Russia’s share in India’s total oil imports has been more than one-third i.e. 33% for the seventh consecutive month. Russia’s share in India’s imports has increased to 36 percent in April. If we understand it in terms of daily purchases, then India imported 4.6 million barrels of crude oil per day in April. Of these, 21 lakh barrels per day were purchased from OPEC countries. At the same time, 16.78 lakh barrels of crude oil was purchased from Russia per day.

Russia is the largest supplier of crude oil

You will be surprised to know that when the Russia-Ukraine war had not started, Russia’s share in India’s crude oil imports in February 2022 was less than one percent. And in April 2022, OPEC, mainly West Asia and Africa, had a 72% share in India’s crude oil imports. Even before that, at one time OPEC’s share in India’s crude oil imports used to be 90%. According to Vortexa, India imported only 68,600 barrels per day of crude oil from Russia in March 2022, which has increased to 16.78 lakh barrels per day this year. In this way, Russia has remained the largest supplier of crude oil to India for the last several months.

Crude oil is being received from Russia at concessional rates

The question arises that the Russia from which we did not buy even one percent of crude oil till February 2022, suddenly what has happened that for the last seven months more than one-third of our requirement of crude oil has been bought from Russia. The biggest reason for this is..changed equations due to Russia-Ukraine war. Earlier, the cost of transportation used to be very high for buying oil from Russia. Because of this, Indian refinery companies rarely bought oil from Russia. But as soon as Russia’s conflict with Ukraine started, since then Russia needed a large amount of money. For this, Russia started selling crude oil at subsidized prices. Seeing this changed situation, Indian companies also started buying crude oil in large quantities from Russia.

Russia becomes new option for crude oil

In this way Russia’s share in India’s crude oil imports started increasing rapidly and the share of OPEC countries started decreasing. The situation is that now the import from Russia has become more than the collective purchase from Iraq and Saudi Arabia. Iraq and Saudi Arabia were India’s biggest oil suppliers in the last decade. In March this year, Russia has doubled the purchase of crude oil for India from Iraq. Iraq was the largest supplier of crude oil to India in 2017-18. At present, 8.1 lakh barrels per day of crude oil is being imported for India from Iraq and in this case it is the second country after Russia. At the same time, Saudi Arabia has reached the third position by supplying 6.7 lakh barrels per day. At the same time, America is at number four in this matter. These figures are enough to tell how Russia’s war with Ukraine has made the Kremlin the new option for crude oil imports for India.

Importance of OPEC regarding crude oil

OPEC is the Organization of the Petroleum Exporting Countries. OPEC means Organization of the Petroleum Exporting Countries. The foundation of this organization was laid in September 1960 at the Baghdad Conference. At that time it included Asian countries Iran, Iraq, Kuwait, Saudi Arabia as well as South American country Venezuela. These five are the founding members of OPEC. Initially it was headquartered in Geneva, Switzerland, but from 1965 Vienna, the capital of Austria, became its head quarter. OPEC was later joined by Qatar, Indonesia, Libya, United Arab Emirates, Algeria, Nigeria, Ecuador, Angola, Equatorial Guinea and Congo. However, later Ecuador, Indonesia and Qatar separated from this organization. At present there are 13 member countries in the OPEC group.

OPEC countries have immense reserves of crude oil

Crude oil is produced in large quantities in OPEC member countries. According to OPEC’s Annual Bulletin, 80.4% (1,241.82 billion barrels) of the world’s oil reserves in 2021 are located in OPEC member countries. In that too, more than 67% of OPEC’s oil reserves are with the Middle East member countries. There was a time when OPEC had a monopoly on everything from determining the prices of crude oil to the quantity to be produced. However, the situation is no longer like that. But it is also worth noting that still crude oil production from OPEC is an important factor, which affects crude oil prices. This organization gives target to the member countries by determining how much will be produced. At present, about 40 percent of the world’s crude oil is produced from OPEC member countries and it is very important in determining the prices of crude oil in the global market.

Earlier India was dependent on OPEC for crude oil.

India was also mostly dependent on OPEC members for the import of crude oil. In that too, India used to buy the most crude oil from Iraq and Saudi Arabia.
Last month, for the first time in terms of crude oil imports to India, Russia overtook both Saudi Arabia and Iraq together. India is getting crude oil at much lower prices as compared to Saudi Arabia and Iraq.

There is a possibility of similar situation in this month i.e. May also. Although China is also engaged in buying more and more crude oil from Russia at concessional prices. In such a situation, Serena Huang, head of Vortex’s Asia-Pacific analysis, believes that due to India’s competition with China in this matter, the pace of import of crude oil from Russia to India may slow down a bit in the coming times. Is. Serena Huang says that such a sharp decline in India’s share shows that OPEC may face an uphill battle in the future to regain market share. Refinery companies will buy oil from where they will get crude oil according to their conditions at low prices.

Russia’s compulsion to sell at discounted prices

We all know that for the last one year, Russia is struggling with the sanctions of America and European Union. These include import restrictions as well. Russia needs a huge amount of money to strengthen its economy. For this reason, to bridge the gap in its energy exports, Russia is selling record quantities of crude oil to India at a subsidized price.

The European Union had banned crude oil imports from Russia by sea in December last year. Also imposed a price cap of $60 per barrel, which prevents other countries from using EU shipping and insurance services, unless crude oil is sold below this cap. At the same time, Indian refinery companies are using UAE dirhams to pay for the oil that is imported at a price of less than $ 60.

Opportunity to cut import bill for India

The changing pattern of crude oil imports is also helping India manage its import bill to meet its energy needs. India has become the most populous country in the world. We are the fifth largest economy in the world. Given the size of the population and economy, our energy needs are also increasing rapidly. It is expected that by 2025, India will become the second largest consumer of energy after the US. In this matter we will go ahead of China. It is also a fact that India imports about 84 percent of its crude oil requirements from more than 40 countries. India has just 0.3% of the world’s oil reserves, while we account for 4.5% of global oil consumption.

Crude oil is converted into fuels like petrol and diesel in refineries. India’s crude oil requirement will be 7.2 million barrels per day by 2040. For this, India will import about 2.3 million barrels of crude oil per day for oil production by 2040. It is also expected that by 2040, India will need a quarter of the global energy demand.

We spend a huge amount on the import of crude oil and the amount is also increasing rapidly. There was a sharp increase in the import of crude oil. Due to this, during the financial year 2022-23 till January 2023, India’s import bill increased by about 22% and it reached $ 601.7 billion. The same figures show that the country’s crude oil imports increased by 43% during the same period and this increased the crude oil import bill to $178.4 billion. Although the central government is continuously working to reduce the import bill of crude oil. In 2016, the Government of India prepared a roadmap to reduce India’s crude oil imports by 10% by 2022. Based on the experiences gained from it, India is busy in executing the strategy ahead.

India has been trying for the last several years to maintain diversity and alternatives regarding dependence on external countries for its traditional energy resources coal, oil and natural gas. But the reality is that for the last 15 years, the top 20 sources are responsible for more than 95% of India’s oil imports. In that too, 80 percent of conventional energy resources have been imported from 10 countries only.

Looking at all these aspects, one thing is clear that decreasing dependence on OPEC countries for crude oil and increasing Russia’s share will help India to move forward on its policy related to its energy needs. Even so, Russia is one of the few countries in the world with which India’s friendship is decades old and despite this, it is still as strong as ever.

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