Page 5 - FSUOGM Week 06 2020

FSUOGM COMMENTARY FSUOGM
tpy (770,000 bpd) of refining capacity, more than 15,000 retail fuel stations and a network of 6,000 liquid petroleum gas (LPG) distributors. New Delhi has decided to sell BPCL’s 60,000 bpd Numaligarh Refinery in Assam State separately to a state-controlled player.
Rosneft gained access to India’s fast-grow- ing petroleum product market in 2017, when it acquired the country’s 400,000 bpd Vadinar refinery in Gujarat State as part of a consortium including global trader Trafigura and Russian fund UCP.
Strategic sense
India’s agreement to participate in Russia’s upstream makes a great deal of strategic sense. On the one hand, New Delhi is invested in reducing its exposure to the Middle East, which still accounts for 60% of India’s oil imports. India imported 4.48mn bpd of crude in 2019, enough to meet 84% of national demand, with Middle Eastern supplies amounting to 2.68mn bpd.
At the same time, India is coming to terms with an uncomfortable truth – years of declin- ing energy production and rising demand have made a mockery of the government’s pledges to reduce the country’s import dependence. India’s oil production slipped by 5.98% year on year in November to 2.61mn tonnes (638,000 bpd), while production in the first eight months of financial year 2019-2020 shrank by 5.85% to 21.72mn tonnes (652,000 bpd). The Interna- tional Energy Agency (IEA), meanwhile, has
predicted that India’s oil demand growth will eclipse that of China by the middle of the decade. The agency said in its India 2020 Energy Policy Review that demand was expected to climb from 4.4mn bpd in 2017 to 6mn bpd by 2024, with domestic production only predicted to expand marginally.
India, therefore, needs to import more oil, but without increasing its exposure to the Mid- dle East. To plug the gap, New Delhi has turned its attention to Russian, US and Latin American suppliers. In the run up to IOC’s agreement with Rosneft, Reuters reported last month that in addition to India’s largest refiner, state-run BPCL and Hindustan Petroleum Corporation Ltd (HPCL) were also in talks to buy more Rus- sian oil.
New Delhi, meanwhile, has also signed a memorandum of understanding (MoU) on energy co-operation with Brazil last week with a focus on the upstream.
Indian news service IANS quoted unnamed diplomatic sources in January as saying that US President Donald Trump’s official visit to India this month was anticipated to deliver a bilateral agreement that will see Indian refiners double their imports of US oil.
Greater investment in Russian upstream pro- jects makes sense for India’s state-run compa- nies, which need to import more oil but wish to minimise their risk while doing so. It is a central pillar in an increasingly supplier-agnostic energy s t r a t e g y. ™
Rosneft, owner of India’s 400,000
bpd Vadinar refinery (pictured), is eyeing further expansion in the country’s downstream.
Week 06 12•February•2020 w w w. N E W S B A S E . c o m P5