India, as among the fastest-growing economies globally, and as a nation with a thriving demand for energy, relies on imported crude oil for supply. Let’s glance at the six regions from which India procures its oil and the partnerships forged along the way.
1. Middle Eastern prevalence
When it comes to oil supply, the Middle East is quite significant in India's energy landscape. With abundant oil reserves and geographical proximity, countries like Saudi Arabia and the United Arab Emirates (UAE), form approximately two-thirds of the total oil importers to the Indian subcontinent.
2. Allies in Africa
India's oil supply journey extends to the shores of Africa with allies in countries like Nigeria, Angola and Algeria, among others. These alliances are beyond just trade, as efforts towards exploration, refining and infrastructure development are also fostered. Hence, Africa is regionally positioned as a vital oil supplier for India.
3. The American influence
India has diversified its oil sources by increasing imports from the United States. The shale revolution in the US has transformed their energy landscape and made them a big player in the global oil market. The “Shale Revolution” refers to the combination of horizontal drilling and hydraulic fracturing that enabled the US to significantly increase its production of oil and natural gas. India has established strong trade ties with the US to diversify the oil supply sources.
4. Reliance on Russia
With its significant oil reserves, Russia is also an essential partner in India’s pursuit of oil and energy. Historically, the mutual reliance among India and Russia has also translated into establishing an oil trade that is substantial. India’s imports from Russia have been steadily growing, credited to the expansion of exploration and production efforts. Joint ventures in refining and exploration further strengthen the bilaterality.
5. Southeast Asian collaborators
India’s neighbours in Southeast Asia also play a role for oil supply. With their considerable oil reserves, Malaysia, Indonesia and Vietnam, have formed significant partnerships with India. The close trade ties and the geographical proximity gives opportunities between the nations, for efficient regional collaborations in the energy sector. Therefore contributing to a steady flow of oil resources.
6. Brazil and the Latin Americas
Latin American nations such as Brazil with offshore oil fields, has emerged as a potential partner in India’s oil supply journey. Therefore contributing to the global alliances in the energy sector.
Diversification and beyond
India’s oil supply strategy emphasises on diversification to ensure energy security. These diverse partnerships minimise India’s dependence on any single source and creates a more resilient energy ecosystem. As a thriving economy with a high requirement for energy sources, India relies on imported crude oil to help fuel its progress.
India's crude oil landscape
Here’s four key aspects that define India's crude oil landscape.
- Growing appetite: India's energy consumption has experienced a remarkable surge driven by rapid industrialisation, urbanisation and a rising population. In FY22, India ranked as the world's third-largest consumer of crude oil, accounting for approximately 5.2 million barrels per day (bpd). India’s consumption of petrol products stood at 183 MMT (million metric tonnes) in January, 2023.
- Crude oil imports: India's crude oil production, although significant, does not fully meet the domestic demand. Therefore necessitating the Indian reliance on crude oil imports and India being among the largest oil importers, globally.
- Refining capacity: India's refining capacity has experienced significant growth to meet its increasing demand for petroleum products. As of September 2021, India’s oil refining capacity stood at 249 MMTPA (million metric tonnes per annum), making it the second-largest refiner in Asia. The refining sector plays an elemental role in transforming crude oil into various petroleum products to cater towards domestic consumption and export.
- Exploration and investment: India continues to invest in the exploration and production activities to bolster its own domestic crude oil production. India’s crude oil production in FY22 stood at 29 MMT. As of August 2022, India had 10,420 kilometres of crude pipeline networks. The government’s annual budget policies have implemented well-rounded initiatives to attract investments and enhance exploration efforts, aimed towards achieving energy security.
So, what’s in the future outlook for India and crude oil?
As India aims to balance its energy needs, efforts are underway to diversify its energy mix and promote renewable energy sources. Nevertheless, crude oil remains a key component in India's energy landscape for the foreseeable future. Steps to ensure energy security, such as expanding strategic petroleum reserves, exploring unconventional oil and gas resources, will help shape India’s crude oil future outlook.
Conclusion
While a significant amount of work is already underway in the crude oil arena, It continues to be essential for India to adapt a balanced approach towards oil. Diversifying the energy sources, biofuels and investing in renewable energy will ensure long-term sustainability and energy security for India.
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