NEW DELHI: India’s crude import bill increased 12% during the first half of the current fiscal 2024-25 to $71.3 billion against $63.7 billion in the same period in FY24, data from the Petroleum Planning and Analysis Cell showed. The country imported 120.5 million tonnes of crude oil during April to September, up 4% from 115.9 million tonnes in the corresponding period of last fiscal.
In September however, the import bill for crude oil declined by almost 3% whereas the volume jumped by 6.3% to 18.6 million tonnes compared to September 2023.
The country’s dependency on import of crude oil during April to September of the current fiscal rose to 88.2%, up from 87.6% in the corresponding period of FY24 amid rising demand and stagnant domestic production.
Upstream companies produced 14.4 million tonnes of crude oil during the period, slightly down from 14.7 million tonnes in the same period last fiscal. The declining trend in production can be attributed to maturing of the existing oil fields amid lack of new areas of production, as per analysts. In September too, production fell marginally to 2.3 million tonnes from 2.4 million tonnes last year.
Despite the government’s efforts to boost production and reduce dependency on imports, the production has remained stagnant over the last ten years and the country’s dependency on imports has only increased.
The government recently introduced a Bill in Parliament to make amendments in the Oilfields (Regulation and Development) Act, 1948 which broadens the definition of mineral oils. The updated definition now includes any naturally occurring hydrocarbon, coal bed methane, oil shale, shale gas, etc. The amendments aim to increase industry participation in the sector.
The government expects the contracts for the upcoming 10th round of OALP (Open Acreage Licensing Programme) to be signed as per the reforms mentioned in the Oil (Regulations and Development) Amendment Bill, which is expected to be passed in the upcoming winter session of the parliament.
Oil minister Hardeep Singh Puri on multiple occasions has said that the government is also constantly engaging with international oil and gas companies to boost domestic output.
At the conclusion of the 10th round of OALP bidding recently, Puri told global oil biggies: “Today, we are much more in an inviting mode. If you want to (invest), we will incentivise that. Come and do your seismic (surveys). You don’t need to make a commitment.”
Stagnant domestic output and rising import dependency does not bode well for India at a time when the geopolitical tensions are on the rise.
India recently intensified efforts to expand crude oil purchases from Brazil amid escalating Middle East tensions. However, plentiful availability of discounted Russian crude and logistical hurdles could pose challenges in boosting purchases from the South American supplier according to S&P Global Commodity Insights.
Puri recently visited Brazil to discuss how India could expand crude oil purchases from Brazil, as well as look for opportunities to collaborate on offshore deep and ultra-deepwater exploration and production projects.
Brazilian exports of crude to India have been subdued in recent months. So far in 2024, India has imported crude from Brazil during just five months, with imports this year peaking at 41,600 barrels per day in April, data from S&P Global Commodities at Sea showed. In December 2023, Indian imports of Brazilian crude were as high as 143,000 bpd.
“Brazil deepwater was one of the most attractive emerging areas and saw huge participation in bidding by global oil majors, including Indian companies. However, with a few exceptions, Brazil then did not end up being a focus area for Indian companies. This can be attributed to attention being paid elsewhere back then — Russia and Venezuela,” said Rajeev Lala, director for upstream companies and transactions at Commodity Insights.
However, Indian upstream companies are now more open to overseas investments and venturing to newer locations, he said.
“While entitlement production for Indian companies from Brazil is miniscule – it was about 8,000 bpd of oil equivalent in 2023 — new projects coming online starting in 2024 would boost production to about 40,000 boe/d by 2028. These include SEAP 1 and Wahoo for BPCL and SEAP 2 for Oil and Natural Gas Corp,” the agency said.
The Union Cabinet in July 2022 had approved a proposal to invest $1.6 billion to develop an oil block in Brazil in an attempt to procure equity oil overseas.
“Intense competition from nearby Middle Eastern sour grades and discounted Russian crude presents significant challenges for Brazilian crude in the Indian market,” said Mark Esposito, senior principal research analyst at Commodity Insights.
He noted that Russian sour Urals dominate in the Indian market, comprising 42% of India’s crude imports this year, and constraining opportunities for alternatives. “Moreover, logistical hurdles further diminish the appeal of Brazilian crude,” he said.
India’s crude oil imports from Russia stood at 1.7 million bpd over January-September, accounting for more than 40% of the total imports, as per data from S&P Global Commodities at Sea.
Iraq was the second-largest supplier, with 940,000 bpd, while Saudi Arabia supplied 623,000 bpd over the same period, making it the third-largest supplier.
Source: The Financial Express
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