Amid India’s bid to cut Saudi oil imports, Aramco raises oil price for Asia
Saudi Arabia on Sunday raised the ‘official selling price’, or OSP, of oil shipments to Asia in May but left the price for Europe unchanged, indicating the world’s largest crude exporter is unimpressed by India’s plan to cut Saudi imports. The OSP has been raised between 20 and 50 cents per barrel for various grades of crude, Bloomberg reported. Saudi Aramco sets the OSP every month for oil supplied under term contracts. Other West Asian producers take a cue to tweak their prices. The OSP revision comes amid the government asking state refiners to cut Saudi oil imports and, in a throwback to 2014-15, use their “collective clout” to negotiate better contracts. New Delhi’s latest salvo follows a protracted war of words with Riyadh over OPEC-Plus ignoring India’s calls since December to end production cuts, which had pushed up prices. As fuel prices rose to record highs, partly aided by high taxes, oil minister Dharmendra Pradhan said the grouping “backtracked” on an understanding arrived among buyers and sellers amid demand meltdown in April 2020. His Saudi counterpart Abdulaziz bin Salman responded by suggesting India dip into its stockpile of cheap oil. This was in sharp contrast when officials claimed India’s victory in February when Saudi Aramco had left March prices for Asia unchanged but raised for Europe. In 2014-15, a team of executives from all state-run oil companies and government officials had visited Kuwait, Abu Dhabi and Saudi Arabia in the past without success since Riyadh is not willing to deviate from established norms based on market dynamics. The OSP is the difference in quality between any Saudi crude and the monthly base price of the Dubai-Oman basket quoted in Singapore. The base price is derived from a rolling average of 30-month quotes. For Indian refiners and mush of other Asian buyers, West Asia, which accounts for 60% of India’s oil imports, is hard to beat as a cost-effective source because of proximity, low shipping costs, capacity to supply committed quantities. Joint procurement iss also a non-starter because of the individual need of each refiner. For the same reasons, the US will not always be a cost-effective source, though it has become the second-largest supplier as India diversifies sources. African producers have issues over meeting their commitments.
Mozambique terror attacks: Anxiety hangs over India’s LNG project
The dastardly attacks in Mozambiques Palma, a resort city close to the French energy major Total-run gas project, by terrorists linked to the Islamic State (IS) have not hit headlines in India. But the recent bloodletting in the Indian Ocean nation has huge implications for Indand the domestic energy industry. Reason? State owned ONGC Videsh Ltd (OVL) and Oil India Ltd (OIL) along with other foreign investors secured $14.9 billion debt to part-finance their $24.1 billion liquefied natural gas (LNG) project being built on the Afungi peninsula. The project with one of the largest investments in Africa, is led by Total. It is expected to produce 12.88 million tonnes of LNG per annum. The French company has decided to recall all its staff from the site after the attacks leading to uncertainty over execution of the project. Last week hundreds of militants stormed Palma, rampaging shops, banks and a military barracks. Seven people were killed while trying to escape a siege on a hotel. The IS is leading an insurgency in the resource rich but predominantly Muslim region since 2017. The fighting has left more than 2,500 people dead while an estimated 700,000 have been displaced. Narendra Taneja, energy expert and BJP spokesperson told India Narrative that though the attacks were ghastly, there is no reason for panic yet. The World Economic Forum estimates India diaspora in Mozambique to be around 20,000. “The attacks have been going on for sometime. These are targeted at the country’s gas assets and foreign executives. Any project related to oil and gas typically tends to become political in nature but our state owned energy companies have operations even in Iran and Syria,” Taneja said. He added that the Mozambique government has also offered protection and enhanced security. “They are well equipped in dealing with adverse situations,” Taneja said. The Mozambique Oil and Gas Chamber said that the attacks are aimed at disrupting the project which “will fundamentally recast the fortunes of Mozambique from one of the poorest countries in the world to possibly a middle-income country”, Africanews, a platform highlighting events in the continent noted. According to a Bloomberg report published by World Oil, a weekly published by Gulf Energy Information, the African nation has been “battling an Islamic State-linked insurgency since October 2017”. It said that over the past year, attacks have grown increasingly sophisticated, while also drawing closer to the coastal site where Total leads a consortium building a project to extract, liquefy and export gas from offshore wells. India-Mozambique relations India and Mozambique have shared close ties, dating back to the pre-colonial period. Diplomatic ties between the two countries were established right after Mozambique achieved independence in 1975. Several Indian companies have invested in the resource rich African nation. Besides OVL and OIL, several private sector companies are also operating there. “Due to the strategic location of Mozambique and one of the longest coastline in its southern eastern part, Mozambique provides a good opportunity for India to enhance maritime cooperation since the Mozambican navy does not have the capacity to protect its coast,” said a report by the Vivekananda International Foundation (VIF). It added that Mozambique may very soon have the fourth largest reserves of gas in the world behind Russia, Iran and Qatar. Hence, India’s engagement and investments in Mozambique’s energy sector are also increasing.
India to buy 36 per cent less oil from Saudi Arabia
The government has decided to reduce oil imports from Saudi Arabia by a whopping 36 per cent in May, news agency Reuters reported quoting sources. The decision comes even after the Kingdom supported the idea of boosting output from the Organisation of the Petroleum Exporting Countries (Opec) and allied producers last week. Relations between the two nations have soured in the past few months as domestic prices of fuel spiked following repeated output cuts by the Saudis and other oil producers, thereby putting an upward pressure on crude prices. When Opec and its allies, known as Opec+ extended the production cuts into April, the Centre asked state-run refiners to cut imports from the Kingdom by about a quarter in May. However, on April 1, Opec+ agreed to gradually ease their oil output cuts from May, after the new US administration called on Saudi Arabia, the de facto leader of the group, to keep energy affordable for consumers. Crude oil suppliers to India In February, the United States accounted for 14 per cent of India’s crude oil imports. While oil imports from Saudi declined sharply by 42 per cent in the same month. Iraq was India’s biggest crude oil supplier at 8,67,500 bpd, followed by the United States and Nigeria. United Arab Emirates (UAE) and Kuwait are also some of the biggest suppliers of oil to India — are all Opec members. State-run refiners have placed orders to buy 9.5 million barrels of Saudi oil in May, compared with the previously planned 10.8 million barrels, sources told Reuters. India’s diversification drive The oil ministry had already urged domestic refiners to speed up their diversification of crude resources and reduce dependence on Middle East. According to the Petroleum Planning and Analysis Cell (PPAC) data, India’s crude oil imports in February fell 18.3 per cent from a year earlier to 15.24 million tonnes, the biggest year-on-year fall since October 2020. India has already curbed its reliance on the Middle East from more than 64 per cent of imports in 2016 to below 60 per cent in 2019. However, that trend reversed in 2020, when the pandemic pummelled fuel demand and forced Indian refiners to make committed oil purchases from the Middle East under term contracts, shunning spot purchases. As India shifts gears again after Pradhan’s call for faster diversification, refineries are looking for new suppliers, the oil ministry official said. Last month, the first cargo from new oil producer Guyana to India departed from a production facility off the South American nation’s coast in a vessel chartered by trading firm Trafigura, data from Refinitiv Eikon showed. Pradhan termed Saudi’s response “undiplomatic” Tensions between the two countries further escalated after Saudi energy minister Abdulaziz last month advised India to use the stocks of crude it bought cheaply during the price slump in 2020. Union minister for oil, petroleum and natural gas Dharmendra Pradhan termed Saudi Arabia’s response on India’s strategic oil reserves as ‘undiplomatic” and said that the country is conscious about its interest. Hit hard by soaring oil prices, the oil minister repeatedly called on the Opec and its allied to ease supply curbs. However, its plea was being overlooked. Aramco raises oil price for Asia World’s largest crude exporter Saudi Aramco raised the official selling price (OSP) of its shipments to Asia in May, but left left the price for Europe unchanged. The OSP revision came amid the government asking state refiners to cut Saudi oil imports and, in a throwback to 2014-15, use their “collective clout” to negotiate better contracts. For Indian refiners and much of other Asian buyers, West Asia, which accounts for 60 per cent of India’s oil imports, is hard to beat as a cost-effective source because of proximity, low shipping costs, capacity to supply committed quantities. Joint procurement is also a non-starter because of the individual need of each refiner. For the same reasons, the US will not always be a cost-effective source, though it has become the second-largest supplier as India diversifies sources.