New Delhi — India will be looking to ship in more crude oil from Saudi Arabia and the United Arab Emirates to fill part of the vacuum created by reduced appetite for supplies from Iran, which is facing US sanctions, according to delegates and policy makers attending the India Energy Forum by CERAWeek.
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Although Indian government officials remained tight-lipped about the exact strategy that Indian refiners would adopt after the winding down period ends early November, many delegates at the India Energy Forum told S&P Global Platts that inflows from Iran are unlikely to fall to zero.
Both Saudi Arabia and the UAE highlighted that they had spare capacity to produce the incremental barrels to supply to leading global crude buyers, including India.
Saudi Arabia's energy minister Khalid al-Falih pledged his country's "full commitment to meeting India's oil demand" and said he wanted to reassure consumers that any supply shortfall would be met, adding that current market fundamentals were in balance.
"We are in close contact with all major consumers to seek their views and listen to their concerns and take those into consideration as we set the kingdom's energy policy and discuss it with our partners in OPEC and outside of OPEC," he said, adding that he had met with Indian Prime Minister Narendra Modi and oil minister Dharmendra Pradhan on Monday.
"I want to assure you of our commitment to supply your energy needs, especially oil, and more broadly to promote market stability and to offset any market shortfall," Falih added.
He added that Saudi Arabia, which is currently producing about 10.7 million b/d, would raise its crude production next month. US sanctions on Iran go into effect November 5.
At the same CERAWeek event, Sultan Ahmed Al Jaber, UAE minister of state and group CEO of Abu Dhabi National Oil Company, also pledged to supply incremental barrels to India if there was a need.
"Yes we have spare capacity. If the opportunity arises to supply more to India, we will step up our supplies to the Indian market for their requirements," he added. IRAN STRATEGY
Although no official comments have emerged from New Delhi, Indian government officials appear confident that it will be able to keep importing Iranian oil this fall despite US sanctions, signaling that high-stakes negotiations between the two countries will continue up until the November deadline.
Pradhan said earlier this month that two Indian oil companies had made nominations to import Iranian oil in November despite the threat of sanctions, adding that India had not yet heard if the US will grant any sanctions relief.
But just after Pradhan's comments, a US State Department official had confirmed that the US was "in the midst of an internal process to consider waivers for individual countries."
Indian crude imports from Iran continued in the range of 200,000-250,000 b/d during previous sanctions on Iran. After the sanctions were lifted in 2016, Indian state-owned refiners stepped up Iranian crude imports as Iran offered steep discounts on freight. In addition, Iran allowed a 60-day credit on oil purchases, making it lucrative for Indian refiners.
Analysts said the Indian government would face a challenging scenario early next year -- when it goes to elections for a second term -- if global crude prices hit $100/b.
"Ensuring supplies from Iran to rein in domestic fuel prices ahead of the general election would be a critical challenge for Prime Minister Narendra Modi," said Sabri Hazarika, a senior analyst with Emkay Global Financial Services Ltd. OPTIONS AHEAD
Pradhan said that India -- as the world's third-largest consumer of energy -- cannot rely on one source of energy. The country would need to look at all sources -- solar, wind, hydro, coal, oil, gas, nuclear and biofuels.
"In the past one year, we have faced severe headwinds by way of rising oil prices. Since the last CERAWeek in New Delhi, crude prices have gone up 50% in US dollar terms and 70% in Indian rupee terms," Pradhan said.
CEOs, ministers and experts from the oil and gas sector, from both India and abroad, met Modi on Monday to discuss the road ahead for India's energy sector.
Modi expressed concern to the oil producers about rising oil prices despite here being enough scope in the world to increase oil production.
"Prime Minister Modi made a strong case for a partnership between the producers and consumers in the oil market, as it exists in other markets. This will help stabilize the global economy, which is on the path of recovery," a government statement said.
Modi also appealed to oil producing countries to channel their investible surplus to pursue commercial exploitation in the oil sector in developing countries.
"Lastly and importantly, he [Modi] requested for the review of [oil] payment terms so as to provide temporary relief to the local currency," the statement added.
Foreign exchange rates often play a crucial role in consumer inflation in India as refiners rely heavily on dollar-denominated crude oil to meet domestic fuel requirements.
The dollar/rupee exchange rate surged to an intraday high of Rupees 74.49 October 11, an all-time high and a 18% rise from Rupees 63.15 at the start of 2018, according to a 24-hourly USD/INR candlestick chart seen by S&P Global Platts.
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