Tezzbuzz Desk- The Indian government has asked its state-owned oil refining companies to consider increasing the purchase of crude oil from the US and Venezuela. This move has come at a time when the US administration has claimed that India has agreed to stop Russian oil imports under the new trade deal. However, India has not officially confirmed the complete ban on Russian oil and has clarified that its priority is to maintain energy security and diversification of import sources.
American oil gets priority in spot market
According to sources, government refineries have been instructed to give preference to US crude oil grades while issuing tenders in the spot market. At the same time, oil will be purchased from Venezuela through personal negotiations with traders.
The objective of the government is to increase the scope of sources of oil imports, so that excessive dependence on any one country can be avoided. This will reduce the impact of any disruption in global supply or geopolitical tension.
Technical Challenges: American oil not suitable for every refinery
There are some technical obstacles in the way of increasing imports from America. US crude oil is usually light and low-sulphur (light and sweet), while many of India’s refineries are designed to process medium or heavy grades of oil.
This means that not all refineries can process US oil efficiently. At the same time, Venezuelan oil is heavy and contains more sulfur, which can be processed only in limited quantities.
Economic aspect: distance will increase costs
Importing crude oil from America results in higher freight charges due to long sea distance, which increases the total cost. In comparison, countries like West Africa and Kazakhstan are relatively close geographically and it may be cheaper to bring oil from there. Therefore, India will have to balance both technical capability and cost while taking import decisions.
Potential Import Volume
According to sources, Indian refineries can import about 20 million tonnes of American oil annually, i.e. about 4 lakh barrels per day. This quantity will be more than last year.
Recently Indian Oil, Bharat Petroleum and Hindustan Petroleum have purchased about 40 lakh barrels of oil from Venezuela. However, state-run refineries can process only a limited amount of Venezuelan heavy grade oil each month.
Energy security and diplomatic balance
India is currently trying to balance between its energy needs and global diplomatic equations. Keeping in view the changing international scenario and fluctuations in oil prices, it is the priority of the government to keep flexibility in import policy.
In the times to come, it will be important to see how India maintains a balanced relationship with various suppliers while ensuring its energy security.
Comments are closed.