New Delhi (IANS) India plans to more than double its oil imports from the United States next year and would negotiate concessional terms for oil supplies during the expected visit of US President Donald Trump next month.
President Trump would be accompanied by a high-level official and business delegation, including CEOs of top oil-producing companies. This would be used to negotiate better terms for US oil imports, diplomatic sources told IANS.
A discount of $2-4 per barrel on American oil to Dubai crude makes it cover higher freight costs. The India side would also negotiate for a higher credit period of 60-90 days that would bring import cost of US oil at par with Iranian oil.
“The shipment of US oil to India has already increased over the past two years and we may end up importing close to 10 million tonnes (mt) in the current fiscal year. This would be doubled in FY21 if official and company level negotiations next month yields positive results,” said an official source.
If this level of oil imports is doubled in FY21, the US will reach close to meeting India’s 10 per cent oil import needs, the same what Iran was meeting prior to the supply squeeze post the sanctions.
In the current fiscal (FY20), oil imports from Iran have dipped to 1.97 mt, down from 23.9 mt in FY19. Iran used to meet more than 10 per cent of country’s total oil imports.
But since last fiscal, the Iran oil squeeze is being compensated through higher supplies by Iraq, UAE and Saudi Arabia. During the period, imports of US oil have also increased to 6.2 mt in FY19 from a level of mere 1.9 mt in the previous year. In the first half of this fiscal, import of US oil has already reached 5.4 mt.
Diplomatic sources said the talks between Indian and US officials on increased oil support by US has progressed smoothly since last year during Prime Minister Modi’s US visit. In fact, the ‘Howdy Modi!’ event was also used to negotiate possible deals with US oil companies to meet the growing needs of world’s third biggest oil importer. That time too, the US had indicated its intent of supplying increased quantities of oil and gas to India on a short notice to prevent the country from facing any shortages.
The talks with the US on oil supplies hinges on the terms of exports.
Sources said that the US could offer concessions on such oil exports that could be at par with the terms India enjoyed with Iran, which offers cheaper freight and a 60-day credit period to Indian importers such as the Indian Oil Corporation, Mangalore Refinery and Petrochemicals (MRPL) and Nayara Energy (formerly Essar Oil).
Though Indian oil companies have started importing oil from the US for past couple of years, the quantity remains miniscule and forms just about 3 per cent of country’s total oil imports. But the quantity can grow with US shale oil market becoming relevant again at current crude levels and an increase in total rig count again in December-January period in the world’s largest oil-guzzling nation.
“The rig count in US had slowed in the second half of FY20 but has again picked up in last few weeks. The domestic rig count will be largely stable, at least through the first six months of the year, as companies spend their drilling budgets for the year and prepare the field to quickly execute on their budgets for the first half of the new year. This would make higher quantities of US oil for exports,” said an oil sector analyst who did not wish to be named.
India’s shift to US would not be sudden as gas transportation company GAIL, oil marketing firm Bharat Petroleum Corporation Ltd (BPCL) and country’s largest oil refiner Indian Oil Corporation have sealed deals for supplies of the US crude earlier as well. The shale oil price there has also become very competitive in comparison to Middle-East and Gulf crude.