Refineries in India are importing oil from more varied sources in order to diversify supply
Indian refineries continue to reduce imports from traditional markets like Saudi Arabia and Iran and have stepped up purchasing from other markets, including Mexico, Iraq and Venezuela while building inventories as crude prices remain low. Availability of cheaper crude variants and softening of shipping costs have encouraged Indian refiners to import from new sources in order to diversify the country’s portfolio, reports Economic Times.
India has been cutting imports from Iran in particular as it seeks to stay in line with international sanctions. Imports from Iran were almost at an 18 month low in February.
“Indian companies are increasingly importing from Mexico and Venezuela. The cost of transporting from these countries is higher than from the Middle East, but they are able to buy cheaper heavy crude,” said Nitin Tiwari, Vice President of Institutional Research for Religare Capital Markets.
In 2013, India was the fourth-largest consumer and net importer of crude oil and petroleum products in the world after the United States, China and Japan, according to the Energy Information Administration (EIA). India’s petroleum product demand reached nearly 3.7 MMBOPD, far more than the country’s total liquids production of roughly 1.0 MMBOPD.
The change in imports is helping the country diversify its oil imports, which has been largely dependent on Saudi Arabia in the past. Industry officials said while the share of imports from the Middle East would change, given the higher imports from other countries, the volume imported from OPEC as a whole may not fall drastically.
While the companies do not share their import data, Thomson Reuter’s data, which is based on tanker arrivals, revealed a significant drop in imports from Iran which is facing sanctions. According to Reuters’ data, India bought about 102 MBOPD of crude and condensate from Iran in February, down 63% from January and 62% from a year ago. Essar Oil, which was the biggest importer of oil from Iran, shipped in 38.5% less in January and is expected to reduce it further.
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