India turns to Saudi to meet oil shortfall

Oil ministry says import from Iran will remain same

Indicating growing uncertainty over doing business with Iran, India on Thursday sought 4 to 5 million tonne of extra  oil per year from Saudi Arabia, its single biggest fuel supplier.

Asia’s third largest economy, however, made it clear that volume of its fuel import from Iran in the coming year would remain the same.

“We said that they should try to organise 4-5 million tonne of oil more each passing year,” Petroleum Minister S Jaipal Reddy told reporters after a meeting with Saudi Deputy Oil Minister Abdul Aziz Bin Salman bin Abdulaziz here.

Reddy said the arrangement was nothing new as growing consumption had forced India to ask Saudi Arabia to increase supply every year. He said the ongoing expansion in India’s refining capacity also made it imperative to increase quantities of Saudi oil.

India’s refining capacity is expected to increase close to 311 mt by 2017 from current 193.4 mt. Oil watchers, however, are of the view that the western sanctions are making it difficult for India to do business with Iran.

“It has played havoc with Iran’s ability to buy imports and receive payments for its oil exports,” an oil expert said.

U.S. President Barack Obama last month signed a bill imposing penalties on financial institutions dealing with Iran’s central bank. Sources say that the Indian government is also pushing its refineries to cut imports from Iran by at least 10 per cent.

The day coincided with state-owned Hindustan Petroleum Corp Ltd (HPCL) making its intents clear that it will double crude oil imports from Saudi Arabia in the ensuing fiscal and cut down on purchases from Iran by three mt this fiscal year. The HPCL imported 1.75 million tonne of Saudi oil in 2011-12. Sources in the HPCL said its fuel import from other countries such as Iraq, Malaysia and Kuwait would continue.

Bharat Petroleum Corp Ltd, India’s second biggest state refiner, had already said on Tuesdaythat it was seeking a 27 per cent increase in its oil deal with Saudi Arabia for the coming fiscal.

When contacted by Deccan Herald about its plans, a senior Indian Oil Company (IOC) official said: “We have to keep our oil imports going and seeing the current geo-political situation, we need to put all options in our basket”.

The IOC official said calculated measures were needed while doing imports as too much dependence on Saudi Arabia may prompt the country to increase its oil prices in future.
Saudi Arabia is the world’s leading producer of crude oil and India, the world’s 4th largest oil importer. It purchased 27mt of Saudi oil last year while its imports from Iran were 17 mt.