Strategies to reduce oil dependence on OPEC

 

• Strategic Petroleum Reserves (SPR) are stockpiles of crude oil maintained by nations and by private industries as a hedge against potential future energy crises.

• The majority of countries other than part of OPEC, such as India, are heavily reliant on oil imports, with India being 82% reliant. 

• That is why Strategic Petroleum Reserves (SPR) are required, which are large tanks and storage facilities that store imported oil and are meant to be used in emergencies.

• India imports 82% of its oil needs and aims to bring that down to 67% by 2022 by replacing it with local exploration, renewable energy and indigenous ethanol fuel. India was the second top net crude oil (including crude oil products) importer of 205.3 Mt in 2019.

• The United States has an oil SPR of 670 million barrels. Given America's fuel requirements, this will suffice for around 70 days of imports. China, which is also a major oil importer, is estimated to have reserves of 500 to 600 million barrels. The strategic reserves of Japan are estimated to be about 300 million barrels.



India’s oil Reserves

• Aside from the three underground storage facilities operated by Indian Strategic Petroleum Reserves Limited (ISPRL) in Visakhapatnam, Mangalore, and Padur, another one is being planned in Chandikhol, Odisha. Our SPR capacity will increase to about seven million tonnes once it is completed.

• The cost of constructing an SPR is important. They'll need ground, as well as concrete or steel storage tanks. Maintenance of the facility, it’s safety and protection are important as it must be secured from a range of threats such as natural disasters or terrorist attacks.

• In 2019, an assault harmed Saudi Aramco’s production capabilities. Saudi Arabia was India's second-largest crude and cooking gas supplier, so any disruption would have an effect on prices in India.

• The state-funded reserves are meant to tide over short-term supply disruptions and will take care of India's oil needs for 9.5 days.

• The country was already holding half of its total 5.33 million tonnes of oil reserves capacity when the government decided to take advantage of the then-existing low crude oil prices due to low worldwide demand.



India’s Current Situation

• When petrol and diesel prices become prohibitively high, countries with sufficient reserves can release them for public use. That is not a choice for India, which has small reserves.

• Even though we had reserved, we would only be able to store 38 million barrels, while our annual demand is more than 1.5 billion barrels.

• Following OPEC's decision to extend production curbs until April, the Indian government asked refiners to diversify and search for alternate crude sources in order to reduce our reliance on the Middle East.

Solutions

India needs to diversify the countries from which it imports oil. India has already started working towards the same. Iraq has been the biggest supplier of crude oil to India with Saudi Arabia being the second biggest but the data released for February shows that the USA became the second-biggest supplier to India accounting for 14% of India’s crude oil imports. Supplies from Saudi Arabia decreased by 42% to 445,200 bpd.

• Diversifying its sources may also help India get a better discount on procurement of crude oil which is generally difficult in a rising crude price environment.

• India needs to decrease its reliance on fossil fuel as well and speed up its transition towards cleaner sources of energy in which it is already abundant. India has started working towards this goal with very ambitious targets and has allocated a relatively hefty part of the latest budget to be spent on sources of renewable energy.



Oil Diplomacy:

1. Acquisition of assets abroad: Acquiring equity participation in developed fields and obtaining exploration and production contracts.

2. Entering into long-term LNG supply contracts.

3. Pursuing transnational gas pipeline proposals.

4. Promoting partnership with foreign entities in the downstream sector both in India & abroad.

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