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After Russia, US hints at oil for India on concessional terms
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SME Times News Bureau | 18 Sep, 2019
The US may offer oil and gas to India on concessional terms from its own
reserves to help the latter tide over any shortages arising from the
drone attacks on Saudi Arabian Oil Company, or Aramco, that have caused
the biggest-ever disruption in global crude oil supplies.
Diplomatic
sources here said that supply details would be discussed in detail
during the visit of the official Indian delegation to the US stating
September 21, where Prime Minister Narendra Modi is also scheduled to
meet US President Donald Trump. The delegation also includes a large
number of Indian business honchos, including chiefs of public and
private sector oil companies.
"We can expect Indian oil companies
to sign memoranda of understanding with their US counterparts for
increasing oil imports to meet the country's domestic demand. Saudi
Arabia meets close to 20 per cent of oil needs of the country and if
there is a supply disruption, the US can become a dependable ally if
terms of such supplies are favourable," one source said.
India
has also sounded Russia for increasing their oil supplies. Rosneft PJSC
has agreed to assist India with its energy security efforts against the
backdrop of the drone attacks on the Saudi oil facilities. Rosneft
Chairman Igor Sechin conveyed this during his meeting with Petroleum
Minister Dharmendra Pradhan on Tuesday.
The talks with US on oil
supplies hinges on the terms of exports. The sources said that the US
could offer concessions oil exports on par with the terms India enjoyed
with Iran. The Islamic Republic offered cheaper freight and a 60-day
credit period to Indian importers such Indian Oil Corporation, Mangalore
Refinery and Petrochemicals (MRPL) and Nayara Energy (formerly Essar
Oil).
"The offer has been indicated and this needs to be worked
out in detail when the delegation level visit happens later this month.
Transportation cost is an issue to bring oil from the US," the
diplomatic source quoted earlier said.
Though Indian oil
companies have started importing oil from the US for the past couple of
years, the quantity remains miniscule and forms just about 1 per cent of
country's total oil imports. But this quantity can grow with the US
shale oil market becoming relevant again at current crude levels and an
increase in total rig count in the world's largest oil guzzling nation.
"The
rig count in US has risen sharply in past few months (1,038 now)
indicating that oil production there is on the rise. One estimate
suggests that the US will pump in additional 4 million barrels of crude
oil in the next couple of years. This provides ample opportunity for
India to tie up long term contracts there. Already, spot purchase
contracts from US have seen a rise," said a government official aware of
the developments.
The emergence of the US as a major oil
supplying nation indicates that it could be the biggest gainer in any
disruption in global oil production.
The shift to the US would
not be sudden as gas transportation company GAIL, oil marketing firm
Bharat Petroleum Corporation Ltd (BPCL) and the country's largest oil
refiner Indian Oil Corporation have sealed deals for supplies of US
crude earlier as well. The shale oil price there now has also become
very competitive in comparison to Middle-East and Gulf crude.
In
fact, the narrowing of price differential between the international
crude oil benchmark Brent and Dubai crude has made US oil more
competitive even after higher transportation charges. A discount of $
2-4 per barrel on American oil over Dubai crude makes it cover freight
costs.
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Customs Exchange Rates |
Currency |
Import |
Export |
US Dollar
|
66.20
|
64.50 |
UK Pound
|
87.50
|
84.65 |
Euro
|
78.25
|
75.65 |
Japanese
Yen |
58.85 |
56.85 |
As on 13 Aug, 2022 |
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