By Deepak Sharma
New Delhi: India’s crude oil import from the United States, the world’s largest producer of hydrocarbon, is set to rise in the future, as the Asia’s third largest economy is looking at diversifying its energy sourcing to meet future challenges.
The US, battered by the collapse in the prices following the government implemented lock down to check the spread of COVID-19, is looking at ways to support the local oil and gas industry.
India began importing crude oil from the US since 2017, as part of its process to diversify energy sourcing basket beyond the Gulf region. It bought 1.9 million tonnes or 38,000 barrels per day (bpd) of crude oil from the US in 2017-18 and another 6.2 million tonnes or 1,24,000 (bpd) in 2018-19.
As per industry estimates, India’s import of crude oil could cross 12.5 million tonnes in the current fiscal. India has become the fourth largest export destination for the US crude.
The bilateral hydrocarbons trade between India and the US touched $9.2 billion during 2019-20, around 10 per cent of the bilateral trade between them.
“Between 2017 and 2019, the US crude oil exports to India rose by nearly tenfold to almost 250,000 barrels per day. Between Mar. 2016 and May 2020, 68 Liquefied Natural Gas (LNG) shipments of over 234 billion cubic feet were exported to India,” US Secretary of Energy Dan Brouillette said today, on the side-lines of an event held to announce the signing of an agreement with India to set up emergency crude reserve in the US.
Recently, India signed a preliminary agreement with the US to co-operate on emergency crude oil reserves, including the possibility of India storing oil in America’s strategic petroleum reserves, a move indicating a strengthening of relationship between the two countries.
The agreement was signed by India’s Minister of Petroleum and Natural Gas Dharmendra Pradhan and Brouillette. Also, the two sides have progressed over storing Indian crude oil in the US strategic reserve to enhance country’s strategic stockpile.
Most US companies engaged in production and exploration of hydrocarbon resources are battling for survival, as a collapse in demand following the restrictions imposed on movements made it difficult for them to sell their produce, and led to significant mismatch in the demand-supply equilibrium, and it ultimately resulted in crude price touching their lowest level in April.
US President Donald J. Trump in March ordered filling the strategic petroleum reserve to its full capacity of about 714 million barrels to support the local oil and gas industry, but the US Congress failed to fund a purchase. Brouillette told reporters that the India pact could mirror a recent plan with Australia, which in April committed to spending about $60 million to build an emergency oil stockpile, first by buying crude to store in the US strategic petroleum reserve.
The US has 714 million barrels of oil storage capacity in its strategic petroleum reserve, the world’s largest supply of emergency crude oil. In comparison, India stores 5.33 million tonnes (about 38 million barrels) of crude oil in underground storage at three locations on the east and west coast, hardly enough to meet its 9.5 days’ need. The International Energy Agency prescribes its members to have at least 90 days of stock in the strategic reserves.