NEW DELHI: In October, preliminary data indicates that India’s crude oil imports jumped about 16.6 per cent year-on-year to 18.15 million tonnes (4.29 million b/d) up from 15.6 million tonnes in the same month last year. Corresponding figures for product imports (2.9 million tonnes) show a 17.2 per cent jump, while product exports (6.15 million tonnes) were strongest of all, up 39 per cent year-on-year. Iran emerged as the top crude oil exporter to India in October, for the first time since before the sanctions era. Iranian price discounting was a factor behind the changing of the guard, which saw Saudi Arabia pushed into second place.
Indian crude oil import growth has been a main driver of seaborne crude oil demand in 2016. Based on the latest trade statistics for October, India’s crude oil imports are projected to expand by 10.2 per cent in 2016 compared with average annual growth of less than 2 per cent in 2014 and 2015. As its economy enters a potentially sustained growth phase, India is looking to sustain its position as the fastest expanding destination for crude oil, which will have important implications in shaping future seaborne trade.
Long-term projections suggest India’s surging crude oil demand growth will not be a flash in the pan – indeed, it will be one of the few bright spots for global demand. The IEA predicts India will be the fastest growing consumer of crude oil in the period 2014-2040, with demand set to increase by 6 million b/d compared with 4.9 million b/d for China (in second place). The importance of Indian demand growth over the next 25 years is brought into even sharper relief when set alongside the uninspiring forecasts for developed countries/regions eg US -4.2 per cent, and Europe -4 per cent.
In terms of crude oil demand, there is no doubt India is coming from quite a low base, which is reflected in the transport sector where there are just 25 cars for every 1000 people compared with 110 in China. While in the age of plastic, India’s plastic consumption is 12kg per capita a year, compared with more than 10 times that amount in Europe. The transport sector is considered one of the primary markets underpinning long-term crude oil demand growth. India is already the world’s fifth largest passenger vehicle market with sales of more than 2.5 million per annum. In September, sales of passenger vehicles reached 195,259, which was up 15.14 per cent year-on-year.
As domestic demand grows, India is taking steps to secure its hydrocarbon future by building closer ties with a wide and diverse range of countries like Saudi Arabia, Iraq, Russia, Venezuela, Nigeria, and Iran. It is also looking to develop its own oil production industry by inviting greater foreign investment, as well as undertaking an ambitious refinery building and expansion programme over the last few years with a number of large-scale projects still in the pipeline.
In October 2016, Rosneft (the part Russian government controlled oil company) and a consortium of Trafigura and United Capital Partners purchased a 98 per cent stake in the 400,000 b/d Vadinar refinery in the Western State of Gujarat. The Vadinar refinery was designed to run on low-quality crudes from Venezuela or the Middle East, rather than Russian grades. Venezuela made up almost half the refinery’s supplies in the first six months of the year, followed by Iran.
It is anticipated that Rosneft will seek to continue Venezuelan supplies to the refinery because of an equity stake it holds in the country. It will mean that Russia does not have to redirect crude exports away from its primary European market. Included in the refinery sale, Rosneft also secured access to about 2,700 fuel stations in India. This development is part of a wider movement by foreign companies to expand their presence in the petroleum retail sector. BP has already secured licenses to open as many as 3,500 fuel stations.
