NEW DELHI: With the US pushing for significantly increasing its oil and gas supplies to India, experts have questioned the cost viability of the proposal.
They said the US, currently India’s fifth-largest crude oil supplier, may become a costly import option for Indian refiners due to higher landing costs as against traditional suppliers in Central Asia or Russia, which offer significant discounts.
However, they still see possibilities of increasing in imports from the North American country. Gaurav Moda, partner and Leader of the Energy Sector, EY-Pantheon, says that increasing crude imports from the USA is possible, as it was done earlier with aligned interests. Accordign to him, LNG can be sourced more quickly, but sourcing WTI crude requires more effort.
“For crude, supply timeline and cost considerations like 6-7 days from Middle-East against 40-45 days from Texas. Alignment of US crude specs with Indian refineries may have to be evaluated. Irrespective, quick volumes growth is possible with aligned interests as we have seen in recent past with respect to supplies from other countries. Increasing gas volumes could be quicker, as Henry Hub prices are discounted against other sources, while discounting WTI crude on realtime basis could require effort,” said Moda.
Prashant Vasisht, senior VP and co-Group Head of ICRA, is of the view that Indian refineries will procure oil from the US only if it is cheaper. However, he says it is not improbable given India has procured oil from Brazil and other countries.
A joint statement by Prime Minister Narendra Modi and US President Donald Trump emphasized to make the US a leading supplier of crude oil, petroleum products, and liquefied natural gas (LNG) to India. India imports 85% of its crude from all the top producers in the world.
The US has always been among the top five suppliers of crude to India, and India buys petroleum worth $20 billion from the US. Following the war between Russia and Ukraine, India raised its crude purchases from Russia, resulting in a decrease in imports from the US.
As per data, India’s crude oil imports from the US have seen a major decline year-on-year, both in volume and percentage share. For instance, in 2021, the average monthly import was roughly 450,000 barrels a day, representing 10% of India’s total crude imports.