US
OIL EXPORTS TO INDIA
India
is the third largest oil importer in the world.
Oil
consumption in India grew by 8.3% in 2016 and the long-term trends show that
India’s oil consumption grew by 4.9% per year in
the
2005–15 period.
As
the oil consumption trend will accelerate in the coming years, India will soon overtake
China in oil consumption.
India’s
oil imports:
20%
- Saudi Arabia
17%
- Iraq
6%
- Iran
16%
- other west Asian nations
11%
- Venezuela
11%
- Nigeria
8%
- other African nations
From
the data above it is clear that Saudi Arabia and other west Asian nations are
the largest suppliers of oil to India.
India
is dependent to a large extent on oil production in West Asia by the
Organization of Petroleum Exporting countries (OPEC).
To
prevent the falling of oil prices still, OPEC nations deliberately cutting
production of oil. OPEC nations are also collecting premium for the oil they
supplied.
India
opposed this move and to bring pressure on the oil cartel, India trying to look
for new sources and diversify its imports basket.
US
and Russia emerged as the largest and
third largest oil producers, respectively, in recent years. India’s oil imports
from these two countries stands out to be just 4 %.
In
search of new sources for meeting of oil demand, India has struck a deal with
the US for the shipment of Shale oil from the United states.
Indian
companies have invested $ 5 billion in acquiring assets in the US shale oil and
gas industry.
US
oil industry is looking to make US an energy export powerhouse. It is because
of the highly available sources of shale oil.
Heavy
oil consumers like India is also seen as potential market for US oil producers.
Buying
US crude became attractive especially after the differential between Brent (the benchmark crude or marker crude that serves as a reference price
for buyers in western world) and Dubai (which serves as a benchmark for
countries in the east) has narrowed. Even after including the shipping cost,
buying US crude is cost competitive to Indian refiners.
The supply
of US crude oil to India is part of larger convulsions in the global
hydrocarbon industry caused by the shale revolution in the US which has led to
the extraction of unconventional oil and gas through fracking i.e. cracking
shale deposits deep underground with a combination of highly pressurised fresh
water and chemicals.
India’s ability to develop its own shale oil market is very limited. Though Indian public sector oil companies like Oil India and Oil and Natural Gas Corporation have started drilling wells for
exploring
the possibilities in shale gas and oil, the prospects are not very encouraging
as available information so far indicates that its prospective reserves of
shale oil and gas are even lower than
that
of Pakistan.
The
large-scale imports of light tight oil or shale oil from the US will throw up
both new challenges and opportunities for
refiners.
But this can be successfully overcome as done by US
refiners who used new process designs and
new generation catalysts to ensure optimum use of existing and new facilities
and refine light tight oil.
Another
important by-product of the growth of oil import from the US is that it will help correct the growing
trade imbalance between the two countries to some extent.
A
fall in trade surplus with the US in coming years following a pickup in US shale oil imports will hopefully
correct this imbalance and help further boost economic and strategic relations
between
the two
countries.