A highlight of the just concluded Petrotech 2019 was the offer of Venezuela to double its oil exports to India. Venezuela sent its oil minister, Manuel Quevedo, to India to attend the Petrotech for convincing refiners, to double their oil purchases from Venezuela. This is significant as originally the Venezuelan Minister was not scheduled to attend the meet. Beleaguered Venezuela’s readiness to help India tide over the oil crisis in the wake of US sanctions on supplies from Iran is indeed welcome news.
Venezuela is in the grip of a major political crisis as the United States and most Western countries have imposed sanctions on the country. It is designed to undercut financial support for the country, cutting its access to oil revenue.
The South American country’s oil exports since the sanctions took effect last month have fallen and in response; Venezuela is turning its focus to buyers paying in cash, especially in India, its second-largest customer after the United States.
Over the last quarter century, Petrotech has served as a platform to discuss solutions to challenges faced by India in the energy sector. Petrotech provides the perfect setting to ponder over the future of the energy sector and to reflect upon how global shifts, transitions, policies and new technologies will influence market stability and future investments in the sector.
A major feature of Petrotech 2019 was the agreement between the Abu Dhabi National Oil Company (ADNOC) with an Indian state owned company to hire half of the 2.5 million tonnes underground strategic crude oil storage that India has built at Padur in Karnataka, making it second such deal by the UAE firm in the southern state.
India has built 5.33 MT of emergency storage in underground rock caverns in Mangalore and Padur in Karnataka and Visakhapatnam in Andhra Pradesh. It has allowed foreign oil companies to store oil in the storages on the condition that the stockpile can be used by New Delhi in case of an emergency.
The biennial event, in which over 90 countries participated, took place at a time when India is seeking from the US an extension of waiver on oil imports from Iran while also trying to align with consumer countries. The waiver from American sanctions has been given to eight nations: India, China, Italy, Greece, Japan, South Korea, Taiwan and Turkey — but this expires in March 2019.
At the Petrotech 2019, major consumers in Asia also highlighted the contentious issue of “Asian premium” before global groups like the Organization of the Petroleum Exporting Countries (OPEC).
The conference once again underlined the fact that India’s economic fortunes continue to be tied to the sharply fluctuating price of oil and that there was urgent need for New Delhi to diversity its energy basket more proactively.
At the conference, Prime Minister Narendra Modi hit the nail on the head by underlining the importance of energy as a key driver of socio-economic growth. “Suitably priced, stable and sustainable energy supply, is essential for rapid growth of the economy. It also helps the poor and deprived sections of society, to partake of economic benefits,” Mr. Modi told the conference that now there is a shift in energy consumption from West to East.
With well over 80% of its oil demand being met through imports, India clearly has a lot at stake as oil prices have risen much in rupee terms in the last year.
Experts have argued that in the short term, India could look to diversifying its international supplier base to manage shocks better. But such a choice carries geopolitical risks, such as in the case of Iran.
The latest report from the International Energy Agency (IEA) has come as a breather for India in the immediate future. The IEA has forecast that the global oil market will struggle this year to absorb fast-growing crude supply from outside OPEC, even with the group’s production cuts and US sanctions on Venezuela and Iran.
Script: Sunil Gatade, Political Commentator