Modi meets CEOs of global oil cos, calls for increasing storage facilities

Oct 20,2021

Prime Minister Narendra Modi on Wednesday spoke about the need to enhance storage facilities for crude oil during his virtual meeting with the chief executives of global oil majors.

The CEOs who attended the meeting included world’s biggest oil producer, Saudi Arabian Oil Co.' (Saudi Aramco) president and CEO Amin Nasser, Russia’s OAO Rosneft chairman and CEO Igor Sechin and London-based BP Plc’ CEO Bernard Looney among others.

 “Talking about the oil sector, he said that the focus has shifted from ‘revenue’ to ‘production’ maximization. He also spoke about the need to enhance  storage facilities for crude oil," Prime Minister’s Office said in a statement. 

This comes in the backdrop of Indian Strategic Petroleum Reserves Ltd (ISPRL) plans to sell 2.17 million barrels each of crude oil to Hindustan Petroleum Corp. Ltd (HPCL) and Mangalore Refinery and Petrochemicals Ltd (MRPL) by December, totalling 4.34 million barrels as reported by Mint earlier.

This is the sixth such meeting that the Prime Minister Modi held with CEOs of energy majors, which was also attended by Schlumberger Ltd’s CEO Olivier Le Peuch, Honeywell’ president and CEO Bryan Glover, Reliance Industries Ltd’ chairman Mukesh Ambani and Vedanta chairman Anil Agarwal. This meeting was held in the backdrop of India reeling under high transportation fuel prices. India’s petroleum and natural gas minister Hardeep Singh Puri also attended the meeting.

India’s strategic petroleum reserves have started supplying crude oil to state-owned refiners. Last year, India bought crude oil at $19 a barrel to fill up its 5.3 million tonnes (mt) of strategic reserves, saving $685.11 million in the process. However, India has an existing crude storage capacity of 5.3 mt built at a cost of $600 million sufficient to meet around nine-and-a-half days of India’s crude oil requirements. The government has also approved the construction of an additional 6.5 mt of strategic crude oil reserves to support 12 days of crude oil requirements. 

In comparison, countries that are part of International Energy Agency (IEA) hold 1.55 billion barrels of public emergency oil stocks. In addition, 650 million barrels are held by industry under government obligations and can be released as needed.

 “Prime Minister recounted that since 2016, the suggestions provided in these meetings have been immensely useful in understanding the challenges faced by the oil and gas sector. He said that India is a land of openness, optimism and opportunities and is brimming with new ideas, perspectives and innovation. He invited the CEOs and experts to partner with India in exploration and development of the oil and gas sector in India," the statement said.

Speaking at the Fifth India Energy Forum by CERAWeek, Puri said, “India believes that access to energy must be affordable and reliable."

This comes at a time when India has been making repeated appeals to the Opec- plus grouping that also includes Russia to up production, as the global energy markets across fuel sources including crude oil, gas and coal that have been on a boil due to inadequate investments in view of the energy transition. 

 “We have always been the source of security to oil markets," said Saudi Arabia’s energy minister Abdulaziz bin Salman on Wednesday at India Energy Forum.

With India’s domestic energy production being low, energy security is an important focus area for the National Democratic Alliance (NDA) government as was articulated by PM Modi in his Independence Day speech on 15 August.

"There should be a balance between the interest of producers and consumers which is needed to sustain the global economy's growth post the pandemic," said an Indian government official aware of the deliberations at the meeting.

 “Shri Puri said that the current levels of oil and gas prices are too high. India is 85% dependent on imported oil while the import dependence is about 55% for gas. He said that 20% of the country’s import bill is from these items. The import bill of these items has almost gone up by almost three times in last quarter compared to last year’s corresponding quarter. He said that the extreme volatility and high prices have led to surge in the domestic prices of hydrocarbon fuels," according to a statement from India’s ministry of petroleum and natural gas.

These is also a growing demand for the Centre and states to cut fuel taxes. The average share of central excise duty on petroleum products was 12% in the gross revenue collection for the period 2017-18 to 2020-21. The central excise duty collected from petroleum products for 2018-19, 2019-20 and 2020-21 is Rs2.35 trillion, Rs1.97 trillion and Rs3.44 trillion respectively. 

 “The high prices of oil has impact on the economies, leading to surge in inflation and affecting the logistics cost. Describing the situation as the wakeup call, Shri Puri said that if prices are not brought under control, global economic recovery could be fragile. He underlined that prices have to be predictable, dependable and stable. This may also impact the producers in the long run, he added. Shri Puri said that OPEC+ countries should factor in the sentiments of the consuming countries," the petroleum ministry statement added.

Following the covid outbreak, crude prices for Indian basket of crude had plunged to $19.90 in April last year during the first wave. The prices since then have rallied and was $73.13 a barrel in September, data from the Petroleum Planning and Analysis Cell showed. India spent $62.71 billion on crude oil imports in 2020-21, $101.4 billion in 2019-20 and $111.9 billion in 2018-19. 

 “We are very proud that you have entrusted us to serve as a key supplier to India’s Strategic Petroleum Reserves. We are proud to include Indian companies as concession partners in our upstream assets, and as major investors in our downstream value chain. And we are proud that India is now our number one LNG customer," added UAE’ Minister of Industry and Advanced Technology and managing director and group CEO of the Abu Dhabi National Oil Company (ADNOC) Sultan Ahmed Al Jaber.

Adnoc is one of the only two firms to commit to India’s crude oil reserve programme till date. Also, Saudi Aramco also partnered with Indian state-run oil companies for setting up the world's largest oil refinery and petrochemical complex in Ratnagiri. The project has hit the skids, after protests from farmers and Shiv Sena which is in power in Maharashtra with its alliance partners.