Moneycontrol | G7 price cap on Russian oil won't impact India; green hydrogen policy soon, says Hardeep Singh Puri

Dec 05,2022

The European Union (EU) and Group of Seven (G7) nations decided to cap the price of Russian seaborne crude oil at $60 per barrel as of December 5. However, the decision is unlikely to impact India, as its exposure to Russian crude oil is minimal, Union Minister of Petroleum and Natural Gas Hardeep Singh Puri has said.

“Russia is not our top supplier of oil; our traditional top suppliers are Iraq, Saudi Arabia, and the UAE,” Puri told BQPrime. In FY22, India imported 53 percent of its oil from these countries. In FY23, between April and September, 52 percent of India’s crude oil imports came from these countries, he added.

Even though the oil minister remained optimistic about India, he said if Russia refuses to sell crude oil at the capped price or cuts down production, it will affect the global supply chain. It will put pressure on producing countries to meet the energy demand, resulting in a spike in crude prices.

Russia exports close to 4.5 million barrels of oil per day, which is roughly five percent of global production. “We have a situation where two major producers—Iran and Russia—are under some form of sanctions and one major consumer, China, is under lockdown,'' Puri said, adding, ''the producers, OPEC+, have decided to cut supplies in their last meeting, so the markets are in a state of flux.''

OPEC+, a group of 23 oil-producing nations including Saudi Arabia and Russia, on December 4 decided to roll over the existing October policy of oil output decision.

It is likely the crude oil price will increase to $200 per barrel when three major oil producers (the US, Russia, and Saudi Arabia) are out of the market for some reason, Puri told BQPrime. Given the tight oil markets at present, it is important to ensure supply stability, the minister said.

Talking about Bharat Petroleum Corporation Limited (BPCL) and its divestment plans, Puri told BQPrime that BPCL is a first-rate asset and the government does not want to sell it right now.

''Right now, with our own energy needs being what they are, we will need to take a strategic decision as to when that happens,'' he said.

On May 26, the government said it called off the ongoing process of strategic disinvestment of BPCL and the plan would be reinitiated after review.

“We want to disinvest, but we cannot have a situation where there's only one bidder…in the last year or so, we've been facing a bit of turbulence but despite that BPCL has done very well,” Puri said earlier in the year. “For now, it (the divestment) is not on the table,” he said.

''India's green hydrogen policy will come sooner than expected,'' Puri said at the BQPrime event. ''Different ministries are involved in the policy and the internal churning on the green hydrogen policy is now beginning to take shape,'' Puri said.

''Green hydrogen is the shape of the future. However, it will succeed where one can produce it and consume it together. Because the expenditure incurred on storage and transportation will be mind-boggling,'' he said.

The minister explained that money is pouring into India from venture capitalists for the production of green hydrogen, which is a positive sign for the economy and the green hydrogen policy.

Finance minister Nirmala Sitharaman first revealed India’s plan to harness green hydrogen in her 2021 budget speech. Later, Prime Minister Narendra Modi announced a National Hydrogen Energy Mission in his Independence Day speech in August 2021.

Green hydrogen is produced using renewable energy through electrolysis. In the first part of the policy, the ministry waived the power transmission charges for 25 years for these units, allowing them to buy renewable power from exchanges or their own unit.

The companies were also allowed to bank unconsumed renewable power for up to 30 days with power distribution companies and will be provided open access within 15 days of application.

The government is likely to release the second part of the green hydrogen policy sometime in December, senior officials in the ministry of new and renewable energy (MNRE) said on October 11. The second part is expected to detail the economic benefits of manufacturing.