As tensions heat up in Middle East, Union Oil Minister Hardeep Puri has said that India is preparing to source crude oil from outside the Persian Gulf and cut its own refined-product exports if the Strait of Hormuz is blocked to ship traffic.
About a quarter of the world’s oil trade passes through the key waterway, which links the Gulf to the Indian Ocean. Some market watchers are concerned that Iran, locked in a conflict with long-time adversary Israel, could choose to attack tankers sailing through Hormuz or close the strait altogether. About 40 per cent of India’s total crude imports, and 54 per cent of its liquefied natural gas (LNG) supplies, would be at risk if the conflict leads to a closure of the Strait of Hormuz, the narrow sea passage between Iran and Oman that carries nearly 30 per cent of global oil trade and 20 per cent of LNG shipments.
India is a net exporter of petroleum products, with refiners such as Reliance Industries Ltd. and Nayara Energy shipping to countries including the United Arab Emirates, Singapore, the US and Australia. It could reduce those shipments if needed to maintain sufficient stockpiles at home, Puri said.
“We have enough stocks” of crude and refined products, Puri told NDTV. “We have enough diversified supplies” of crude, and “even if there were to be disruption, we can source it from alternate sources.”
Iran has previously threatened to close the strait in times of conflict, though there’s no sign of that happening so far. Of the 5.5 million barrels of oil India consumes every day, 1.5 million pass through the waterway, according to Puri.
“I don’t think this is something we are unduly worried about,” he said. There is ample crude available in the global market, which means it isn’t supply but prices that are a concern, he said.
India is a net exporter of petroleum products, with refiners such as Reliance Industries Ltd. and Nayara Energy shipping to countries including the United Arab Emirates, Singapore, the US and Australia. It could reduce those shipments if needed to maintain sufficient stockpiles at home, Puri said.
India’s product exports have averaged 1.3 million barrels a day so far this year, with Reliance and Nayara accounting for 82 per cent of shipments, Kpler data show.
India eyes West Africa
Indian refiners are considering West African nations and other alternative energy sources to secure additional fuel supplies, should Iran attempt to block the Strait of Hormuz — a critical choke point for global oil and gas transit —as its conflict with Israel intensifies, reported ET quoting oil industry executives.
Since the outbreak of the Iran-Israel hostilities on Friday, top oil ministry officials and industry executives are analysing various scenarios and evaluating all possible responses to potential supply disruptions and price spikes.
According to the oil ministry, India has total crude and petroleum product storage ‘capacity’ equivalent to 74 days of national consumption. This includes strategic reserves that can cover 9.5 days of demand. Total capacity includes inventory at refineries, pipelines, ships enroute, product depots, and empty tanks that can hold crude or refined products, executives told ET.
Why Strait of Hormuz a point of worry?
At just 33 kilometres wide at its narrowest point, Strait of Hormuz is considered the world’s most important chokepoint for oil and gas. A quarter of the world’s oil and 20 per cent of the world’s liquefied natural gas passes through it, so mining the choke point would cause gas prices to soar.
Iran has previously targeted vessels passing through this channel and has made repeated threats to close the route. Recently, ships passing through the area have also experienced jamming of their signals.
The strait forms a narrow maritime corridor between Iran and Oman and is the main export route for crude oil and liquefied natural gas (LNG) from major producers such as Saudi Arabia, Iraq, Kuwait, the UAE, Qatar, and Iran.
In response to the rising tensions, Qatar has asked tankers to wait outside the strait until they are ready to load. Meanwhile, Japanese shipping company Nippon Yusen KK has instructed its vessels to keep a safe distance from the Iranian coast while passing through the area.
