India Evaluates Options to Tame Import Bill

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India is exploring new options to reduce its oil import bill, but lacking a significant strategic oil stockpile, it is fighting an uphill battle. Bureaucrats in New Delhi recently proposed striking long-term, fixed-price crude supply deals with producers, similar to those inked with LNG suppliers. India's state-owned explorer Oil and Natural Gas Corp. last week signed an initial pact with Saudi Aramco to explore such contracts. India is also working with the US to coordinate release of some strategic stockpiles to cool prices. India meets 85% of its oil demand from overseas. Its crude import bill more than doubled to $61.1 billion in the first seven months (April-October) of India's current fiscal year from $26.9 billion in same period last year, even though volumes rose just 13% to 4 million barrels per day. Indian state refiners import 70% of their crude under long-term contracts, which are renewed annually with national oil companies (NOCs), mostly from the Middle East. Aramco sets an official selling price every month as a differential to the Dubai and DME Oman price structures, and the trend is followed by other Mideast NOCs from Iraq, Kuwait, Iran and the United Arab Emirates. India has long voiced concerns that while European and US buyers are supplied crude at discounted rates by Mideast NOCs, Asia's growing economies must accept premiums. India, which is expected to overtake China as the engine of global oil demand growth after 2025, seeks to leverage its demand potential to strike better supply deals. Unlike China and the US, which boast significant strategic stockpiles that can be tapped if necessary, India’s strategic reserves of 39 million barrels are barely enough to meet nine days of imports. Plans to raise domestic production have mostly failed, too.

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