india

Updated: Jun 25, 2019 05:28 IST

India may discuss with US secretary of state Mike Pompeo a host of issues crucial for its energy security, including oil price volatility due to rising tensions between Tehran and Washington, disadvantages in purchasing American crude and technical issues arising due to sanctions that threaten India’s strategic projects, said officials aware of the developments.

During Pompeo’s visit, New Delhi will seek Washington’s cooperation in getting reliable and affordable energy supply, especially after US sanctions that prohibited the import of Iranian crude from May, two government officials said. India, which is a net importer of energy, is a victim of volatility in crude prices that is often caused because of geo-political reasons.

The recent tussle between the US and Iran has further aggravated the situation that could adversely impact major oil consumers such as India, said the officials cited above.

Petroleum minister Dharmendra Pradhan recently spoke to US secretary of energy Rick Perry and raised these issues. During the telephonic conversation, Pradhan emphasised the impact of price volatility on Indian consumers and stressed the important role that the US could play in bringing global price stability, officials said. International crude oil prices soared after Tehran allegedly shot down an American drone on Thursday, which deepened tensions US-Iran tensions.

Traditionally, Iran has beena major crude oil supplier for India to meet almost 10% of its annual requirements. India, which has already stopped purchasing Iranian crude due to the sanction, is facing problems in meeting the shortfall. “We are yet to get suitable alternative. Iranian crude is not only of good quality but also cheaper as Tehran always supplied crude on lucrative commercial terms,” said one of the officials quoted above. Unhindered crude oil imports on economic terms are crucial for India’s energy security as it imports more than 80% crude it processes.

Rajnish Gupta, EY India associate partner (tax and economic policy group), said, “Threat of reduction in supply of crude oil from any significant producer of oil will tighten the markets and is likely to cause price volatility, as it happened last week...any reduction in supplies from any country needs to be made up by increased production elsewhere. Increase in production or change in source requires time. Therefore from India’s perspective, a transition period is required.”

The other issue that is expected to be discussed is the possibility of crude oil supply from the US as an alternative to Iranian crude, the officials said.

India’s state-run and private refiners said no government could force them to buy oil from the US on terms that are uneconomical. “Each crude or shale oil have different assay, based on that refiners extract value. One would buy crude oil or shale oil depending on the value one would get. It is purely commercial consideration,” chief executive of one refinery said.