India looks for alternate oil supplies

SOMA BANERJEE <ahref=economictimes.indiatimes.com>TIMES NEWS NETWORK [ SATURDAY, MARCH 29, 2003 01:32:27 AM ]

NEW DELHI: With the ongoing war against Iraq threatening to be a prolonged one, India is taking no chances on its crude supplies. It has already initiated the process of tying up with oil-producing countries like Sudan and Angola and has also signed contracts for additional shipments from Kuwait.

On the shipping front, the country has sent delegations to Saudi Arabia and Kuwait to ensure stability of shipping lines and routes.

At a high-level meeting held to day by the cabinet secretary to review the impact of the ongoing war on India, the petroleum ministry is learned to have laid out a detailed strategy on the measures being adopted to ensure regular supplies of oil. The strategy has focused on two main aspects — availability and price.

On the price front, all oil companies have been directed to cut back on their margins for the time being to spare consumers from a steep price hike.

According to the strategy, although the petroleum ministry is still holding discussions for a fiscal break to cushion the impact of volatility in global crude prices, domestic oil prices have now been told to hold on to retail prices and maintain stability.

As India meets 70% of its energy requirements through imports, the government has to make all efforts to maintain regular supplies. Apart from contracting additional supplies from conventional suppliers, oil companies have signed up advance oil contracts for three months.

This is over and above the strategic reserve of 60 days which is being maintained by all oil companies at domestic depots. 

As far as new oil-sourcing countries are concerned, India has contracted an additional monthly cargo of 2.5 million tonnes from Sudan which would be imported from May onwards. Discussions have also been on with Angola.

India (which imports significant quantities from Kuwait) has also asked for additional shipments following disruption of supplies from Iraq and Nigeria.

IOC, the largest importer, has placed orders for two additional shipments from Kuwait for the month of April. The Indian government has also sent two delegations to Saudi Arabia and Kuwait to ensure stability of shipping routes during this period.

Industry sources said that sourcing crude from countries like Kuwait is both economical and safe but this could change if the Persian Gulf comes under attack.

Routing the crude from the Red Sea could be an expensive proposition. In fact, the domestic unrest in Nigeria and Venezuela has also impacted prices as supplies from both these countries have been stopped.