India’s crude import bill increased 3.7% during the first nine months of the current fiscal 2024-25 to $102.5 billion against $98.8 billion in the same period in FY24, data from the Petroleum Planning and Analysis Cell showed. The country imported 179.3 million tonnes of crude oil during April to December, up 3.2% from 173.7 million tonnes in the corresponding period of last fiscal.
In December alone, however, the import bill for crude oil declined by almost 6% whereas the volume increased marginally by 1% to 19.9 million tonnes compared to December 2023.
The country’s dependency on import of crude oil during April to December of the current fiscal rose to 88.1%, up from 87.5% in the corresponding period of FY24 amid rising demand and stagnant domestic production.
In the beginning of the fiscal year, ICRA had projected India’s net crude oil import bill to reach $101-104 billion in FY25 from $96.1 billion in FY24 on the back of lower discounts on Russian crude purchase amid rising import dependency.
Now the latest US sanctions on Russia have also posed a threat to India’s crude oil supply which may result in higher cost of the landed crude oil for Indian refiners as they diversify their crude sourcing, likely at a premium to the landed price of Russian crude arriving into India.
Given that global VLCC (very large crude carrier) freight rates have spiked over the past few days, oil sourcing from other countries including the Middle East and the US would further increase freight costs for Indian refiners, as per Xavier Tang, market analyst at Vortexa.
Russia remained the largest crude supplier to India in December accounting for 31% of India’s total crude oil imports. However, imports from the country registered a decline of 13.2% to 1.39 million barrels per day against 1.61 million barrels per day in November, data from Vortexa showed.
Upstream companies produced 21.6 million tonnes of crude oil during the period, slightly down from 22.0 million tonnes in the same period last fiscal. The declining trend in production can be attributed to maturing of the existing oil fields amid lack of new areas of production, as per analysts. In December, production remained muted at 2.5 million tonnes.
Despite the government’s efforts to boost production and reduce dependency on imports, the production has remained stagnant over the last ten years and the country’s dependency on imports has only increased. However, state-run major oil explorer Oil and Natural Gas Corp expects to increase its output in the coming two years with production to start in a clutch of new fields.
In 2023, the company acquired more than 32,000 square kilometers of new acreages, taking the total area to around 180,000 SKM. ONGC expects its acreage to increase to 250,000 SKM once the OALP’s 9th round results are formalised.
With the recent amendments in the Oilfields (Regulation and Development) Act, 1948, the government expects increased participation from the domestic and international players. The amendment broadens the definition of mineral oils which includes any naturally occurring hydrocarbon, coal bed methane, oil shale, shale gas, etc.
Oil minister Hardeep Singh Puri on multiple occasions has said that the government is also constantly engaging with international oil and gas companies to boost domestic output.
Stagnant domestic output and rising import dependency does not bode well for India at a time when the geopolitical tensions are on the rise. However, Indian upstream companies are now more open to overseas investments and venturing to newer locations, according to analysts.