MUMBAI (ICIS)--India has agreed to release 5m barrels of crude oil from its strategic oil reserves in coordination with other major consumers, including the US, China, Japan and South Korea.
“India has repeatedly expressed concern at the supply of oil being artificially adjusted below demand levels by oil-producing countries, leading to rising prices and negative attendant consequences," the Ministry of Petroleum and Natural Gas said in a statement on 24 November.
The release of crude oil will “happen in parallel and in consultation with other major global energy consumers including the USA, China, Japan and South Korea”, it said.
India has agreed to the strategic release after a request from the US to consider the move in a coordinated effort to lower global energy prices after members of oil cartel OPEC and their allies rebuffed repeated requests to increase output.
The US is expected to release around 50m barrels of crude from its strategic reserves.
The 5m barrels that India will release over the next 10 days is roughly equivalent to a day's consumption in the south Asian country, and is unlikely to make a dent on crude import targets this year, according to media reports.
The country stores crude oil in underground caverns at three locations along the east and west coasts and holds a combined stockpile of 38m barrels or 5.3m tonnes of crude. These reserves are sufficient to meet around nine-and-a-half days of India’s crude oil requirements.
It has 1.33m tonnes of storage at Visakhapatnam in Andhra Pradesh in the southeast coast; and two storages in the southwestern Kartanaka state - 1.5m tonnes at Mangaluru and 2.5m tonnes at Padur. India plans to build an additional 6.5m tonnes of strategic reserves in the near future.
The stocks will be sold to the refineries of Mangalore Refinery and Petrochemicals Ltd. (MRPL) and Hindustan Petroleum Corp Ltd. (HPCL), which are connected by pipeline to the strategic reserves.
India is dependent on oil imports to meet 85% of its demand and OPEC accounts for over 40% of its oil imports. It imports around 226m barrels of crude oil every year.
In the April-October 2021, the country’s imported a total of 118.5m tonnes of crude oil at a cost of $61.1bn.
India, the world's third-largest oil consumer and importing nation, has been severely hit by a near-60% surge in crude oil prices this year which threatens its economic recovery.
“India strongly believes that the pricing of liquid hydrocarbons should be reasonable, responsible and be determined by market forces,” the ministry stated.
Retail prices of auto fuel petrol and diesel shot up to record levels in early November which then forced the government to cut taxes, costing it Indian rupees (Rs) 600bn ($8bn) in revenues this year.
“These difficult steps, despite the high fiscal burden on the government, were taken to provide relief to citizens," the ministry said.
In New Delhi, petrol prices are still hovering at an all-time high of Rs104/litre, with diesel at nearly Rs87/litre, up 28% and 22%, respectively compared with last year’s levels.
Focus article by Priya Jestin
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