Oil & Gas

15 Mar 2022

India Hopes for Oil from Iran, Venezuela; Higher Output from OPEC+ to Cool Prices

15 Mar 2022  by   
India, the world's third-largest energy-consuming and importing nation, is pinning hope on resumption of crude oil supplies from Venezuela and Iran as well as higher production from OPEC+ nations to help cool international oil prices that have hit multi-year highs.

It will also evaluate the Russian offer to sell crude oil at discounted prices after considering aspects such as insurance and freight required to move the fuel from the non-traditional supplier.

Replying to supplementaries during question hour in the Rajya Sabha, Oil Minister Hardeep Singh Puri said oil export from Venezuela and Iran had been hit due to sanctions.

The two nations are among those with the highest oil reserves in the world and were significant suppliers to India before US sanctions halted purchases.

"It is our hope and expectation that oil, not only from Venezuela, but other countries under sanction, will become available," he said. "I am hopeful that we will all use collectively, our margin of persuasion... to request the international community to make more oil available including from Venezuela".

Indian oil companies will enter into agreements with Venezuela and "equally (with) Iran" no sooner their oil comes into the market, he said.

Stating that there are reports that the nuclear issue, which had led to sanctions on Iran, is likely to be resolved, the minister said "that will also bring more oil into the market."

He hoped that "apart from oil which will become available by countries who, hitherto, were not supplying on account of sanction, existing OPEC plus will increase their production" to cool oil prices.

International oil prices had hit a 14-year high of USD 130 per barrel earlier this month before retracting. It was trading at over USD 108 on Monday.

But retail petrol and diesel prices have remained unchanged for a record 130 days in a row. Rates were last revised on November 4, 2021, when international oil prices were at USD 81-82 per barrel.

Asked about the reported Russian offer to sell its crude oil and other raw materials at discounted prices with payment through a rupees-rubles transaction, Puri said the government will explore all options which are available.

"Let me again reiterate that in a situation like the one characterised by the pandemic in the last two years and in the last few weeks by a war or a military action taking place between Russia and Ukraine, the government will explore all options which are available," he said.

The minister said he has had discussions with the Russian government officials.

"Discussions are currently underway. There are several issues which are required to be gone into like how much oil is available either in Russia or in new markets or with new suppliers which may be coming in the market. Also, there are issues relating to insurance, freight and a host of other issues including the payment arrangements," he noted.

He promised to report any arrangement that is worked out between Indian oil companies and their counterparts in the Russian Federation or with Iran or any other countries where more oil is coming up.

"It is a dynamic evolving situation characterised by military warfare," he added.

Puri was repeatedly interrupted by Opposition members who alleged that he was skirting the questions they had put to him.

"I would be happy if some of the 'military quotient' is less here, and, I will get a chance to explain things to my distinguished colleague in greater detail," he said.

Puri said the price of petrol and diesel at the retail point or at the bunk is determined by international price, cost of insurance, freight, exchange rate, refining margins and a number of other factors.

On November 4, 2021, excise duty on petrol was cut by Rs 5 per litre and that on diesel by Rs 10 to provide relief to consumers reeling under record-high prices.

International rates have since climbed to multi-year highs but retail prices have remained at the November 4 levels.

"I thought that all the elected representatives would be rejoicing at the fact that the price paid by the consumer has remained steady during that period but I did not see that," he remarked.

To a separate question, his junior colleague and Minister of State for Petroleum and Natural Gas Rameswar Teli in a written reply said the geopolitical situation between Russia and Ukraine has resulted in a steep increase in global crude oil and gas prices.

"Government of India is closely monitoring global energy markets as well as potential energy supply disruptions as a fall-out of the evolving geopolitical situation," he said.

In November 2021, in a bid to control inflationary pressures, the Government of India, in consultation and parallelly with major energy consumers, had agreed to release 5 million barrels from its strategic petroleum reserves.

"Government of India is ready to take all appropriate action, as deemed fit, for mitigating market volatility and calming the rise in crude oil prices," he added.

On taxes being raised on petrol and diesel at the onset of the pandemic, Puri said they were raised for a particular purpose.

"The question is, raising of taxes, levying of taxes are done depending upon the situation at that point of time," he said.

After the Union government's decision to cut excise duty, all but nine states also cut local sales tax or VAT.

"We are willing to take such steps as are necessary to control the price," he said.

He added that rates in India have gone up only by 5 per cent as compared to over 50 per cent in countries like the US, Canada, Germany, and the UK.

"We should be rejoicing that. Instead, what we are hearing from the distinguished member is why it has not gone up," he said.


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