Last updated on April 1, 2020
INDIA – RUSSIA ENERGY TIES
Context: A deal has been signed between Indian Oil Corp (IOCL) and Russia’s Rosneft for the annual purchase of 2 million metric tonnes of Urals grade crude oil from Rosneft.
WHAT IS THIS DEAL?
This is the first-ever Term Contract between IOCL and Rosneft which is signed for importing 2 Million Metric Tonnes of Urals grade crude oil during the year 2020 to India. As per the guidelines of the contract signed, the crude oil will be loaded in Suezmax vessels at Novorossiysk port of Russia and will come to India, bypassing Straits of Hormuz. This is the first ever annual oil purchase deal between India and Russia. HOW IS THIS DEAL IMPORTANT? This deal holds a great importance as sourcing of Russian crude oil through long term contracts is a part of India’s strategy for diversifying the country’s crude oil supplies from non-OPEC countries, and a part of the five-year roadmap for bilateral cooperation in the hydrocarbons sector that was signed during PM Modi’s visit to Vladivostok in September 2018. This deal will be able to look after the possible risks arising out of the geo-political disruptions as the addition of Russia as a new source for crude oil imports by India’s largest refiner will go a long way in catering the India’s energy needs. WHAT IS THE STATUS OF CRUDE OIL IMPORTS IN INDIA? India is the third largest oil importer after the United States and China and is highly dependent on imports of crude oil. The net imports of crude oil rose from 132.78 MTs during 2008-09 to 220.43 MTs during 2017-18. India has an 82.8% import dependence for crude oil and 45.3% for natural gas/LNG. The country spent an estimated Rs 8.81 lakh crore (US$120 billion) to import 228.6 million tonnes of crude oil in 2018-19. Most of its crude oil and cooking gas comes from Iraq and Saudi Arabia. The following countries were the 5 largest sources of crude oil imports into India in 2018:
- Iraq: $23 billion (Import Value)
- Saudi Arabia: $21.2 billion
- Iran: $13 billion
- Nigeria: $9.6 billion
- United Arab Emirates: $8.9 billion
- RUSSIA stands at 15th Position with a total import value of $1.2 billion.
- Novorossiysk port of Russia: Novorossiysk Sea Port (NSP) is one of the largest ports in the Black Sea basin and the largest in Krasnodar Krai. NSP berthing line (8.3 km) is the longest among all the ports of Russia. The port is located on the Northeast coast of the Black Sea, in the Tsemes Bay (also called Novorossiysk Bay).
- Strait of Hormuz: It is a strait between the Persian Gulf and the Gulf of Oman. It provides the only sea passage from the Persian Gulf to the open ocean and is one of the world’s most strategically important choke points. On the north coast lies Iran, and on the south coast the United Arab Emirates and Musandam, an exclave of Oman.
- 1/3rd of the world’s liquefied natural gas and almost 25% of total global oil consumption passes through the strait, making it a highly important strategic location for international trade.
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