Petroleum Ministry and Refiners Develop Contingency Plan for Increased Russian Oil Imports

India Contingency Plan for Crude Supply Amid Rising West Asia Conflict

Key Figures:

• 90%: India's crude needs met through imports
• 50%: Crude imports from Iraq, Saudi Arabia, the UAE, and Kuwait
• $79: Benchmark Brent price as of March 2
• 20%: Global oil supply passing through the Strait of Hormuz
• 85%: India's LPG imports passing through the Strait of Hormuz

Situation Overview

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India is developing a contingency plan to secure crude supply in light of the widening West Asia conflict. The petroleum and natural gas ministry has met with oil marketing companies to discuss alternative regions and routes for crude supply. With 90% of India's crude needs met through imports, the country is vulnerable to disruptions in the Middle East.

Impact of Conflict

The conflict between the US and Iran has resulted in the "blocking" of key oil routes, including the Strait of Hormuz. This has led to a rise in the benchmark Brent price to $79 a barrel as of March 2, up from $72 on February 28. The movement of ships through the Strait of Hormuz has come to a standstill, affecting nearly half of India's oil imports and 85% of its LPG imports.

Contingency Plan

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India plans to secure crude through the Saudi East-West pipeline and Abu Dhabi Crude Oil Pipeline to bypass the Strait of Hormuz. Indian refiners are also considering increasing their purchases of Russian oil if access to Middle Eastern grades tightens. With a continued availability of Russian cargoes in the Indian Ocean and Arabian Sea region, Indian refiners could pivot back toward Russian grades relatively quickly.

Import Data

In February, India's Russian oil imports stood at 1.1 million barrels per day (bpd), down from its previous high of 1.8 million bpd in November. Imports from Iraq stood at 992,000 bpd against 1.06 million bpd in January, while Saudi Arabia exported 1.04 million bpd in February compared to 774,000 bpd in January.

Logistical Advantage

Gulf crude retains a clear logistical advantage with a five-seven day voyage compared to 25-45 days of voyage from the Atlantic. However, with the potential disruption of the Strait of Hormuz, Indian refiners will have to explore longer routes, leading to extended voyages and increased freight costs.