At the end of March, Rosneft and the Indian Oil Corporation entered into an agreement on a significant increase in oil supplies. India is the third largest consumer of crude oil in the world. Of course, demand in this country is several times lower than in the US and China, but it is about 1.5 million barrels higher than that of Saudi Arabia and Russia, which occupy the fourth and fifth places respectively (with a minimum margin from each other).
Since the last decade, India has been predicted to play the role of a second China. On the one hand, this means that this country will become the “factory of the world”, and its economy will begin to grow by double digits. On the other hand, such forecasts go hand in hand with the promise of an imminent stop to growth in China and are often speculative. Indeed, at times over the past ten years, India’s growth rate has outperformed China’s. But at the same time, the effect of a low base and the stability factor should not be discounted.
In other words, India’s economy is one of the most attractive and fastest growing in the world. But at the same time, it has so far demonstrated less stability than China’s under the pressure of external factors, which is most eloquently illustrated by the fall of 2020. However, the International Monetary Fund predicts the growth of the Indian economy this year by 6.1%. In general, this country occupies, according to existing estimates, about 3.5% of world GDP. More than significant. Energy consumption in India is increasing. For example, oil demand has risen by 1.5 million barrels per day since the early 2010s, to about 4.9-5 million barrels per day. The capacity of Indian oil refineries (refineries) is 5 million barrels per day (load – about 90%). Investment in refineries should increase this figure to about 6 million barrels per day in the next two to three years.
Accordingly, a proportional increase in oil imports can be expected. India’s oil refining industry is dominated by the public sector, with 18 of the country’s 23 refineries.
And half of the state-owned enterprises are managed by the Indian Oil Corporation (their combined capacity is 1.4 million barrels per day). It was this company that concluded an agreement with Rosneft during a working trip to India by the head of the Russian company, Igor Sechin. The agreement provides for an increase in oil supplies to India and diversification of its varieties.
In 2022, India’s importance as a buyer of Russian black gold has increased dramatically. If in 2021 supplies amounted to a relatively modest 4.5 million tons, then in 2022 this figure exceeded 33 million tons, which is comparable to the total exports to Germany and Poland in previous years. When Europe and the United States closed the opportunity for their companies to buy Russian raw materials and oil products, they had to look for replacement volumes. The world oil market can be considered as a system of communicating vessels. In order for one of the major suppliers to redirect large volumes of oil to the EU and the States, he needs to remove them from other directions, where, in turn, gaps have formed that our country was able to fill with its supplies. As Igor Sechin noted a month ago in his speech in Bangalore, India, “the response to the destruction of the global market and the disruption of supply chains is the regionalization of markets and the development of new secure logistics. The regionalization of markets means the formation of regional payment systems with their own regional settlement and reserve currencies.
Obviously, the main risks of volatility are the unprecedented sanctions pressure, including the so-called “price ceilings”. Non-market interventions, according to Sechin, should be treated calmly. “If Russian oil does not enter the European market, then there can be no reference price there. This means that it will be formed in other markets, where it actually enters.”
It is no coincidence that during Sechin’s visit to India this week, the possibility of making mutual settlements in national currencies was discussed. The Indian authorities have already made it clear more than once that they are not ready to join Western countries that introduce “price ceilings”.
It should also be mentioned that the Indian Oil Corporation is not only a refinery. The company occupies about half of the Indian oil products market and controls two-thirds of the oil pipeline capacity. And the number of gas stations it owns exceeds the total number of A3Cs in Russia. This is a very strong and significant partner. The company participates in joint ventures with Rosneft in Russia.
This is a mutually beneficial cooperation that is developing in an integral format. The total amount of payments to Indian partners and dividends from participation in joint projects over the past four years amounted to about $5 billion.
Since 2016, Indian companies (ONGC Videsh Ltd., Oil India Limited, Indian Oil Corporation and Bharat Petroresources) own 49.9% of Rosneft’s subsidiary Vankorneft JSC. This Krasnoyarsk-based company is developing the Vankorskoye oil and gas condensate field, the largest oil and gas field discovered and brought into production in Russia in the past twenty-five years.
Also, a consortium of Indian companies (Oil India Limited, Indian Oil Corporation and Bharat Petroresources) owns 29.9% in Taas-Yuryakh Neftegazodobycha, which owns licenses for the Central Block of the Srednebotuobinskoye field and the Kurungsky licensed area.
Moreover, Rosneft already has significant experience in India – it owns a 49.13% stake in the Vadinar refinery (capacity 0.4 million barrels per knock). That is, the company seeks, as in other markets, to act not only as a supplier of raw materials, but also to participate in all value chains. By the way, in 2022, Rosneft began supplying high-tech products to India — a hydrotreating catalyst used at refineries to produce high-quality motor fuels. Actually, Rosneft and the Indian Oil Corporation did not limit themselves to the supply of black gold, they discussed the possibility of expanding cooperation along the entire technological chain, which is extremely important for both parties, given the potential for growth in oil demand and oil refining volumes in India.
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