Gulf tensions spike, Centre readies contingency oil plan
New Delhi, Feb. 23 -- India is exploring contingency plans for crude oil imports as rising tensions in West Asia push global oil prices higher and raise fears of supply disruptions. Oil prices have surged about 7% in the past three sessions following a large US military build-up in the region and President Donald Trump's threats to bomb Iran.
Three people aware of the developments said India is exploring alternative supply routes, expanding its supplier network, and building up its domestic reserves to ensure energy security.
Risks escalated last week after Iran partially restricted movement through the Strait of Hormuz-a critical pass-through point for global crude oil and liquefied natural gas supplies.
For India, which imports 90% of its crude requirements, roughly 1.5-2 million barrels of the country's daily oil import of 5.5 million barrels comes through this narrow passage from countries like Saudi Arabia, Iraq, Kuwait and the UAE.
"The contingency for ensuring energy security involves securing crude oil supplies through two pipelines specifically built to bypass the Strait of Hormuz, tapping Abu Dhabi National Oil Company (Adnoc) and Saudi Arabian Oil Co's (Saudi Aramco's) global reserves and portfolios for replacement barrels," one of the people cited above said, requesting anonymity.
The two pipelines-the Adnoc-operated 360-km Habshan-Fujairah strategic oil pipeline with a 1.5 million barrels per day (mbpd) capacity that opens to the Gulf of Oman; and the Saudi Aramco-operated 1,200-km east-west crude oil pipeline with a 5 mbpd capacity that offers access to the Red Sea-may be tapped in case the Strait of Hormuz comes to a closure. The plan was initially explored after the 10-day war last year involving Iran, Israel and the US, the first person added.
Kirit Parikh, former member (energy) of federal think-tank Niti Aayog, said that if the Strait of Hormuz is blocked, the major concern would be how long such a blockade would last.
"India would certainly have stocks available for a few days, but if the blockade lasts for a longer period, then it would affect not just the buyers of oil and Iran, but also other suppliers in West Asia who use this strait to export their produce," Parikh said. "Hopefully we (can) get more from the UAE and Saudi Arabia through alternate routes like the pipelines, and from other countries."
Notably, Iranian media had reported-citing the Islamic Revolutionary Guard Corps Navy-that its navy is prepared to shut down the Strait of Hormuz if ordered by the country's senior leadership. Iran has reportedly already undertaken large-scale naval exercises in the Persian Gulf and the Strait of Hormuz last week.
Queries emailed to the Union ministry of petroleum and natural gas, Indian Oil Corp. Ltd, Bharat Petroleum Corp. Ltd, Hindustan Petroleum Corp. Ltd, Adnoc and Saudi Aramco remained unanswered till press time.
Madan Sabnavis, chief economist at Bank of Baroda, said a conflict in West Asia could impact supplies.
"As long as prices are in the range of $70-80 per barrel, it should not be a major concern for India as most supplies are based on forward contracts. But as prices near the $80-per-barrel mark and eventually cross that level, it would raise concerns," said Sabnavis....
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