Deal on oil & gas to boost India’s energy security, lower costs – Economy News

India and the US have committed to increase energy trade during Prime Minister Narendra Modi’s recent visit to the US, as part of efforts to ensure energy security, and to establish the US as a leading supplier of crude oil and petroleum products and liquified natural gas to India. 

The availability of more volumes of US crude oil is expected to ensure that other global crude suppliers (including Russian ones) to India continue to remain price competitive, as per analysts. Moreover, given the Indian government envisages to increase the share of natural gas in the energy mix to 15% from current 6% by 2030, enhanced US gas imports are a welcome change.

“The US already supplies between 2.5-3.5% of India’s crude oil needs, most of which is light and sweet (e.g., WTI), which suits India’s need to continue producing diesel and gasoline in high volumes. Therefore, the news of both countries striving to make the US a leading supplier of crude oil to India is great news,” said Ashwin Jacob, Partner at Deloitte India.

He noted that Indian refiners are sophisticated buyers of crude and have always considered options that provide the best refining margins while ensuring supply security. “As a result, Indian refiners have looked to Russia to access discounted crudes over the last 2-3 years besides the Middle East, which is the origin of approximately half of India’s crude needs,” he said.

India is the third largest consumer of crude oil and imports over 85% of its crude oil requirements. It also imports 50% of its total gas consumption. The country imported $4.12 billion of US petroleum crude in Apr-Nov 2024 against $5.02 billion in fiscal 2023-24, as per government data. Imports of liquified natural gas from the US during Apr-Nov last year stood at $2.15 billion against $1.41 billion in 2023-24. 

Russia is currently the country’s top oil supplier, followed by Iraq, Saudi Arabia, the United Arab Emirates, and the US.

Jacob highlighted that the availability of more volumes of US crude oil will ensure that other global crude suppliers (including Russian ones) to India continue to remain price competitive, which will be good for India’s energy import bill. 

“However, the international gas market dynamics are slightly different from oil, and the US has emerged as the predominant LNG exporter in recent times, thanks to the fact that it produces a large quantity of ‘associated gas’, which it exports at very competitive commercial terms. Given India’s thrust towards increasing gas in its energy basket, the commitment from both countries to grow US gas exports to India will be good for ensuring energy security,” he said.

Many Indian oil and gas majors are now eyeing to buy more crude oil and LNG from the US. Reports have suggested that the country’s major oil marketing company Indian Oil Corp is in talks with Cheniere Energy Inc. for a long term LNG supply pact while Gail India Ltd has also revived plans to buy a stake in a liquefaction facility in the US.

The two countries discussed the tremendous scope and opportunity to increase trade in the hydrocarbon sector including natural gas, ethane and petroleum products as part of efforts to ensure supply diversification and energy security, as per the joint statement released by the government. The countries also committed to enhance investments, particularly in oil and gas infrastructure, and facilitate greater cooperation between the energy companies of India and US.

Following Modi’s visit to the US, India’s Foreign Secretary Vikram Misri said that there is a “good chance” that India’s oil and gas purchases from the US will grow to $25 billion a year soon from around $15 billion last year. 

The country currently buys a significant amount of oil and gas from the US. The US is India’s fifth-largest supplier of crude oil and also a top supplier of LNG.

“I think last year, we purchased around $15 billion of US energy output. There is a good chance that this figure will go up to as much as $25 billion in the near future… Today’s discussions did focus considerably on the possibility of more energy purchases. And it is entirely possible that these increased energy purchases will contribute to impacting the deficit between the two countries as well,” Misri said.

India’s oil minister Hardeep Singh Puri during the India Energy Week also said that there has been a substantial progress in bilateral relations, particularly in the natural gas sector. He had said earlier that there is a possibility of more energy purchase between India and the US, adding that more US energy coming into the market is welcome.

Puri said that the new US administration’s push for increased oil supply has created favorable conditions in global markets. He noted the emergence of new oil sources from the Western Hemisphere, including Brazil, Argentina, Suriname, Canada, US, and Guyana, as beneficial for major consuming nations like India.

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