India is increasing its crude oil procurement from Latin America as disruptions arising from the Iran conflict and problems around the Strait of Hormuz prompt the world’s third-largest oil consumer to diversify its sources.Crude oil serves as the feedstock that refineries process into products such as petrol and diesel.Venezuela has emerged as a much larger supplier to India in August till now, with imports rising sharply and placing the South American producer fourth in India’s crude supply rankings, Kpler data showed.Russia remains India’s largest source of crude, with August imports approaching 2 million bpd. Purchases of Russian oil had climbed to roughly 2.6 million bpd during June and July, accounting for more than half of India’s crude imports and offering a buffer against interruptions along conventional Middle Eastern supply routes.Also Read | Beijing’s billion-barrel weapon: Why India must prepare for China-driven oil prices
Venezuela a key oil supplier
Venezuelan shipments stood at around 371,000 barrels per day, compared with 106,000 bpd from Iraq and 138,000 bpd from the United States, according to Kpler data.Venezuelan crude has gained a much bigger share of India’s supply mix since purchases resumed in April. Indian refiners have stepped up buying from Venezuela, Brazil and African producers following disruptions in Middle Eastern supplies, while Russian crude continues to account for a substantial portion of imports.“India’s strategy is increasingly operating on several fronts at once: increasing domestic upstream production where possible, diversifying overseas crude suppliers and transportation routes, building strategic and commercial inventories, and accelerating alternatives such as gas, biofuels, EVs and renewables,” said Sumit Ritolia, Senior Manager – Modelling at Kpler according to a PTI report.
India’s diversification strategy
The developments point to a wider approach taking shape in response to supply disruptions. India is not looking to reduce its dependence on oil in the immediate future. Instead, it is trying to make the crude it continues to require more secure by expanding both its supplier network and the range of routes through which oil can reach the country.That approach reflects a central consideration for India’s energy security. Completely replacing Middle Eastern crude is neither practical nor necessarily cost-effective, Ritolia said.Gulf producers continue to have a geographical advantage because their proximity to India means shorter voyages and lower transportation costs than supplies sourced from Venezuela, the US, West Africa and other parts of Latin America.Indian refiners have, however, demonstrated significant flexibility in shifting between crude from the Middle East, Russia and the Atlantic Basin.Despite the disruptions, India’s overall crude imports have stayed close to 5 million bpd in recent months, helping refineries maintain relatively stable operations.
Longer shipping routes
Ritolia said sourcing oil from Venezuela, the US, West Africa or other parts of Latin America involves longer shipping routes, which can raise freight and insurance expenses. Geopolitical disruptions can therefore increase India’s oil import bill even when refiners manage to secure adequate physical supplies.“Diversification helps with supply security, but it can only go so far in insulating India from geopolitics. India will still need to import large volumes of crude, meaning any major disruption will ultimately feed through into higher oil prices, freight and import costs,” Ritolia said.Indian refiners sharply raised their purchases of Russian crude after the Iran conflict disrupted supplies from the Gulf. Russian oil made up more than half of India’s crude imports in July. Meanwhile, the Middle East’s share of India’s import basket dropped to around 30 per cent during April-July, compared with 43 per cent a year earlier. Over the same period, Latin American supplies, including Venezuela and Brazil, increased their share to 12.7 per cent from 3.5 per cent.Also Read | 100% tariffs: Why India may ignore Trump threat and continue buying Russian crude oil
