Saudi Arabia’s oil premium may force India to tap Africa

India is looking at Africa to spruce up its oil and gas imports as it seeks to diversify its energy basket after Saudi Arabia’s decision to charge a premium for the oil it sells to Asian customers, according to the government.

“Regarding this (Saudi Arabia charging a premium), we are looking for alternative sources of oil. Towards this, we are in talks with various African nations and the upcoming India-Africa Hydrocarbon Summit will help in moving this forward,” a senior official in the Ministry of Petroleum and Natural Gas said on condition of anonymity.

Africa already contributes around 15 per cent of India’s oil needs, with India having imported 32 million metric tonnes from the entire continent in 2014. Last year, Nigeria overtook Saudi Arabia as the largest contributor to India’s oil imports for a short period of time and currently remains one of the top providers of oil to India.

Saudi Arabia’s national oil and gas company, Saudi Aramco, recently announced that it would be charging Asian customers 60 cents a barrel more for Arab Light crude oil during February compared to the prices they would be paying in January. India is currently the third-largest oil importer in the world, relying on imports for 76 per cent of its oil needs. The International Energy Agency projects that this would rise to around 90 per cent by 2030 as India’s demand continues to increase.

“The increase in oil consumption will almost entirely have to be supplied through imports since India’s domestic supply will remain meagre, and no technological breakthrough will make such an impact on our oil needs,” the official said. Oil Minister Dharmendra Pradhan last year said that state-run ONGC and BPCL will invest $6 billion in developing a gas field off the coast of Mozambique. OVL, ONGC’s overseas arm, already has investments in Sudan, South Sudan, Libya and Mozambique. The 4th India-Africa Hydrocarbon Summit will take place on January 21 and 22 in New Delhi and will include 22 African nations, with nine of them coming at a ministerial level.