New Delhi, Aug. 19: India plans to enter into a long-term contract with Kuwait to source crude as part of its strategy to diversify imports amid growing international pressure on Iran.
The country is also weighing imports from other Gulf nations following sanctions imposed by the US and European Union on Tehran.
India meets around 75 per cent of its crude requirement through imports.
A meeting of a joint working group of the two countries has been convened next month to explore the possibility of a long-term import contract at a discount and participation in exploration and production activities in Kuwait.
“The meet next month is significant as imports from the Gulf nation have increased in the recent past and entering into a term contract will provide energy security for the country,” a senior oil ministry official said.
“If Kuwait allows farm-in opportunity for state-owned firms in their assets, it will have significant implications for the country’s energy diplomacy,” he said.
Officials said the contract would act as a safeguard against volatility as crude prices have risen from below $100 a barrel to around $125 a barrel in just two months.
They said the Gulf nation had offered an average discount of $0.15 per barrel in 2011-12, and the country could bargain for more as it was a win-win proposition for both.
India has been looking at alternative energy sources following growing international pressure on Iran.
The Islamic nation has lost its position as the second largest crude supplier to India after import cuts. It is now the fourth largest supplier after Saudi Arabia, Kuwait and Iraq.
Imports from Iran have come down from 18.5 million tonnes (mt) in 2010-11 to 17.44mt in 2011-12. India is likely to further cut imports to 15.5mt this fiscal.
The country has also sought additional 5mt of crude from Saudi Arabia.
The Persian Gulf contains two-thirds of the world’s proven petroleum reserves and 35 per cent of gas reserves. The major suppliers of oil to India are Saudi Arabia, Iran, Iraq, Kuwait, the UAE and Yemen.
Indian refiners imported 171.41mt of crude in 2011-12. Of this, 32.63mt came from Saudi Arabia, 24.51mt from Iraq, 17.67mt from Kuwait, 17.44mt from Iran and 15.79mt from the UAE.
The spike in global crude prices bloated the country’s oil import bill, which jumped from $100 billion in 2010-11 to $140 billion in 2011-12 as the economy grew 6.9 per cent last fiscal down from over 8 per cent in the past few years.