India Seeks Crude Oil Supplies from Africa and Latin America as Middle East Sources Deplete

In an escalating geopolitical landscape, India's major oil refineries are actively pursuing crude oil supplies from distant regions like Angola (Africa) and Venezuela (Latin America) as traditional contractual supplies from the Middle East face repeated disruptions preventing timely delivery to India.

This recurring challenge confronts India, the world's third-largest crude oil importer, as critical maritime shipping routes through the Strait of Hormuz become increasingly unstable due to regional conflicts. According to senior executives from Indian refineries, state-owned oil giants are actively seeking and testing new crude oil varieties to compensate for supply losses stemming from Middle Eastern conflicts, as reported by India's Economic Times.

Supply Diversification Strategy

"We have diversified our crude oil supply away from the Strait of Hormuz, exploring many geographical regions including two new crude varieties from Venezuela and Angola," Vetsa Ramakrishna Gupta, finance director of state-owned Bharat Petroleum Corporation Limited (BPCL), told Economic Times.

Another state-owned refiner, Hindustan Petroleum Corporation Limited (HPCL), reported receiving almost no contractual supplies from the Middle East in the first quarter as shipments remained stranded in the Persian Gulf, west of the Strait of Hormuz.

"This time in the first quarter, we got almost nothing from term contracts because many contracts were on the other side of the Strait of Hormuz," Vikas Kaushal, managing director of HPCL, told the Indian publication. "We had to make decisions based on availability rather than optimization," the executive added.

Shifts in Crude Oil Supply Chain

India's changing crude oil supply strategy occurs amid escalating tensions in the Middle East, particularly following recent attacks on oil tankers and the imposition of shipping restrictions through the Strait of Hormuz.

The table below summarizes the crude oil supply situation for Indian refineries in the first quarter:

Situation with Iraq and Russia

This week, several of India's state-owned refineries have suspended crude oil loading from Iraq due to escalating hostilities in the Middle East and sudden disruptions in maritime traffic through the Strait of Hormuz.

Indian Oil Corp and Mangalore Refinery and Petrochemicals Limited (MRPL) have reportedly suspended crude oil loading from Iraq. Indian Oil abandoned plans to load the supertanker Lila Jamnagar, concluding that sending a fully loaded 2-million-barrel oil tanker through Hormuz was no longer worth the risk. MRPL also halted oil loading from Iraq as security conditions in the region continue to deteriorate.

Despite these challenges, India's crude oil imports from Russia remained near record levels in July despite the US ending sanctions waivers the previous month.

Impact on India's Economy

The shift in crude oil supply sources could have significant implications for India's economy, a nation heavily dependent on imported crude oil to meet its energy needs. Redirecting to more distant supply sources could increase transportation costs and create logistical challenges.

However, analysts suggest that this diversification could help India mitigate risks associated with dependence on a geopolitically unstable region, particularly as Middle East tensions may persist for the foreseeable future.

Future of India's Crude Oil Supply Chain

The current situation raises questions about the sustainability of India's energy strategy. Experts indicate that India needs to reassess its crude oil supply chain to cope with increasing geopolitical risks.

Indian refineries may need to invest more in eastern coast port infrastructure to reduce dependence on western routes through the Strait of Hormuz. Concurrently, developing renewable energy sources could help gradually reduce long-term dependence on imported crude oil.

In the meantime, the situation in the Middle East continues to evolve, with Indian refineries continuously adjusting their supply strategies to ensure uninterrupted operations.

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