The Indian government has given the Abu Dhabi National Oil Company (ADNOC) the green light to export crude oil stored in India's strategic reserves, marking a shift in policy and potentially boosting foreign participation in the country's oil storage infrastructure. This decision comes after ADNOC reportedly faced difficulties selling its oil to Indian refiners due to a decline in demand.
Previously, India maintained a strict policy regarding oil exports, only allowing state-owned Indian Oil Corporation (IOC) to handle such transactions. The new policy exempts ADNOC's Marketing International arm (AMI) from these restrictions, granting them the flexibility to re-export their oil stored at the Mangalore strategic petroleum reserve (SPR). This move aligns with practices adopted by other major oil consumers like Japan and South Korea, who permit oil producers to re-export stored crude.
The Indian government, the world's third-largest oil importer, established strategic reserves at three locations across the country to mitigate the impact of potential supply disruptions. These underground storage facilities, with a combined capacity of 5.33 million tonnes, can provide enough oil to meet the nation's needs for approximately nine days. While India retains the first right of refusal on any oil re-exported by ADNOC, this policy change signifies a willingness to enhance the usability of these reserves.
Analysts suggest this decision could offer several advantages. Firstly, it grants ADNOC greater operational flexibility, allowing them to navigate fluctuations in the Indian market and potentially secure better deals elsewhere. Secondly, it could incentivize other foreign oil companies to utilize India's storage facilities, thereby increasing revenue and potentially leading to the expansion of these reserves. This, in turn, would bolster India's energy security by diversifying its crude oil sources and storage options.
However, some concerns have been raised regarding the potential impact on domestic refiners. If ADNOC opts to re-export a significant portion of its stored oil, Indian refiners might face challenges securing alternative supplies, particularly for specific crude grades. Additionally, some experts caution that over-reliance on foreign oil storage could leave India vulnerable to external factors influencing export decisions.
The Indian government is likely keeping a close eye on the situation to ensure a balance between the needs of domestic refiners and the broader strategic goals of attracting foreign investment and enhancing energy security. This policy shift, while limited in scope for now, opens the door for further collaboration between India and international oil producers in the realm of strategic storage and crude oil management.