Abu Dhabi: India’s partnership with Abu Dhabi National Oil Company in oil storage is likely to benefit India and protect its economy from crude price shocks and supply disruptions, experts said as energy ties between India and the UAE grow.
“The storage is something that is important for energy security, specially when there are threats to oil supplies in the region. India is close to the UAE and kind of an ideal place to develop strategic storage,” said Robin Mills, Chief Executive Officer of Dubai-based consultancy firm Qamar Energy.
Dharmendra Pradhan, Indian Minister of State for Petroleum and Natural Gas, last week announced Adnoc has successfully partnered with the Indian Strategic Petroleum Reserve Limited (ISPRL) to store crude at India’s soon to be completed strategic oil reserve project in Mangalore.
The development comes as His Highness Shaikh Mohammad Bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces, visited India to strengthen relations between the two countries.
India also announced that it would be increasing its oil imports from the UAE as the demand grows due to rapid economic development.
India’s GDP grew by 7.3 per cent in the last quarter in 2015 and is set to grow by 7.6 per cent this year.
The country is planning to increase its imports from the UAE by 15 per cent this year, Pradhan said after a meeting with UAE Energy Minister Suhail Al Mazroui in New Delhi.
“Indian oil demand is growing and they need more imports. Oil-exporting countries are looking for customers and the main area of growth is in Asia. India is obviously the second largest oil market in Asia and the one which is growing strongest at the moment,” Mills added.
The Indian Petroleum Minister talked about Indian companies’ interest in acquiring a stake in Abu Dhabi Company for Onshore Oil Operations (Adco) concessions but did not give details.
Justin Dargin, an energy expert from the University of Oxford, said India, with it rapidly growing oil consumption, seeks to secure access on favourable terms to productive fields in the Gulf that are quite close to its territory.
“This is part of a growing trend of Asian countries seeking to acquire stakes in oil and gasfields abroad in order to ensure access and in a bid to foster competitive import terms,” he said.
Talking about India’s partnership with Adnoc on oil storage, Dargin said the benefits of storing the UAE oil is that it allows it a cushion to guard against supply disruptions and price volatility.
“In addition, the UAE benefits by being able to store oil when prices are particularly low, as they are currently, and then release it on the global market when oil prices increase.”
The UAE makes up for 8 per cent of India’s oil imports and is the sixth largest supplier of crude oil to India in 2014-15.