New Delhi: On Friday, petrol and diesel prices increased by ₹3 across India. At the same time, Prime Minister Narendra Modi was in Abu Dhabi, signing two significant energy agreements with the United Arab Emirates (UAE).
These agreements could change the game for India’s energy security. The first is a memorandum of understanding (MoU) between the Indian Strategic Petroleum Reserves Limited (ISPRL) and the Abu Dhabi National Oil Company (ADNOC). The second involves the Indian Oil Corporation Limited (IOCL) and ADNOC for the supply of LPG. This cooperation comes at a time when oil markets are volatile, influenced by conflicts in West Asia.
In essence, these agreements are smart moves to safeguard against an unstable global oil landscape. The Ministry of External Affairs highlighted that the UAE is a vital partner for India’s energy needs, especially for crude oil and liquefied natural gas (LNG).
One of the key components of the ISPRL-ADNOC agreement is the potential for ADNOC to store up to 30 million barrels of oil in India’s strategic reserves. This includes facilities based in Vishakhapatnam, Andhra Pradesh, and future developments in Chandikol, Odisha. The agreement also explores options for storing crude in Fujairah, UAE, which could be crucial for managing supply disruptions.
India’s strategic reserves act as a buffer in emergencies. They are particularly important given the recent tensions in the Middle East. If issues arise, such as supply route blockages, having these reserves allows India to stabilize prices and protect consumers.
Talmiz Ahmad, a former Indian Ambassador to the UAE, emphasized the importance of these reserves. “They serve as an emergency resource,” he explained. “Countries often need to store oil to prepare for unforeseen events.”
Ahmad pointed out that while India is not a member of the International Energy Agency (IEA), having these stores is essential for national security. The strategic reserves would belong to ADNOC, but India could purchase the oil in times of need.
Moreover, the agreements come at a pivotal moment. The UAE recently opted out of the OPEC agreement, allowing for greater production flexibility. This could mean more favorable pricing for India. With the UAE now free from quotas, it can negotiate more productive deals, which may help Indian buyers navigate global supply chain issues.
Ahmad noted that the UAE aims to increase its daily oil production beyond its OPEC quota. “They have the capacity to produce much more, and this gives India an opportunity to secure better deals,” he stated.
The collaboration between IOCL and ADNOC also centers on long-term LPG supplies. Assured access to LPG can offer the Indian government a better position to manage market prices, inflation, and subsidy challenges, especially during global price fluctuations.
In summary, the energy agreements signed during Modi’s visit to the UAE do more than just strengthen commercial ties. They enhance India’s energy security at a crucial time, taking into account new geopolitical realities. The UAE’s shift from OPEC has opened doors for India, making it a potentially more cost-effective and flexible energy partner.
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PM NARENDRA MODI, PETROL AND DIESEL, INDIAN OIL, ABU DHABI NATIONAL OIL COMPANY, INDIA UAE TIES, BEYOND OIL TRADE: INDIA–UAE ENERGY DEALS SIGNAL GEOPOLITICAL HEDGING
