Crude oil imports from Qatar was just 70,000 barrels per day (bpd) last year; it supplies huge amount of LNG
Qatar's proposed exit from the Organisation of the Petroleum Exporting Countries (Opec) would require extensive diplomatic exercise on the part of India to balance trade ties with all its Middle Eastern partners.
Even though India's crude imports from Qatar, which was just 70,000 barrels per day (bpd) last year, may not get impacted, it would have to watch its trade relations with the Gulf nations.
Arun Singhal, chief editor, drilling and exploration world (DEW) Journal, told DNA Money that since India has several major contracts, especially for liquefied natural gas (LNG), in place, it would have to ensure they are not disrupted because of the latest development in one of the world's major energy body.
"Some kind of diplomacy exercise would need to be undertaken because, at the end of the day, we have to be in terms with both Opec and Qatar. Qatar has been a long-standing partner of India and it is supplying a huge amount of LNG to us. Any movement would have an impact but we should not be jittery and expect that India will face some kind of a deadlock. Some permutation and combination may have to be worked out by India in the coming times," he said.
As per data available, India's imports from Qatar was $16.8 billion in 2014. Of this, oil constituted a major chunk at $14.9 billion. In the same year, the second largest Qatari imports were plastics at $700.8 million. India's exports during that year were $1.2 billion, with cereal topping the list at $215.3 million and machinery coming in at the second position at $108.6 million.
The peninsula in the Gulf region has also signed a pact with India to invest $5 billion in its energy sector. This agreement includes a proposal to build a deep-sea gas pipeline from Qatar to India through Oman.
Sambit Mohanty, senior editor, Asia Oil News & Analysis, published by energy researcher S&P Platts, does not see Qatar's exit from Opec affecting India's trade flow with Gulf nations.
"Qatar's exit is unlikely to alter trade flow in India in any way," he told DNA Money over the phone from Singapore.
Mohanty said since Qatar contributed only 2% of Opec's output, and leaving the petroleum exporters' body may have "very limited" impact on the global oil supply and prices and the demand-supply equations around the world.
"It (Qatar's exit) doesn't affect either its supply to most of the countries or in any way the demand-supply equation in a big way because Qatar is a very small supplier. It contributes only 2% of the Opec's output. From that point of view, the impact on global prices and on demand-supply equations around the world is very limited," said the energy expert.
A statement issued by S&P Global Platts said; "Qatar's decision to become the first Middle East member country to leave Opec and focus on its core strength of gas exports has stunned the cartel".
The announcement of the gas-rich sheikhdom leaving the petroleum producers' cartel was announced by Qatar's energy minister on Monday.
It has come very close to Opec's scheduled meeting on December 6-7, where its members were to potentially agree to cut output to support falling prices.
The S&P Global Platts Analytics predicts a 1.2 million-1.4 million barrel per day reduction from October levels when prices had climbed to a high of over $86 per barrel.
Since India is a major importer of crude – close to 80% of its oil requirement is met through imports – any jump in petroleum prices would affect its fiscal deficit. Rating agency Icra has forecast September current account deficit to come at around 3% of the GDP because of high oil import bill.
Most energy experts do not expect major gyration in global crude prices due to Qatar's decision. A survey of S&P Global Platts shows that the Gulf country pumped in just "over 600,000 b/d last month".
Qatar's walkout has come after Saudi Arabia and the United Arab Emirates (UAE) maintained a political and economic boycott on it since June 2017, accusing it of supporting terrorism.
Doha has denied the charges and said the boycott was aimed at impinging on its sovereignty. It has emphasised that its move to leave Opec was a strategic, rather than a political decision.
Whatever may be the reason, Opec and its allies, including Russia, are determined to take a decision to slash oil supply when they meet on Thursday and Friday.
SECURING OIL TIES
- $16.8bn – India’s imports from Qatar in 2014
- $1.2bn – India’s exports to Qatar four years ago
- 2% – Qatar contributes to Opec’s output
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