In recent years India has emerged as one of the key importers of crude oil and in 2015 is expected to account for 11% of global seaborne crude imports.

Indian crude imports are projected to stand at just over 4.0m bpd in 2015, double the level of 10 years ago. So what has led to India becoming a key driver of oil tanker demand

The growth of Indian crude imports has been intimately linked with the rise of domestic refinery capacity, which is estimated to have stood at 4.6m bpd at the end of 2014. The continued growth of Indian refinery capacity, driven by growing oil demand and the construction of refinery hubs aimed at exporting large volumes of refined products (such as Jamnagar, which was expanded in 2009) buoyed Indian crude imports.

Further to this, several refineries have opened since 2009; most notably a number of refineries came online in 2010 which added 1.2m bpd of refinery capacity, aimed at supplying the domestic and foreign markets.

Although Indian crude imports have grown firmly, the diversity of suppliers has reduced recently. India now tends to import its crude from three major regions, the MEG, WAF and the Caribbean, with the majority being sourced from the Middle East, which supplied 58% of India’s crude imports in 2014.

However, this was not always the case, with short-haul imports from Asian exporters playing a greater role around the mid-2000s. Indian imports of WAF and Caribbean crude have increased from just 0.2m bpd in 2005 (8% of crude imports) to 1.4m bpd in 2014 (37% of crude imports), a growth rate of 28% p.a. on average.

This has been built on trade agreements and CoAs between producers and major refiners (such as Reliance, who operate the Jamnagar complex), which has edged out many smaller producers, resulting in ‘other’ exporters having a more limited role in Indian crude trade.

The rapid growth of long-haul crude shipments from the Atlantic Basin to India, coupled with more limited growth in volumes from the MEG has supported a sharp increase in the average haul of Indian crude imports. In 2005, the average haul stood at around 2,000 miles, compared to 4,000 miles in 2014.

As a result, tonne-mile imports grew by 17% p.a. between 2005 and 2014, compared to 7% p.a. growth of crude volumes during the same period. The growth of Indian crude tonne-mile imports has supported demand for VLCC and Suezmax tonnage.

Given expectations of further growth of refinery capacity and the filling of petroleum reserves it is likely that Indian crude imports will continue to grow in the near future. For example, a 0.2m bpd refinery is expected to be constructed in 2015, followed by two plants of a combined 0.45m bpd in 2016 in Haldia and Orissa.

Meanwhile, a petroleum reserve of roughly 70m barrels is scheduled for completion in 2015. Furthermore, some Indian producers are purchasing exploration blocks in the Caribbean, with the aim of supplying Indian refineries. These trends are likely to support crude tonne-mile imports and cement India’s place as a key driver of crude tanker demand.

Source:hellenicshippingnews.com