The Indian government is in discussions with Norwegian energy giant Equinor to secure its participation in India’s strategic petroleum reserves (SPR). In a related move, negotiations are also ongoing for long-term liquified natural gas (LNG) deals from Equinor’s extensive portfolio in the US and Qatar, according to two people aware of the development.
These efforts are part of India’s broader strategy to enhance its energy security, given its status as the world’s third-largest energy consumer.
If talks are successful, this would mark the second such commitment to India’s strategic crude oil reserve programme, following Abu Dhabi National Oil Co (Adnoc). These negotiations come against the backdrop of continued production cuts by the Organization of the Petroleum Exporting Countries (OPEC) and its allies, including Russia, which have put global supply chains under pressure.
Bolstering LNG imports
The proposed LNG deal with Equinor is part of India’s strategy to fortify its LNG imports. State-run Indian Oil Corp. (IOC) recently inked a long-term LNG contract with France’s TotalEnergies to supply 1 million metric tonnes per annum (mmtpa) for around 10 years. There are plans to sign another long-term contract with Adnoc for a similar volume.
“We are asking Equinor to come in our SPR, and also participate in our E&P (exploration and production) programme. The discussions are ongoing. We are talking with Equinor for sourcing long-term LNG from their portfolio in the US and Qatar,” said one of the two people cited above, who requested anonymity.
Queries sent to India’s energy ministry and Equinor on Thursday evening remained unanswered at press time.
Energy security
India currently has a crude storage capacity of 5.3 million tonnes, distributed across Visakhapatnam, Mangaluru, and Padur. An additional 6.5 million tonnes of strategic crude oil reserves are under construction in Chandikhol, Odisha, and Padur, Karnataka. These reserves are critical for energy security, as evidenced by India’s coordinated release of 5 million barrels of crude oil in November 2021 with other major consumers to stabilize global prices. India had bought crude oil at $19 a barrel in 2020 to fill up the reserves, and in the process, saved $685.11 million.
A recent S&P report highlighted that in addition to India’s strategic petroleum reserve capacity, state-run oil companies maintain storage facilities for crude oil and petroleum products sufficient for 64.5 days of total net imports. This brings the current total storage capacity for crude oil and petroleum products to 74 days of total net imports.
Equinor, meanwhile, is no stranger to India, having partnered with state-run Oil and Natural Gas Corp. (ONGC) on carbon capture, utilization and storage (CCUS), offshore wind, and green hydrogen projects. Equinor-backed Scatec ASA has also joined forces with India’s Acme Group for a $6 billion green hydrogen and green ammonia project in Oman, which aims to supply emission-free fuel to Europe and Asia.
In February, Equinor signed a 15-year agreement to supply LNG to Indian fertilizer and petrochemical company Deepak Fertilisers.
Energy security is pivotal for India, which imports over 85% of its oil and 55% of its gas requirements. Fluctuations in global prices can significantly impact India’s import bill, stoke inflation, and widen the trade deficit.
In fiscal year 2023 (FY23), India’s import of crude oil and petroleum products surged 29.5% to $209.57 billion. LNG imports also rose by 17.5% year-on-year in FY24, reaching 23.5 mmtpa.
Indian Oil had previously signed an agreement with Adnoc for the supply of 1.2 mmtpa of LNG starting in 2026. Petronet LNG extended its contract with QatarEnergy LNG in February, securing a long-term deal for 7.5 million tonnes of LNG per annum. Adnoc has also offered India a stake in its upcoming LNG liquefaction terminal at Ruwais, marking what could be India’s first equity stake in an overseas LNG terminal.