In February, Saudi Arabia’s Crown Prince Mohammed bin Salman said he expected investment opportunities worth more than $100 billion in India over the next two years. The kingdom’s planned investments, which includes energy, may see India look to Saudi for oil. The South Asian country is the largest importer of Nigeria’s oil.
“…we expect the opportunities we are targeting in India in various fields to exceed $100 billion in the coming two years,” the crown prince said. T.S. Tirumurti, who handles economic relations at India’s foreign ministry said sectors of interest included energy, infrastructure, agriculture and manufacturing, although he told Reuters that Saudi Arabia’s focus was on expanding non-oil trade with India, which imported 5.22 million tonnes from Saudi Arabia in the first quarter of 2018.
However, Saudi Aramco, the kingdom’s oil company, which wants to become a top three oil trader (paywall) said it was in talks with India’s Reliance Industries Ltd., which owns the largest refinery in the world.
Indian Prime Minister Narendra Modi told reporters when the Saudi Crown Prince visited New Delhi in February that it was time India and Saudi Arabia converted their energy relationship into a strategic partnership.
“The biggest refinery in the world and Saudi participation in India’s strategic petroleum reserve elevate our relationship from a mere buyer-and-seller relationship,” Modi said.
The Saudi crown prince agreed with Modi, explaining that the kingdom was diversifying its interests in petrochemicals and building storage capacities. “We want to cooperate with India, and this will give a new momentum to our relationship,” he said.
The commitment of both countries to improving bilateral relationship to the extent of setting up a Strategic Partnership Council and hold a summit meeting every two years is bad for Nigeria, a country that strongly depends on oil revenue to fund its budget. India is a major importer of Nigeria’s oil, with the South Asian powerhouse importing 131 million barrels of Nigeria’s crude in 2017 and N719.2 billion worth of the product in the third quarter of 2018 during which it also took up N37.7 billion worth of natural gas exports from Nigeria.
Although India’s oil imports from Nigeria also rose 20.53 percent to 1.35 MT in December 2018, it does not necessarily signify hope for continued offtake of Nigeria’s oil as India is always looking for the best deals which Nigeria may not be able to afford due to its level of dependency on petrodollars.
In 2017, the United States offered India a $2 discount against benchmark Brent crude prices, on every barrel of oil it buys, as the world power re-entered the oil export market. India responded by requesting two million barrels of U.S.’s shale at the stated discount.
As Iran faces US sanctions, the country agreed with India, which had secured sanctions waiver on Iranian oil, to settle oil trades through Indian government-owned UCO Bank in the Indian currency. India has already asked the U.S. for an extension to the waiver which expires in early May.
Iranian oil minister Bijan Zanganeh said in February that the country had offered almost free shipping and an extended credit period to boost sales to India, which Iran was hoping to sell more than 500,000 bpd of oil to in 2018/19.
Saudi Arabia, which recently made its Indian investment intentions known invested $44 million between 2016 and 2019.
How far is Nigeria willing to go to secure its exports to India?
Current Nigerian oil export numbers are good. According to the National Bureau of Statistics (NBS), crude oil export in Q4 2018 appreciated by 51.05 percent over Q4 2017. Q3 2018 brought on a 39.17 percent appreciation to N4.15 trillion ($11.5 billion) from N2.97 trillion ($8.2 billion) in Q3 2017. In fact, oil prices are up, with Brent, Bonny Light and the OPEC Basket all above the $70 mark. But with the black gold accounting for 60 percent of government revenue and about 90 percent of forex earnings, it is important for the Nigerian government to constantly look out for threats to its oil exports, especially to major importers of its crude like India. But the issues in Venezuela, another major exporter to India may ensure Nigeria’s export volume to India remains as it currently is, even if Saudi Arabia’s improved relations with India ensures it can export more to the country.
Venezuela is one of the top five crude oil suppliers to India. However, its supply volume has been erratic due to ongoing political and economic crisis in the south American country. The country’s upstream sector has also not enjoyed sufficient investment, which is affecting production. As a result, India’s crude imports from Venezuela dropped 6.28 percent to 13.42 MT between April-December 2018 as against the same period in 2017.