Potential Disruption of the Strait of Hormuz
Indian refiners are considering diversifying their energy sources in light of potential disruptions in the Strait of Hormuz due to the conflict between Iran and Israel. This strait is a vital passage for global oil and gas transit.
Risk Analysis and Preparedness
- Approximately 40% of India's crude imports and 54% of its LNG supplies could be at risk if the Strait of Hormuz is blocked.
- The strait facilitates nearly 30% of global oil trade and 20% of LNG shipments.
- Oil industry executives believe a blockade is unlikely based on historical patterns, as it would cause global price spikes and provoke US intervention.
India's Energy Imports: Current Sources and Challenges
- India imports around 90% of its crude oil, with significant reliance on Gulf countries.
- Current crude import distribution:
- 35% from Russia
- Over 40% from the Gulf
- Remaining from Africa, the US, and other sources
- Recent shifts in import patterns observed: Africa's share dropped from 12% in April to 5% in May 2024.
- India depends on the Gulf, particularly Qatar and UAE, for 54% of its LNG needs.
- Qatar plays a crucial role as one of the top LNG exporters globally.
- Lack of strategic gas storage in India poses a vulnerability, although strategic crude reserves exist.
- India's total storage capacity equates to 74 days of national consumption, with strategic reserves covering 9.5 days.
Global Energy Market Dynamics
- Any disruption in the Gulf could lead to a global energy supply crunch and price spikes.
- The global LNG market is less flexible than the oil market, with limited alternative supplies.
- The 2022 energy crisis highlighted vulnerabilities when a Gazprom unit defaulted on LNG supply to India's GAIL.
