Oil lines blocked, India eyes options

India’s crude oil refiners are scouting for new supply sources after Iran’s historic announcement of the closure of Strait of Hormuz, three people aware of the development said.

- Rituraj Baruah, Dhirendra Kumar & Subhash Narayan

The Union petroleum ministry is consulting with the refiners, taking stock of oil stocks and exploring possible alternatives in Africa and South America, even as the global oil cartel Opec+ has decided to boost production.

The assassination of Iran's supreme leader Ali Khamenei on Saturday during joint strikes by the US and Israel and Iran’s retaliatory attacks across the US military and air bases in the Gulf and civilian areas are expected to hit the global trade in oil. Freight rates are expected to soar, even as cargo vessels are stuck at both sides of the Strait.

In FY25, nearly half of India’s crude oil imports and 54% of LNG imports were routed through the Strait of Hormuz. Even during previous periods of strife in West Asia, such as the Iran-Iraq war, the vital supply route had remained open. Its closure is a setback for New Delhi, which was beginning to veer towards West Asian supplies.

“The petroleum ministry is taking continuous stock of the energy supply scenario along with the refiners. They are looking at ways to ensure that supplies are not interrupted. Saudi Arabia and Iraq have emerged as the major suppliers of late, and the situation is concerning. Import from alternative sources may pick up. Even if supplies are ensured, prices are sure to rise and will impact the cost and margins of the refineries,” said one of the three people mentioned above.