The UAE's departure from the Organization of the Petroleum Exporting Countries (OPEC) could prove significantly advantageous for India, which is seeking to secure its long-term energy requirements amid recent supply disruptions caused by the military conflict in West Asia, according to officials familiar with the matter.
Opportunity for Lower Oil Prices
Abu Dhabi has decided to ramp up oil production without being constrained by OPEC quotas. This move may translate into an opportunity for India to source crude oil at lower prices from a friendly and geographically closer supplier. India imports nearly 90% of its estimated daily crude oil consumption of 5.8 million barrels. A senior government official indicated that this could allow India to enter into a long-term oil trade agreement with the UAE without being bound by OPEC's production restrictions on member nations.
“It will be beneficial given the logistical advantages and the higher quality of crude exported from the region,” the official said. “Given the strategic partnership that India has with the UAE, there could also be negotiations on crude prices.”
Official Reaction
When asked for a reaction on the impact of the UAE exiting OPEC on India, Sujata Sharma, joint secretary in the petroleum ministry, stated that it was too early to comment.
UAE's Role in OPEC
The UAE is the third-largest oil producer among OPEC members, after Saudi Arabia and Iraq, contributing nearly 13% of the group's total production. While the UAE's oil production capacity is estimated at 4.2 to 4.5 million barrels per day (mbd), it currently produces about 3 to 3.2 mbd and plans to increase output to 5 mbd by 2027.
Logistical and Cost Advantages
“Since the UAE is closer to India than the US, Russia, and African nations, higher purchases will mean lower freight charges,” the official added, noting that this would also reduce India's import bill.
