India's state-owned oil refineries are reportedly hesitant to procure contracted supplies of Russian crude, with the previously flourishing trade encountering heightened challenges due to stricter enforcement of US sanctions. The largest state-owned refiner, Indian Oil Corp., is expected to scale back its intake of crude under term supply agreements, while Bharat Petroleum Corp. and Hindustan Petroleum Corp. have opted not to commit to receiving contracted oil in the upcoming fiscal year, according to a report by Bloomberg citing sources.
The trio of refiners had engaged in discussions with Russia's Rosneft PJSC to secure approximately 500,000 barrels per day, equivalent to a third of India's daily imports, aiming to diminish dependency on sporadic purchases that can frequently incur higher costs. However, the tepid reception towards a proposed contractual clause aimed at addressing supply disruptions further contributed to the cautious stance adopted by Indian refiners, states the report.
While Indian Oil has an established long-term agreement with Rosneft, securing contracted supply is a new venture for HPCL and BPCL.
While Russia remains India's largest supplier, there are indications that refiners are increasing purchases from alternative sources, such as Saudi Arabia. Additionally, state-owned companies are exploring contracted crude options from the Middle East and West Africa. However, these alternatives are anticipated to be pricier compared to Russian oil, as per the report.
State refiners are projected to fulfil 40 per cent of their crude requirements in the fiscal year starting April 1 through spot deals or one-off purchases. Consequently, substantial volumes of oil from Russia could continue to be imported into India, as indicated by the report.
In the last year, Indian Oil finalised a set of agreements with Rosneft, Sakhalin-1 LLC, and Gazprom Neft PJSC, securing a total of 24.5 million tons or 492,000 barrels per day until the year concluding on March 31, according to the report. This stands in stark contrast to the pre-war arrangement with Rosneft in 2021, which was only for 2 million tonnes over a year.