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In a first, IOC to buy crude from US in 2-million-barrel deal

The company will buy more crude from the US if the market conditions remain favourable

Press Trust of India  |  New Delhi 

Indian Oil Corporation, IOCL, IOC
Indian Oil Corporation logo outside a fuel station in New Delhi. Photo: Reuters

India, the world's third-largest oil importer, has sealed a first deal to import crude oil from the US and the shipment is expected to touch Indian shores in October.

The deal, by state-owned (IOC), comes within weeks of Prime Minister Modi's visit to the US when President Donald Trump talked of his country looking to export more to

"We have bought 2 million barrels of crude oil from North America comprising 1.6 million barrels of US Mars crude and 400,000 barrels of Western Canadian Select," Director (Finance) A K Sharma told PTI here.

US Mars is a heavy, high-sulphur grade which will be processed at IOC's newest refinery at Paradip in Odisha.

"Given the current international oil markets where the differential between Brent (the benchmark crude or marker crude that serves as a reference price for buyers in western world) and (which serves as a benchmark for countries in the east) has narrowed.

"Even after including the shipping cost, buying US crude proved to be very cost competitive to us and so we bought one very large crude carrier (VLCC) cargo through a tender from the spot (or current) market," he said.

Sharma said the company will buy more crude from the US if the market conditions remain favourable for such purchases.

The move has already led to more purchases by other Indian refiners. State-owned Bharat Petroleum Corp Ltd (BPCL) too tendered to buy one million barrels of crude either for loading on August 16-September 5 or delivery on Septeber 26- October 15.

But for importing crude from the US, had to take special permission from the shipping ministry.

"Indian government policy provides for purchases of crude oil to be made on condition that the shipping will be done by the Indian carriers (the buyer arranging for ships to ferry the oil).

"However, in case of US, this was not possible as VLCCs can't load on US ports and crude has to be first loaded on small ships and at high sea the same is put on a VLCC," he said.

So, obtained permission to buy the cargo on a delivered basis where the seller arranges for the ships.

"Every time we decide to buy US oil, we will have to take this permission," he said adding the cargo contracted will be delivered at Paradip refinery in the first week of October.

Indian refiners are joining their Asian counterparts to diversify their crude slate following the narrowing of the spreads against West Texas Intermediate (WTI) and Brent prices in the wake of OPEC/non-OPEC production cut deal.

Sharma said that is looking at five to six grades of US crude, including Mars crude, for future purchases.

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Mon, July 10 2017. 16:53 IST