IOC to buy Guyanese crude as India doubles up on cutting Opec dependence

Indian Oil Corporation (IOC) will buy a consignment of Guyanese crude oil in a push to diversify the sources.

According to oil ministry officials, this deal is at competitive rates and is in line with the strategy to have multiple sources of crude oil for Indian refiners.

“We are no longer constrained by West Asian crude oil grades. Our refineries today can process around 200 grades of crude oil. With improvements in global shipping value chains, we are able to access more sources. This approach also helps mitigate any unwarranted surges or premiums levied on crude oil,” the official told Business Standard.

India recently doubled efforts to diversify the regions from where it buys crude oil. These steps were taken after Saudi energy minister Abdulaziz bin Salman snubbed India’s suggestions to stop production cuts and firm up crude oil prices in March 2021.

Reacting to this stand, minister for petroleum and natural gas Dharmendra Pradhan said India was saddened by this approach. But he added that the country was on the lookout for alternatives to the Organization of Petroleum Exporting Countries (OPEC) bloc. 

He also talked about Russia and Kazakhstan that were increasing oil production. IOC’s purchase of Guyanese crude oil will make it the second such buy by an Indian refiner, the first being HPCL-Mittal Energy (HMEL) that bought a one-million-barrel cargo of Guyana’s Liza light sweet crude.

“Guyana is on path to becoming a major oil producer. It is a very small country with a significant population of people of Indian origin. The large oil discovery over there is going to change the fortunes of that country,” the oil ministry official said.

India imports 1,656.58 million barrels (roughly 226 million tonnes, or mt) of crude oil every year. This comprises around 84 per cent of India’s total crude oil requirement.

The official said India is also eying Russian crude and is in talks for a way to bring the crude into the country.

This has been in the works for a while, and in February 2020, IOC had signed the first term contract to import crude oil. The contract allowed import of up to 2 mt of Urals grade crude oil from Russia’s Rosneft. One of the options on the table was a swap deal to avoid the journey of crude by ship from Russia to India.

Elaborating on the prospects of Russian crude for India, the official said, “Most of the current Russian crude oil and gas production is tied up for European markets that it supplies through pipelines. That demand is saturating soon and Indian demand is bound to grow. The Russians are aware of this and they, too, want to have a supply chain in place at the earliest. While a swap deal has not been signed yet, both sides are eager and we may expect some more action soon.”

India’s crude oil imports have dipped in fiscal year 2020-2021 compared to last year. This fall is largely attributed to a crash in fuel consumption that has closed at a four-year low. The country’s diesel consumption stood at 72.72 mt in fiscal 2020-2021, down from 82.60 mt a year ago. This reflects slowing down of the economy during the pandemic lockdowns.

According to commerce ministry data, India’s total crude oil import from April 2020 to February 2021 stood at 171.95 mt. This is down from 200 mt reported during April 2019 to February 2020.

Iraq, Saudi Arabia and the United Arab Emirates continue to remain the largest crude oil suppliers to India. The US has inched above Venezuela, that is no longer in the top 10 list of India’s oil suppliers. This is because US sanctions made trade with Venezuela unfeasible for most Indian companies that did not want to be locked out of the American financial markets.