 "Indian oil giants, Brazil's Petrobras in talks for long-term crude supply")
Indian oil majors Indian Oil Corporation Ltd (IOCL), Hindustan Petroleum Corporation Ltd (HPCL), and Bharat Petroleum Corporation Ltd (BPCL) are in negotiation with Brazilian energy major Petroleo Brasileiro SA (Petrobras) to secure long-term crude oil supply contracts, according to a report by Mint. This move is part of India’s broader strategy to diversify its energy sources.
Officials from IOCL, HPCL, and BPCL visited Brazil in April to initiate talks with Petrobras on these lines. These discussions are aimed at securing guaranteed crude oil supplies for the long term. BPCL has already begun testing Brazilian crude in its refineries, and the final contracts are expected to be signed soon.
IndianOil had previously signed a long-term oil supply contract for 1.7 million metric tonnes per annum (mmtpa) and BPCL established a memorandum of understanding (MoU) with Petrobras in 2022 amid the Russia-Ukraine war. Additionally, BPCL has a stake in an ultra-deepwater hydrocarbon block in Brazil through its subsidiary, Bharat PetroResource Ltd.
Brazil’s role in India’s energy strategy
Brazil, currently not a major oil supplier to India, has been identified as a potential key player in India’s diversified energy strategy. In the financial year 2023-24, Brazil’s oil exports to India were valued at $1.46 billion, a small fraction of India’s total oil import bill of $139.85 billion. Despite this, Brazil’s growing oil production, which reached over 3.4 million barrels per day in 2023, presents a promising opportunity for India.
Consortium approach to crude oil negotiations
The three oil manufacturing companies are negotiating as a consortium, which may enhance their bargaining power, Mint noted. Although each company will sign separate contracts with Petrobras, the terms are expected to be largely similar, with only the quantity of oil varying. This collaborative approach may also ensure that Indian oil companies receive more favourable terms, as well as, credit lines.
Importance of diversification of India’s oil imports
India’s push to diversify its oil imports comes amid rising crude prices due to geopolitical tensions in West Asia and Ukraine, and supply uncertainties in the Strait of Hormuz. Traditionally, India has relied heavily on West Asian countries for its oil due to logistical advantages. However, recent output cuts by the OPEC+ group have highlighted the need for diversification.
Petrobras diversification and expansion plans
Meanwhile state-run Petrobras has been actively seeking international partnerships since last year in various sectors and has faced its share of disruption this year. In March, Jean Paul Prates outlined Petrobras’ ambitious investment plans to the Financial Times, emphasising a $100 billion-plus focus on offshore oil exploration and production. He stated that Petrobras aims to be one of the last remaining oil producers globally.
Meanwhile, newly appointed CEO Magda Chambriard in June voiced strong support for oil and gas exploration in Brazil's Equatorial Margin, indicating big development for the state-run energy firm.