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With most heavy crude grades suffering supply disruptions, Western Canadian Select (WCS) is being explored as a key alternative for Indian importers, refiners and Petroleum Ministry officials said on Friday.
Other heavy grades from Russia, Venezuela, and Iraq are currently suffering supply disruptions. Given the large number of complex refineries in India that can process these grades, the decision by the US to impose tariffs on Canadian crude has given India a window of opportunity to establish term contracts, officials said.
"Canada can be a stable source of large volumes of crude for India, at a time when we are diversifying the supply basket. The 30-day shipping run from Western Canada's Pacific coast to India, would be slightly longer than that for Russian crude, which currently takes up to 25 days," an official said.
Canadian crude is available at a discount of $5-15 per barrel," he added. This is since Canada is keen to find buyers after Trump put a 10 percent tariff on Canadian oil earlier this year. On Thursday, he placed a hefty 35 percent tariff on all imports from the country.
Generally defined by an API gravity of less than 28, and higher sulphur content, heavy crudes are much thicker and denser, making them difficult to pump, transport and refine. But many Indian refineries have been specifically designed to process these, since these grades have often been available at discounts.
Iraq's Basra Heavy, Saudi Arabia's Arab Heavy and Upper Zakum from the United Arab Emirates have historically featured in the extensive list of heavy grades of crude imported by Indian refiners. In the past few years, the supply of these crude grades have periodically come under threat from geopolitical flare ups in the Middle East, the latest of which played out between Israel and Iran when traffic in the Strait of Hormuz was expected to be blocked.
The medium-sour Russian Urals blend has become a mainstay of Indian crude imports since the conflict in Ukraine began nearly three and a half years back. On July 9, US President Donald Trump publicly backed a proposed legislation that includes a provision of sanctioning countries such as India and China with 500 per cent tariffs for purchasing Russian energy.
Canada has a disproportionate dependence on the US for selling its crude oil.
Around 60 per cent of Canadian crude is shipped via pipelines into the Midwest and Mid-Atlantic regions of the US, while approximately 25 per cent reaches Texas through pipelines.
The remaining quantities are transported via tankers, including shallow-water shipments. Approximately 5 million barrels per day of Canadian heavy crude — primarily from Alberta — flows into the US through major pipelines like the Enbridge system and the Keystone pipeline.
"The Trans Mountain Pipeline coming online has increased Canada's export capacity for heavy crude from Alberta to the Pacific coast by up to 1 million barrels per day. Canada is also building more deep-water port capacity to handle Very Large Crude Carriers (VLCCs). This significantly improves their ability to diversify exports beyond the US," Atanu Mukherjee, President and CEO of Dastur Energy said.
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"India leveraged global supply chain disruptions to strengthen its position in refined products, both domestically and in export markets. Volatility in global crude markets — driven by geopolitical tensions, sanctions, or trade disruptions — actually creates favourable conditions for India," Mukherjee said.
Meanwhile, refiners hope that Washington DC will not be miffed at the decision since any purchases from Canada will be beyond India's commitments to buy US shale oil, sources said. They added that major private and public sector refiners from India have already visited Canada in the past few months.
"Canadian crude has also attracted Chinese interest, who also want to tie up large volumes through term contracts now that Iranian oil flows have been impacted," a source added.
