India received its first shipment of US crude oil when a very large crude carrier (VLCC) docked at Paradip port in Odisha on Monday.
Indian Oil Corp (IOC) in early July booked the first US cargo, opening floodgates that saw other state-owned refiners including Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) rushing to buy US crude oil. They placed orders for over 2 million barrels.
MaryKay Loss Carlson, the Chargé d’Affaires at US Embassy in Delhi said, “this event marks significant milestone in growing partnership between US and India”.
The Indian government has encouraged state-controlled refiners to buy US and Canadian crude from the US Gulf coast as it looks at cheaper alternatives that have emerged due to global supply glut.
A US energy official had on Friday stated that IOC and BPCL have committed to buy eight shiploads of US oil by March 2018.
“We have booked a second cargo as well for delivery at Vadinar in Gujarat in about a month from now,” Singh said. “We expect to buy one shipload of US crude every month through tenders.”
India, the world’s third-largest oil importer, joins Asian countries like South Korea, Japan and China to buy US crude after production cuts by oil cartel OPEC drove up prices of Middle East heavy-sour crude, or grades with a high sulphur content.
Buying US crude has become attractive for Indian refiners after the differential between Brent (the benchmark crude or marker crude that serves as a reference price for buyers in western world) and Dubai (which serves as a benchmark for countries in the east) has narrowed.
Even after including the shipping cost, buying US crude is cost competitive to Indian refiners, an industry official said.
The IOC deal cames within weeks of Prime Minister Narendra Modi’s June-end visit to the US when President Donald Trump talked of his country looking to export more energy products to India.
To encourage US crude purchases, the government has allowed refiners to use a foreign rather than an Indian-owned vessel for the purchase. Indian refiners typically have to use domestic vessels for their crude imports.
(The article has been edited for length)
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