India’s state-run oil refiners are showing reluctance towards contracted Russian crude supply due to increased difficulties arising from tighter enforcement of US sanctions.
Indian Oil Corp, the largest state-owned refiner, is likely to decrease the volume of crude received under term supply agreements. Meanwhile, Bharat Petroleum Corp and Hindustan Petroleum Corp have opted not to commit to firm purchases of contracted oil for the next financial year, according to six sources familiar with the matter who requested anonymity due to the sensitivity of the information.
These refiners had been in discussions with Russia’s Rosneft PJSC to secure approximately 500,000 barrels per day, which amounts to one-third of India’s daily imports. The aim was to reduce reliance on spot purchases, which can often be more expensive. However, the lukewarm response from Indian refiners was partly due to concerns over a proposed contract clause addressing supply disruptions.
While Indian Oil already has an existing long-term deal with Rosneft, this would have marked the first contracted supply arrangement for Hindustan Petroleum Corp and Bharat Petroleum Corp. Despite Russia remaining India’s largest crude supplier, there are indications that refiners are diversifying their sources, with increased purchases from producers such as Saudi Arabia.
Additionally, state-owned companies are exploring contracted crude from the Middle East and West Africa. However, such deals are expected to be pricier than Russian oil.
Although state refiners are anticipated to fulfill 40% of their crude requirements through spot deals in the next financial year, significant volumes of oil from Russia could still be imported into India.
Last year, Indian Oil entered into agreements with Rosneft, Sakhalin-1 LLC, and Gazprom Neft PJSC for a total of 24.5 million tons, or 492,000 barrels per day, for the year ending March 31. This marks a significant increase compared to the pre-war contract with Rosneft in 2021, which was for 2 million tons over a year.
