India Explores Options to Buy More Russian Oil

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Oil Minister Hardeep Puri told parliament on Monday that India has been looking into the possibility of importing more crude oil from Russia. However, the country's refiners have expressed wariness about the idea.

Puri said India has been talking to Russia about buying more of its crude, including details such as volumes, insurance, shipping and payments.

“The government will explore all options which are available,” he said in response to a question from a legislator about whether Russia had offered crude to India at discounted prices.

India is the world’s third-largest importer of crude oil after China and the US. It imported 4.2 million barrels per day in 2021. That was up from 4.0 million b/d in 2020, but down from 4.5 million b/d in 2019.

India typically imports only small volumes from Russia, but as Moscow faces a backlash over its invasion of Ukraine, Russian crude has been offered at deep discounts to buyers who are still willing to take it.

The government controls several of India's largest refining companies, but executives have shown little enthusiasm so far for taking more Russian oil, citing logistical issues and risks as a result of sanctions imposed by the US and other countries.

Russia said on Friday saying that Puri and Russia’s Deputy Prime Minister Alexander Novak had spoken by telephone, with Novak offering more crude to India and inviting its companies to increase their investment in Russia’s oil and gas sector.

Indian officials told reporters in New Delhi that the two countries are working on a system of payments that would use the the ruble and the rupee. This would avoid the US dollar and potentially limit risks associated with financial sanctions.

Proximity and Scale

Executives at Indian Oil Corp. have said the company last lifted Russian crude before the Feb. 24 invasion of Ukraine and that it has no plans to buy any more until issues related to payments and sanctions are addressed.

However, Reuters reported on Monday that the company had bought 3 million barrels of Russia’s Urals crude from trader Vitol for delivery in May.

In December Indian Oil signed a deal with Russian oil giant Rosneft to supply a relatively modest 2 million tons per year (40,000 b/d) of crude oil in 2022.

Indian Oil executives have said the company prefers to buy cargoes carried by supertankers with a capacity of around 2 million bbl to reap economies of scale, but that a lack of such vessels prevents it from using them to import Russian crude.

Furthermore, crude from Russia takes over a month to reach India, which can add to risks during periods of price volatility.

About 60% of India’s crude imports are sourced from the Middle East, which is much closer.

Indian refiners are also unclear about how they could pay for Russian oil without exposing themselves to penalties for breaching sanctions.

“Due to the challenges, the deep discounts offered by Russia do not make it any more attractive for us,” said one executive.

Oil Demand, Oil Trade, Refining
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