Indian Oil Corporation Signs $1.5 Billion Deal To Buy U.S Crude Oil
In a first-ever deal by an Indian company, Indian Oil Corporation Ltd. said it has signed an annual deal worth $1.5 billion to import three million tonnes of crude oil in the fiscal year beginning April 1, 2019.
This is the first time any Indian refiner has signed an annual contract since 2017 when the country began importing crude oil from the U.S.
"IOC has finalised a term contract for import of up to three million tonnes of crude oil of U.S. origin grades as a part of its strategy to diversify term crude sources," the company said in a statement.
The contract was finalised on Feb. 15.
The term contract follows IOC signing up to buy crude oil from the U.S. through a term-tender deal in August last year. It had at that time bought about six million barrels of the U.S. crude oil under a single tender for delivery between November 2018 and January 2019.
"The approximate value of the contract works out to $1.5 billion," the IOC statement said. "This is the first term contract finalised by any Indian PSU oil company for import of U.S. origin crude oil grades."
Prior to this, IOC and other state-owned oil firms bought crude oil from the U.S. on a spot or current tender basis which comprises one shipload of oil.
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They cannot enter into term or fixed quantity deals without a board approval as the present policy does not allow them to enter into such contracts with non-state foreign firms.
To overcome this, IOC last year floated a tender to buy three shiploads of the U.S. crude instead of the usual practice of one cargo, an official said, adding that now the board has authorised it to buy crude oil on a term basis.
India first imported the U.S. crude oil in October 2017, and since then oil firms have been buying oil from that country on a tender basis.
The increased purchase from the U.S.-based oil companies has come within months of re-impostion of economic sanctions against Iran—India's third-biggest supplier of oil. The sanctions, which came into force from Nov. 4, 2018, have led to India cutting oil purchases from Iran.