After Indian Oil, HPCL buys 2 mn barrels of Russian crude
New Delhi: After Indian Oil Corporation (IOC), Hindustan Petroleum Corporation Ltd (HPCL) has bought two million barrels of Russian crude oil as Indian refiners stepped up efforts to secure Russian oil available at deep discounts.
Just like IOC, HPCL also bought Russian Urals crude through European trader Vitol, sources with knowledge of the development said. Separately, Mangalore Refinery and Petrochemicals Ltd (MRPL) has floated a tender seeking one million barrels of similar crude oil.
Western sanctions on Russia over its invasion of Ukraine has prompted many companies and countries to shun its oil. This has led to Russian crude being available in the market at deep discounts. To capture the opportunity, Indian refiners are floating tenders to buy such discounted oil. The tenders are mostly won by traders, who would have stocked inventories of the cheap Russian oil.
The sources said IOC, the nation's top oil firm, late last week bought three million barrels of Urals through Vitol for May delivery at a discount of $20-25 a barrel to dated Brent.
HPCL this week made the rare purchase of two million barrels of Urals crude for loading in May, they said.
Meanwhile, Reliance Industries Ltd, operator of the world's biggest refining complex, may avoid buying Russian fuel as it has a huge exposure in the US and the sanctions against Moscow may impact its business.
Since 2020, IOC has had a term or fixed volume deal to buy crude oil from Russia's Rosneft. But, it rarely imported volumes under the term deal as the cost of transporting the oil from Russia made it uneconomical.
But, with discounts of $20-25 per barrel have turned the tide in favour of Russian crude and Indian refiners are lapping it up, the sources said.
MRPL, which just like HPCL is also a subsidiary of state-owned Oil and Natural Gas Corporation (ONGC), is also seeking one million barrels of such crude for the end of May loading, they said.
The refiners are buying Russian crude on a delivered basis to avoid any complications that sanctions may lead to in arranging shipping and insurance.
The sources said the trade with Russia is being settled through in dollars as the international payment mechanism has so far been kept out of the western sanctions ambit.
Also, unlike the sanctions the US imposed on Iran over its controversial nuclear programme, oil and energy trade with Russia has not been banned.
This essentially means that any country or company was free to buy oil and other energy commodities from Russia and use the international payment systems to settle the trade.
This wasn't the case with Iran, which was cut off from the international money and security transfer system, SWIFT. Also, companies or entities investing or buying oil from Iran were sanctioned.
IOC had in February 2020 signed a deal with Rosneft Oil Company to import up to two million tonnes of oil via the Black Sea port of Novorossiysk. In 2021, the deal envisaged supply of up to 1.7 million tonnes of crude oil but IOC bought just on parcel or shipload as the cost of transporting the oil made it uneconomical. In December 2021, it renewed the deal to buy up to two million tonnes of crude oil in 2022 from Rosneft.
India has tied up supplies from Russia to the US in a bid to diversify its oil import basket, cutting reliance on the Middle East to meet its oil needs.