Indian Oil Corp (IOC) in early July booked the first US cargo, opening floodgates for others to come.
New Delhi: India will on Monday receive its first ever shipment of US crude oil when a very large crude carrier (VLCC) docks at Paradip port in Odisha.
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) rush to buy US crude oil.
"The ship carrying 1.6 million barrels of US crude will reach Paradip sometime around midnight tonight or early tomorrow morning," IOC Chairman Sanjiv Singh told PTI here.
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."
While in the first purchase IOC is importing 1.6 million barrels of high sulphur crude Mars from the US and 400,000 barrels of Western Canadian Select oil, in the second it has bought 1.9 million barrels of US crude, half of it being shale oil, he said.
"We have bought 950,000 barrels of light sweet Eagle Ford shale oil and 950,000 barrels of heavy sour Mars crude in the second tender," he said.
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.
BPCL has bought two of the US cargoes -- 500,000 barrels each of Mars and Poseidon varieties of medium-to-high-sulphur crude for delivery to its Kochi refinery between September 26 and 15 October and 1 million barrels of US WTI Midland sweet crude for delivery in October.
HPCL too has made its first purchase of the US oil, buying 1 million barrels of Mars crude from trading firm Trafigura for delivery in December at Visakhapatnam in Andhra Pradesh.
Bharat-Oman Refineries Ltd (BORL) has also bought 1 million barrels of Mars crude from Trafigura for November 16- 25 arrival.
BORL is a 50:50 joint venture between BPCL and Oman Oil, which operates a 6 million tonnes a year refinery at Bina in Madhya Pradesh.
A VLCC can carry up to 2 million barrels of oil.