After IOC, HPCL buys 2 million barrels Russian crude oil

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 USD 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.

Explained: Why India and Russia are exploring alternative payment channels to continue trade

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.

With imports making up for 85 percent of its oil needs, the recent spike in international oil prices have hurt it badly and it is now looking to cut spiralling energy bill through purchases from anywhere it can get at cheaper rates. Oil Minister Hardeep Singh Puri on Monday told Rajya Sabha that the country will evaluate the Russian offer to sell crude oil at discounted prices after considering aspects such as insurance and freight required to move the fuel from the non-traditional supplier.

"Let me again reiterate that in a situation like the one characterised by the pandemic in the last two years and in the last few weeks by a war or a military action taking place between Russia and Ukraine, the government will explore all options which are available," he had said. The minister said he has had discussions with the Russian government officials.