India is expected to deepen energy cooperation with Russia as several major western economies have continued to source Russian energy despite tough U.S. sanctions against Moscow’s rulers. An official confirmation in this regard came in the backdrop of reports that after the Indian Oil Corporation (IOC), the Hindustan Petroleum Corporation Ltd (HPCL) has bought two million barrels of Russian crude oil as Indian energy majors forge ahead with attempts to secure a part of Russian energy supply.
In response to a question on whether India would opt for Russian energy which is reportedly being offered at a “discount”, an informed source said, “We will take it.” The policy decision, it appears, is part of India’s plans to ensure energy security as the oil and gas market continues to witness volatility in the backdrop of European developments of the past few weeks. The official clarified that the energy cooperation with Russia will require some necessary adjustments in the financial front because of the challenges posed by the American sanctions.
Pragmatic approach
The comments from the senior official indicated the government has adopted a pragmatic approach in this matter and is likely to forge ahead. Already, like IOC, HPCL also bought Russian Urals crude via European energy trader Vitol, sources with knowledge of the exchange said. Another similar energy consignment is expected as the Mangalore Refinery and Petrochemicals Ltd (MRPL) has floated a tender, seeking one million barrels of same kind of crude oil.
The Indian orders for Russian crude oil are prompted by the fact that the recent Western sanctions have forced many countries to avoid Russian oil and gas. This has created an opportunity for some of the major energy importers like India who can source Russian crude from the market at special 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 lesser priced 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.
Huge exposure in U.S.
However, companies that are deeply engaged with the U.S. economy may not be able to purchase Russian crude. This is evident in the case of Reliance Industries Ltd, operator of the world’s biggest refining complex, which may avoid purchase of Russian energy as it has a huge exposure in the U.S. and the sanctions against Russia may hurt its business.
Earlier, an official of the Ministry of External Affairs said India was “exploring all possibilities” to ensure energy security. “We are a major oil importer and we continue to have necessity regarding oil and gas,” said Arindam Bagchi, official spokesperson of the Ministry of External Affairs. Russia was not among the top energy suppliers to India in the past, though there were signs in recent years of broadening collaboration on that front. Last year ONGC and IOC signed memoranda of understanding (MoUs) with Russian energy giant Gazprom.
(With inputs from PTI)
