India’s state-refiners, who account for about two-thirds of the country’s oil processing capacity, are seeking more flexibility in import contracts as they look to tap new sources of supply flushed out by the US shale boom.
India, the world’s fourth-biggest oil consumer with refining capacity of 4.3 million barrels per day, imports 80 percent of its crude needs and has traditionally relied on the Middle East for heavy oil supplies and West Africa for lighter, sweet crude, Reuters reported. A push to include both fixed and optional volumes in contracts would allow refiners to fill some of their needs from cheaper spot cargoes now on offer from suppliers such as Algeria, Latin America and Canada as US demand has dwindled.
“It’s a buyer’s market now,” said Sanjiv Singh, head of refineries at Indian Oil Corp, the country’s biggest refiner.
As refiners start to negotiate annual term contracts for the coming financial year starting in April, IOC is looking to build in both firm and optional volumes, its head of finance A.K. Sharma told Reuters.
A contract would include a fixed amount, as well an optional amount that the buyer could forgo if cheaper spot supplies appear on the market.
“We will be looking for flexibility from most of the term crude suppliers so that whenever some ‘opportunity crude’ is available in the market we can directly tap it,” Sharma said. Brent’s premium to Dubai, currently near its lowest since July 2010 due to a glut of crude in the Atlantic Basin, has made crude from the North Sea, Africa and Latin America more competitive in Asia.
“We have more bargaining power,” said an official at Bharat Petroleum Corp Ltd., who is not authorized to speak to media. “Crude sources are far more than before and all of them are reaching Asia because there is no other market for this surplus crude.”
