With the first shipment of crude in India, USA has become India’s latest oil supplier. Indian Oil Corporation’s purchase of 1.6 million barrels arrived at Paradip, Odisha which is a great step towards strengthening of US and Indian bilateral ties. During 1975, the US had stopped oil exports. This ban was lifted by former US President Barack Obama in 2015.
“IOC will process the crude at its refineries at Paradip, Haldia (in West Bengal), Barauni (in Bihar) and Bongaigaon (in Assam),” an IOC statement said. In fact, IOC is now the first public sector refiner to source US crude. It has also made cumulative order for 3.9 million barrels from US. Other state-owned refineries like Bharat Petroleum Corporation Ltd and Hindustan Petroleum Corporation Ltd have also placed orders for about 2.95 million barrels and 1 million barrels of US crude making it altogether 7.85 million barrels.
Sunjay Sudhir, the oil ministry’s joint secretary (international cooperation), Katherine B Hadda, the US consul general in Hyderabad, senior officials of the foreign ministry and IOC were present at the welcome ceremony for the first cargo arrived at Paradip in Odisha.
Indian companies, both public and private, have invested about $5 billion in US shale assets. They have also contracted 5.8 million tonnes per annum of liquefied natural gas from the US and the first shipment is expected to be delivered to India in January 2018. The second shipment is expected in a month’s time.
The US embassy, in its own statement, said, “During their June 26 meeting in Washington, President Trump and Prime Minister Modi committed to expanding and elevating bilateral energy cooperation through a strategic energy partnership.” The present US President Trump affirmed that the US continues to remove barriers to energy development and investment in the US and to US energy exports, so that more natural gas, clean coal, and renewable resources and technologies are available to fuel India’s economic growth and inclusive development.
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 from the US, half of it shale oil.
India, the world’s third-largest oil importer, joins Asian countries like South Korea, Japan and China, which have been buying US crude after production cuts by oil cartel OPEC drove up prices of West Asian heavy-sour crude, or grades with a high sulphur content.
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 the western world) and Dubai (a benchmark for countries in the east) narrowed.
Indian government has allowed refiners to use a foreign rather than an Indian owned vessel for the purchase to increase US crude purchases. Indian refiners typically have to use domestic vessels for their crude imports.