Indian Oil Corporation has become the first Indian refiner to buy US equity oil — a third-country company’s share of output proportionate to its stake in a field — under term contract as part of its plan to substitute Iranian supplies that were stopped since this month under threat of US sanctions. Company chairman Sanjiv Singh on Friday said the term contracts have been signed with Equinor (formerly Statoil) of Norway and Sontrach of Algeria for a total volume of 4.6 million tonne in 2019 calendar year. According to US Energy Information Agency, both companies have stake in oil and gas fields in the US. Indian Oil director (finance) A K Sharma said the company had bought 9 million tonne of Iranian crude in 2018-19. The contracts with Equinor and Sonatrach will cover 50% of the 9 million tonne of crude the company had imported from Iran in 2018-19.
“We are looking at alternate sources that are cost-effective for us. No single country can make up for the volumes lost. That is why we have diversified our sourcing and we have robust supply chain to make up for all of the Iranian oil,”. To this end, Sharma said the company has exercised the provision of ‘optional volumes’, which allows it to buy additional quantities beyond the contracted volume, in its term with Saudi Arabia. This will yield two million barrels of additional oil in the six-month period beginning July. Indian Oil has an annual contract for 5.6 million tonne of crude from Saudi Arabia. Indian Oil’s latest term deals for US oil indicates a deepening effect of US hardline policy against Iran, which appears to be driving Tehran’s major customers into Washington’s lap. India has been the second biggest buyer of Iranian oil after China, buying 24 million tonne of crude in 2018-19, or a tenth of its total imports. Indian refiners stopped importing crude oil from Iran this month after Washington refused to extend waiver on sanctions against Iranian oil sales.
Indian Oil became the the first Indian refiner to test the US waters by importing a shipment of US oil, bought from the spot market, in October 2017 as Washington began hardening its stand against Tehran. In addition to the US contracts, the company can also operationalise optional volumes in its contracts with Kuwait, Mexico to substitute shipments from Iran.