India’s state-owned oil refiners are facing challenges in securing the volume of Russian crude they need to meet their demands, according to industry sources familiar with the matter.
Executives from Indian Oil Corp., Bharat Petroleum Corp., and Hindustan Petroleum Corp. have reported difficulties in obtaining sufficient Russian crude for January loading in the spot market. Speaking on condition of anonymity due to the sensitivity of the matter, they highlighted that the lower availability could be attributed to factors such as a long-term contract between Rosneft PJSC and private refiner Reliance Industries Ltd., as well as higher processing rates in Russia, reducing crude exports.
The shift toward long-term contracts with Russian producers, rather than relying solely on spot market purchases, seems to be a strategy being favored by Moscow. Indian state refiners currently rely entirely on the spot market for Russian crude, while private firms use a combination of spot and long-term agreements.
Alternative sources from the Middle East and Africa are available, but these options come at a higher cost, which could impact margins. Government refiners have been purchasing approximately 1 million barrels a day of Russian crude this year, a significant increase from near-zero imports prior to the Ukraine conflict.
Moscow has been urging Indian firms to secure long-term contracts directly with state-run firms like Rosneft and Gazprom Neft. While New Delhi supports this approach, encouraging both state and private refiners such as Reliance to negotiate jointly for favorable terms, some state-owned companies have been hesitant to accept the pricing and conditions offered.
In December, reports emerged that Reliance had independently signed a 10-year deal with Rosneft for 500,000 barrels per day, a move that has weakened the collective bargaining power of Indian state refiners. This deal is seen as likely reducing the volume of spot market offerings, contributing to the current scarcity of crude supplies.
Indian Oil, BPCL, and HPCL have yet to comment on the issue, with Indian Oil having previously held a term contract with Russia for 490,000 barrels per day for the fiscal year ending March.
The ongoing struggle to balance the need for Russian crude with more strategic long-term agreements underscores the complexities facing India’s energy sector in a rapidly evolving geopolitical landscape.