• EMAIL

    info@cci-logistics.com

  • CALL

    +91-022-6781 8500

26

Nov

2018

Indian oil refiners look at ‘consortium’ approach to buy crude from United States

By, ccilogistics Uncategorised Comments: no comments

Indian refiners, both state-owned and private, are weighing a “consortium” arrangement for buying crude from the United States to secure concessions and save on freight costs, at least two people familiar with the plan said.

“There was a lot of discussions on energy. This is a new sector in Indo-US relations. We have begun importing oil and gas from the US worth about $4 billion this year. We expressed our readiness to import more oil and gas from the US as a way of expanding our trade,” India’s Foreign Secretary Vijay Gokhale said after Prime Minister Narendra Modi and US Vice President Mike Pence met on the sidelines of the East Asia Summit held in Singapore a few days ago.

“Today, US is all private oil producers. So, can there be a consortium we can deal with in totality so that we can get the best terms,” an official with one of the state-run oil refiners said, asking not to be named.

“Suppose all of us agree that we want to bring 20 million tonnes of US crude to India and if we are able to do it together, we will be able to share the freight or if we are able to engage with a consortium of US suppliers on a long-term, then we may be able to get more concessions. Suppliers and refiners may then be looking at the logistics of shipping to reduce the freight costs. We have to work on this,” an executive with a private oil refining firm said. He too declined to be named because the discussions are confidential.

State-owned refiners’ bid to buy more US crude got a bog boost with the government permitting them to buy as much as 35 per cent of their annual imports on a cost, insurance and freight (c.i.f) basis that puts the onus of shipping the cargo on overseas suppliers.

The approval partially amended a government policy that mandated oil PSUs to import their entire crude on freight-on-board (f.o.b) basis wherein the Indian buyer makes the shipping arrangements. According to the policy, state-run oil firms could also buy on c.i.f basis but only after taking approval from the shipping ministry on individual purchases.

“The approval to source 35 per cent of our yearly requirements on c.i.f basis will take care of crude imports from the US,” said an official looking after shipping at one of the state-run oil companies. “We have that much more flexibility. Now, it will be easier to do a c.i.f shipment from the US because we don’t need to take clearance for each shipment. Earlier, we had to put in a request to the shipping ministry and wait. Sometimes, we have to take quick decisions, we can’t wait for the ministry to give clearance,” he said.

Indian refiners, though, could face hurdles in buying large quantities from the US as the port infrastructure there is insufficient to cater to huge exports including handling bigger ships.

“US ports cannot accommodate very large crude carriers or oil super tankers that brings economies of scale because they never developed these facilities. It was never meant for US oil exports, which re-started only in January 2016 after a 40-year ban. They are working on improving port infrastructure and pipelines,” an oil industry official said.

Leave a Reply

Your email address will not be published. Required fields are marked *


LATEST POSTS
TWITTER FEEDS