The Indian government has asked its state-owned oil refiners to consider buying more crude oil from America and Venezuela. This step has come at a time when the US administration claimed that under the new trade deal, India has agreed to stop Russian oil imports. However, India has not publicly confirmed a complete shutdown of Russian oil and has said that its priority is energy security and diversification of sources of supply.
According to sources, refineries have been asked to give preference to American oil grades when they issue tenders in the spot market. Venezuelan oil will be purchased through personal negotiations with traders. The government wants to increase import options so that dependence on any one country is reduced.
However, the purchase of American and Venezuelan oil has its limits. American crude oil is generally light and sweet, whereas many of India's refineries are built to process medium or heavy grade oil. In such a situation, American oil is not suitable for every refinery.
Apart from this, due to the long sea distance in bringing oil from America, the freight cost is high, which increases the cost. India also has relatively nearby and cheaper options like West Africa and Kazakhstan.
According to sources, Indian refiners can take about 20 million tonnes of American oil annually i.e. about 4 lakh barrels per day, which will be more than last year. Recently, Indian Oil, Bharat Petroleum and Hindustan Petroleum have purchased about 40 lakh barrels of oil from Venezuela. It is being told that state refineries can process only a limited amount of Venezuelan heavy and high sulfur oil every month.
Overall, India is trying to strike a balance between its energy needs and diplomatic balance. In the times to come, it will be important to see how India balances its oil import strategy amid global politics and price fluctuations.
