As part of the two million barrels contracted by India, the first shipment of US crude oil arrived here at Paradip Port in Odisha on Monday. The shipment follows recent commitments to US oil purchases by IndianOil (IOC) and Bharat Petroleum (BPCL), both of which have placed orders for over 2 million barrels from the US. As per a report, the US crude oil is $2 per barrel cheaper to India, compared with the most-imported Dubai crude. The shipment at Paradip was met by US consul general to Hyderabad Katherine Hadda, joint secretary for international cooperation in the petroleum ministry Sunjay Sudhir, and joint secretary (Americas division) in the ministry of external affairs (MEA) Munu Mahawar. While the US crude oil shipments to India have the potential to boost bilateral trade by up to $2 billion, this is one of the first shipments to India since the US stopped oil exports in 1975.
According to a US embassy statement, MaryKay Carlson, chargé d’affaires at the US embassy in New Delhi said, “This event marks a significant milestone in the growing partnership. The US and India are elevating our cooperation in the field of energy, including plans for cleaner fossil fuels, renewables, nuclear, and cutting-edge storage and energy efficiency technologies. We look forward to working together on further sales of US crude and exploring opportunities to expand the role of natural gas in India.”
During their June 26 meeting in Washington, US President Donald Trump and Prime Minister Narendra Modi committed to expanding and elevating bilateral energy cooperation through a strategic energy partnership. Energy trade between the nations is set to expand as India is taking steps to enhance the use of natural gas in its energy mix. India is also expanding its infrastructure for piped natural gas and liquefied natural gas used in cooking.
Calling it a new chapter in the history of Indo-US trade, particularly in the oil and gas sector, in a statement released by the MEA, Sudhir said the inclusion of the US as a source for crude oil imports by India’s largest refiner will go a long way in mitigating the risks arising out of geopolitical disruptions. He expressed hope that the new arrangement would also usher in price stability and energy security for India. MT New Prosperity, a very large crude carrier (VLCC), of capacity 2 million barrels of crude, left US Gulf Coast on August 19.
IndianOil will process the crude at its east coast-based refineries, located at Paradip, Haldia, Barauni and Bongaigaon. IndianOil, which became the first Indian public-sector refiner to source US crude, has placed a cumulative order of 3.9 million barrels from the US. BPCL and Hindustan Petroleum, India’s two other public-sector refiners, have also placed orders for about 2.95 million barrels and 1 million barrels, respectively, for their Kochi and Vizag refineries from the US.
The total volume of the crude currently contracted by Indian public-sector refineries is, therefore, 7.85 million barrels. The three refiners are sourcing sweet, sour and heavy crudes for their refineries which are equipped to handle complex mix of crude oils. Indian companies, both public and private, have made sizeable investments in US Shale assets with a total investment of approximately $5 billion.
Indian firms have also contracted LNG from the US and the first shipment is expected to be delivered to India in January 2018. Both India and the US are the world’s largest and third largest consumers of energy, respectively.