The first shipment of 1.6 million barrels, bought by Indian Oil Corporation from the US, has been received at Paradip Port today, following the docking of a very large crude carrier (VLCC). A VLCC can carry up to 2 million barrels of oil.

Indian Oil Corportion (IOC) had, in early July, booked the first US cargo, opening floodgates that saw other state-owned refiners including Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) rush to buy US crude oil.

The Indian government, as per a PTI report, has encouraged state-controlled refiners to buy US and Canadian crude from the US Gulf coast as it explores cheaper alternatives that have emerged due to a global supply glut.

A US energy official had on September 30 said that IOC and Bharat Petroleum Corporation (BPCL) have committed to buy eight shiploads of US oil by March 2018.

Hindustan Petroleum Corporation (HPCL) too has made its first purchase of the US oil, buying 1 million barrels of Mars crude from trading firm Trafigura for delivery in December at Visakhapatnam in Andhra Pradesh.

"We have booked a second cargo as well for delivery at Vadinar in Gujarat in about a month from now," said Sanjiv Singh, chairman, IOC.

While in the first purchase, IOC has imported 1.6 million barrels of high sulphur crude Mars from the US and 400,000 barrels of Western Canadian Select oil, in the second it has bought 1.9 million barrels of US crude, half of it being shale oil, he said. "We have bought 950,000 barrels of light sweet Eagle Ford shale oil and 950,000 barrels of heavy sour Mars crude in the second tender," he said.

India, the world’s third-largest oil importer, joins Asian countries like South Korea, Japan and China to buy US crude after production cuts by oil cartel OPEC drove up prices of Middle East heavy-sour crude, or grades with a high sulphur content.

Buying US crude has become attractive for Indian refiners after the differential between Brent (the benchmark crude or marker crude that serves as a reference price for buyers in western world) and Dubai (which serves as a benchmark for countries in the east) has narrowed. Even after including the shipping cost, buying US crude is cost competitive to Indian refiners, an industry official said.

To encourage US crude purchases, the government has allowed refiners to use a foreign rather than an Indian-owned vessel for the purchase. Indian refiners typically have to use domestic vessels for their crude imports.

BPCL has bought two of the US cargos – 500,000 barrels each of Mars and Poseidon varieties of medium-to-high-sulphur crude for delivery to its Kochi refinery between September 26 and 15 October and 1 million barrels of US WTI Midland sweet crude for delivery in October.

Bharat-Oman Refineries Ltd (BORL) has also bought 1 million barrels of Mars crude from Trafigura for November 16- 25 arrival. BORL is a 50:50 joint venture between BPCL and Oman Oil, which operates a 6 million tonnes a year refinery at Bina in Madhya Pradesh.

The current high price of both petrol and diesel continues to burn a hole in the wallets of Indian motorists, even as global crude oil prices go down. The government, which is facing huge flak for its inability to control prices, seems to be exploring various alternatives to lower prices.

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