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India's State Refiners Eye Long-Term Russian Oil Deal to Secure Stable Supplies

Indian state-held refiners have started jointly to discuss terms of a potential deal with Russia for long-term supply of Russian oil, a government source with knowledge of the matter told Reuters on Thursday.  

Russia has become India’s top oil supplier since the Russian invasion of Ukraine and the Western embargoes and other sanctions on Russian crude sales. India, the world’s third-largest crude oil importer, has snapped up a large part of Russian spot supply over the past two years, but it is now looking to sign long-term supply deals. 

“Joint negotiations of state refiners with Russia are already happening,” the government source told Reuters. 

India needs “predictable and stable” oil supplies amid expanding refining capacity, the source added. 

India has said it expects to raise its refining capacity by around 1.12 million barrels per day (bpd) each year until 2028 as it seeks to meet rising fuel demand. Total Indian refining capacity is expected to increase by 22% in five years from the current 254 million metric tons per year, which are equal to around 5.8 million bpd. 

Some of India’s private refiners have already struck long-term agreements to purchase Russian oil. These include Nayara Energy, in which Russian oil giant Rosneft has a stake, as well as Reliance Industries, which operates the Jamnagar refinery in India, the world’s largest and most complex single-site refinery. 

Reliance Industries signed earlier this year a one-year agreement with Rosneft to buy at least two cargoes of Urals crude in Russian rubles per month. 

Indian refiners have paid for Russian oil in Indian rupees, Chinese yuan, and UAE dirhams since the West imposed an embargo on Russian oil imports and implemented a $60 per barrel price cap on Russian crude oil if it is to use Western insurance, reinsurance, shipping, or financing. 

Russia was India’s single largest oil supplier for a second consecutive fiscal year, as surging imports of Russian crude dragged down the share of OPEC and Middle East supply to India to a record low.  

By Tsvetana Paraskova

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  • Mamdouh Salameh on July 12 2024 said:
    Russia is now the top crude oil supplier to both China and India which account for 23% of both global oil demand and crude imports.

    Therefore, it comes as no surprise that India's State refiners are planning to secure a long-term Russian oil deal to ensure stable supplies.

    This comes within the agreement between India and Russia during the Indian Prime Minster's latest visit to Moscow to raise bilateral trade between them to $100 bn by 2030 and to create a strategic alliance between them.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

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