The prevailing geopolitical and geoeconomic uncertainties have evidently shelved a potential term deal for Russian oil that was being pursued by India’s public sector refiners. Government-owned oil refiner Indian Oil Corporation (IOC), which is also India’s largest refiner, is currently not in “any active negotiations” for a term deal with Russian oil majors like Rosneft, according to Indian Oil Chairman Arvinder Singh Sahney. On the question of increasing oil purchases from the US, given that the Donald Trump administration wants to increase American oil and gas exports and India is a major importer of crude oil, Sahney said that all purchase decisions would be purely on commercial basis, and there was no “mandate” for the company to buy more oil from any country.
“As of now, we are not in any active negotiations…We are waiting and watching because every day things are changing. Every day the situation on tariffs, the situation on sanctions are changing…So, in these topsy-turvy conditions, I don’t think it is prudent to go in for a term deal with a new player…any new player,” Sahney told reporters in response to a question on the status of term deal negotiations with Russia. The company, however, remains open to inking term contracts with new suppliers, should the conditions allow, he added.
Term oil deals are usually annual supply agreements with fixed volume commitments at a predetermined pricing formula. Such contracts assure buyers as well as suppliers of steady supply and offtake, unlike spot market oil deals that are prone to higher pricing and supply volatility. Spot contracts, as the name suggests, are immediate purchases from suppliers or traders with the shortest-possible delivery cycle. A bulk of oil purchased by India’s public sector refiners—IOC, Bharat Petroleum Corporation (BPCL), and Hindustan Petroleum Corporation (HPCL)—is through term contracts. However, all the Russian oil being bought by these companies is on spot basis.
As Russia is currently India’s largest supplier of crude oil, the public sector refiners were understood to be negotiating a potential term contract for Moscow’s discounted oil. According to industry sources, private sector refining major Reliance Industries had inked a large term deal with Russia’s Rosneft in December 2024. This had led to speculation that the PSUs were also looking to seal term deals for Russian oil. But with fresh and stringent US sanctions hitting Russian oil trade in January this year and with the volatility in geoeconomic circumstances since took charge as US President later that month, the hopes of a term deal appear to have been dashed, at least for the time being.
India is the world’s third-largest consumer of crude oil and depends on imports to meet over 85 per cent of its requirement. From being a marginal oil supplier to India prior to the war in Ukraine, Russia is now India’s biggest supplier of crude, thanks to Moscow offering oil at significant discount after the West started shunning Russian oil. In 2024, Russian oil accounted for nearly 38 per cent of India’s total oil imports, per tanker data.
As for American crude, there has been speculation that India’s public sector refiners could be nudged by the government to increase imports of US oil. Sahney, however, said that there was no mandate for IOC to increase American oil purchases. This is not the first instance when Sahney has said so. In an interview with in February, he had said that IOC would be open to buying more American oil if it is commercially viable and competitively priced. The US is India’s fifth-largest source of crude oil imports, behind Russia, Iraq, Saudi Arabia, and the United Arab Emirates.
“There is also potential to increase imports of American crude, especially for Indian Oil, as our refineries are very versatile. We have 10 refineries and they have different feed (crude oil) requirements. So, whatever kind of feed comes to India, Indian Oil can take it. We will be happy to have more American crude, but it has to be commercially viable,” Sahney had said in the interview.
Indian oil and gas companies, including IOC, would be a lot more comfortable increasing US natural gas imports, considering India’s rapidly growing appetite for natural gas and competitively priced US LNG vis-à-vis other major suppliers like Qatar.
