NEW DELHI, Feb 5 (Reuters) - State-owned Indian Oil Corp , India’s top refiner, has signed a deal with Russian oil major Rosneft that gives it an option to buy up to 2 million tonnes, or 40,000 barrels per day (bpd) of crude in 2020, the Indian oil minister said on Wednesday.
“This is just the beginning,” Dharmendra Pradhan said, after meeting with Rosneft Chairman Igor Sechin in New Delhi.
India has been diversifying the sources of its crude oil imports to hedge geopolitical risks that have the potential to choke supplies from a particular region or country.
The refiner will exercise its option to buy Urals crude under this first annual deal with Rosneft whenever the price is low enough to compensate for freight costs, an IOC source said.
Under the contract, IOC has the option to take as much as 40,000 bpd of oil this year, said the source, who declined to be named as he is not authorised to speak to the media.
Indian state refiners typically buy Russian oil via the spot market rather than under contract. The nation’s crude imports from Russia have typically been low since the freight costs tend to be higher than for supplies from the Middle East.
India, the world’s third-biggest oil consumer and importer, ships in more than 80% of its crude needs, usually relying on the Middle East for most of its supply. However, its imports from that region slid to a four-year low last year.
The Middle East’s share of India’s crude imports shrank to 60% last year - down from 65% in 2018 and lowest since 2015 - as record output from the United States and countries like Russia offered opportunities for importers to tap into other supplies. (Reporting by Nidhi Verma in New Delhi, with additional reporting by Nallur Sethuraman in Bengaluru; Editing by Tom Hogue)