This is the first time any Indian refiner has signed an annual contract since the country in 2017 began importing crude oil from the US. "IOC has finalised a term contract for import of up to 3 million tonnes of crude oil of US origin grades as a part of its strategy to diversify term crude sources," the company said in a statement.
The contract was finalised on February 15. The term contract follows IOC signing up to buy crude oil from the US through a term-tender deal in August last year. It had at that time bought about 6 million barrels of US crude oil under single tender for delivery between November 2018 and January 2019.
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"The approximate value of the contract works out to USD 1.5 billion," the IOC statement said. "This is the first term contract finalised by any Indian PSU oil company for import of US origin crude oil grades."
Prior to this, IOC and other state-owned oil firms bought crude oil from the US on a spot or current tender basis which comprises one shipload of oil. They cannot enter into term or fixed quantity deals without a board approval as the present policy does not allow them to enter into such contracts with non-state foreign firms.
IOC and other state firms like Bharat Petroleum Corp Ltd (BPCL) and Hindustan Petroleum Corp Ltd (HPCL) enter into annual term import deals with national oil companies of mostly Middle East countries.
To overcome this, IOC last year floated a tender to buy three shiploads of US crude instead of the usual practice of one cargo, an official said adding that now the board has authorised it to buy crude oil term basis.
India first imported US crude oil in October 2017, and since then oil firms have been buying oil from that country on a tender basis.
The increased purchase of US oil companies has come within months of reimpostion of economic sanctions against Iran - India's third-biggest supplier of oil. The sanctions, which came into force from November 4, 2018, have led to India cutting oil purchases from Iran.
(Inputs from PTI)
