Saudi Aramco will supply state-run Indian Oil Corp Ltd (IOC) an extra 2 million barrels of crude a month from July to December, an IOC executive said, as New Delhi seeks to make up for a loss in supplies from Iran.
Saudi Arabia approached Indian buyers last month offering them additional supplies to compensate for lost Iranian oil after U.S. sanctions kicked in. The United States, which imposed new sanctions on Iran in November, initially gave Indian and seven other buyers a six-month waiver to allow them to continue importing Iranian oil. Those waivers have not been renewed.
IOC has a term deal to buy 5.6 million tonnes from Saudi Aramco in the financial year 2019/20 that started on April 1 and an option to buy additional 2 million tonnes. "We have told them we will be taking 2 million barrels every month for six months from July (about 1.6 million tonnes in total) and they have agreed," said A. K. Sharma, IOC finance director.
India, Iran's top client after China, has close diplomatic ties with Iran but wants to work closely with the United States.
In 2012, when Iran was under a previous round of sanctions, Saudi Arabia and Iraq raised their Asian market share. Since then, trade has shifted as U.S. and other crude supplies have come to the market.
India had bought about 300,000 barrels per day (bpd) of Iranian oil under the six-month U.S. sanctions waiver.
Only state refiners, accounting for about 60 percent of India's 5 million bpd refining capacity, purchased oil from Iran since November. India imported about 304,500 bpd Iranian oil between January and April 2019.
IOC, which was the biggest Indian buyer of Iranian oil in 2018/19, has not signed an annual contract to buy oil from Iran this fiscal year. IOC has been diversifying its suppliers.
"We have requested Saudi Arabia for additional oil. We have optional contracts with ADNOC, Kuwait and Mexico. We will ask them also for extra supplies if required," Sharma said.
IOC has signed separate annual contracts with Norway's Equinor and Algeria's Sonatrach to buy 4.6 million tonnes of U.S. oil in 2019, he said.
"Buying from the U.S. was a message to the market that we are diversifying," he said, adding that with the lost of Iranian oil "the supplies from U.S. are definitely helping us."