Continental shift: Indian refiners look West to source crude

  • Anupama Airy, Hindustan Times, New Delhi
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  • Updated: Aug 20, 2012 00:31 IST

As part of its efforts to diversify its energy sources and reduce its heavy crude oil and gas dependence on West Asia, India is ready to cross over 12,000 km to buy scarce energy resources from the far off Canada and the US.

Senior petroleum ministry officials disclosed that following a proposal from the Planning Commission, state-owned companies including Indian Oil are keen to source crude oil from Canada and LNG (liquefied natural gas) from both Canada and the US, for which discussions are underway.

For LNG imports, Indian buyers are contemplating the formation of a new company in Canada, the official said.

“We have conveyed our willingness to the petroleum ministry on this proposal for joining the proposed consortium of Indian PSUs or even go alone to source LNG from Albany province based on techno-economic viability,” a senior IOC official confirmed.

India does not have a free trade agreement with the US, but is in talks to relax bilateral trade norms. Currently, gas exports from the US is permitted to only those nations that have an FTA with it. Even with Canada, India does not have any engagement as of now; however, there are no restrictions on importing oil and gas from that country.

Canadian oil producers are looking to diversify markets for their crude oil grades. “There is limited pipeline capacity available at present to transport western Canadian crude to the Canadian west coast for onward transportation to Asia. Crude oil producers there are planning to increase connectivity to world markets by adding more pipeline capacity,” the IOC official told HT.

The Canadian conventional grade of crude oil gives India price advantage over the comparable crude varieties being sourced from West Asia.

“During January-June 2012, Canadian synthetic crudes were priced on an average between $62 a $83 a barrel whereas similar crudes were priced on an average between $90 to 95 a barrel against the average price for Brent at $113/bbl during the same period,” the official said.

Companies like IOC are examining the suitability of using this synthetic grade of crude, the official said: “If it is found suitable, it could then compete with other crude oil grades from other region of the world for Indian refineries.”

Canadian companies would however be seeking long-term commitments from customers of major consuming countries like India for sourcing their crude oil, so that they can decide on investing in the pipeline projects. The appraisal of the Canadian crude by Indian refiners, thus, becomes of utmost importance, since long-term commitments would become feasible only if the crude meets the Indian requirements.


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