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Crude oil purchases by Indian Oil Corp. may shift as the new US sanctions on Russia affect supplies from Moscow, pushing the South Asian country’s biggest refiner to seek alternatives.
Before Russia’s war in Ukraine, India used to buy less than 2% of its total oil imports from Moscow. However, the volume surged to almost 45% in the middle of last year, according to data compiled by analytics firm Kpler, after Russia offered deep discounts. India’s inbound shipments from traditional suppliers like Saudi Arabia declined.
“Whatever has shifted to Russia was the spot market only,” Arvinder Singh Sahney, chairman of India’s third-largest company by revenue, said Wednesday. “Now we will rebalance.”
The US imposed its most aggressive sanctions on Russia yet on Jan. 10 as the Biden administration looked for last-minute ways to boost Ukraine’s leverage in possible peace negotiations. The measures targeted two oil producers, 160 tankers and traders linked to hundreds of cargoes.
The sanctions may impact daily flows of as much as 2 million barrels to India and China, Sahney told Bloomberg Television on the sidelines of the World Economic Forum in Davos. India will tap suppliers, such as OPEC producers, the US, Guyana and Brazil, to fill any shortfall, he added.
Despite buying crude from Russia, Indian Oil has continued to honor its term supply contracts with producers in the Middle East, Sahney said. “We have enough sources, we have enough collaborations, we have enough geopolitical and commercial alliances going forward.”
The sanctions will have only a marginal impact on India due to the nation’s diversified crude supply sources, he added.
Russia exported 4.6 million barrels a day in December, according to the International Energy Agency. About 1.5 million barrels a day came to India from Moscow last month, Kpler data showed.
Oil prices rose after the US sanctions, but are likely to remain rangebound between $75-$80 a barrel in the short- to near-term, Sahney said.
The New Delhi-based company owns nine out of 23 refineries in India, accounting for more than one-fourth of the country’s total installed base of 5.2 million barrels a day. The refiner is on track to expand capacity by as much as a quarter by 2027-28 to meet the growing economy’s demand.