Refiners in India, the third largest importer of oil in the world, are continuing to look towards Guyana and its neighbour Brazil to secure agreements for the supply of crude.
Since last year, Indian refiners have been snapping up maiden import deals for newer crudes such as Guyana’s Liza and Brazil’s Tupi in a sign that the country is looking to diversify its feedstock basket and have steady supply sources beyond the Middle East, S&P Global Platts said in an article.
Analysts said high shipment costs, long sailing period and limited bandwidth with Brazil to commit plentiful volumes beyond its traditional Asian customers will keep the size of any new term deals with the South American country relatively small.
“We are keen on sourcing Brazilian oil under long-term special contracts,” Platts quoted an Indian oil ministry official as saying.
Although New Delhi has expressed willingness to explore options for term Brazilian crude, Indian refiners remain skeptical for now about entering in term contracts for Latin American crudes as global prices remain high.
“Brazilian term crude imports at current prices above $100/b are not viable although imports are viable on a long-term basis if they are commercially competitive compared with other origins,” said an official with one of the state-owned refiners.
Another Indian refinery source added: “We buy Brazilian crude mainly on a spot basis. Some other Indian buyers have contracts with Mexico.”
India has been pursuing a deal with Guyana to buy its Liza crude but natural resources minister Vickram Bharrat has said the new South American producer is not in favour of such a bilateral agreement since the government prefers an open process for selling its crude.
India ships in more than 80% of its oil needs from overseas and relies heavily on the Middle East. The nation’s gas demand is expected to increase nearly 3-fold from 229 million metric tonnes in 2018 to 607 million metric tonnes in 2040.