 India is attempting to negotiate better rates for the crude oil it imports from Saudi Arabia and Kuwait, according to news agency Bloomberg.
Hindustan Petroleum, India’s third-largest state refiner, is seeking to at least double the interest-free credit period for crude purchases from Saudi Arabia and Kuwait to 60 days, B.K. Namdeo, the company’s refineries director, said in Mumbai.
Mangalore Refinery & Petrochemicals wants price discounts for agreeing to contracts that are more than 10 years long, according to Managing Director P.P. Upadhya.
“Discussions are going on, and we expect the extended credit period to be reflected in the new contracts from April 1,” Namdeo said.
“There is a surplus in the market, and India should take full advantage of the situation.”
A shale-oil boom in the US, the world’s biggest consumer, has pushed crude production to the highest in almost 26 years, leading the country to cut imports.
In response, some of the biggest Middle East producers are turning to Asian nations to lock in buyers as the easing of sanctions on Iran brings more oil into the market.
“Deals between Indian refiners and countries in the Middle East are best viewed as a security of supply effort,” said Abhishek Kumar, a London-based energy and modelling analyst at Interfax Europe’s Global Gas Analytics.
“Countries like Saudi Arabia and Kuwait are as much concerned about competition from Iran as from the US.”
Indian Oil Corp., the nation’s biggest refiner, is in talks with some Middle East suppliers, including Saudi Arabia and Kuwait, to increase the credit period for crude purchases to 60 days, its Finance Director P. K. Goyal said in an interview in New Delhi.
Iraq, the company’s biggest crude supplier, started offering 60-day credit from January, he said.
Iran currently gives Mangalore Refinery and Mumbai-based Essar Oil Ltd. 90-day credit.
“Until some years back, Saudi Arabia used to give us better payment terms, which was later stopped,” said B.K. Datta, Mumbai-based director of refineries at Bharat Petroleum Corp., the nation’s second-biggest state refiner. “It will be good if payment terms are relaxed once again.”
Kuwait Petroleum officials couldn’t immediately be reached to comment on potential changes to payment terms. Saudi Aramco declined to comment.
Indian state-run refiners sell fuels below their production cost to help the government curb inflation. While they are partly compensated by the government, subsidies are often delayed, forcing the oil processors to borrow money.
Imports of Iranian crude by countries including China, Japan and India rose by 100,000 barrels a day in January to 1.32 million barrels as a deal easing sanctions over Iran’s nuclear program took effect, the International Energy Agency said in its monthly oil market report released Feb. 13. Six world powers including the US agreed to ease sanctions on Iran in November in return for curbs on the country’s nuclear program.
India, which imported about 185 million metric tons (3.7 million barrels a day) of crude in the year ended March 2013, gets about 63 percent of its requirement from Middle East suppliers including Saudi Arabia, Kuwait, Iraq, Iran, the UAE, Qatar, Oman and Yemen, according to data from India’s Ministry of Oil.
Saudi Arabia is the biggest supplier, followed by Iraq and Kuwait, together making up 43 percent of the South Asian economy’s total oil imports, according to the oil ministry.
