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Market Watch
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Press Release [FREE Access]
Petro Intelligence » Time To Go Big On Crude Oil Deals With Russia

By R. Sasankan

Russia is the world's third-largest crude oil producer with proven reserves of 80 billion barrels and production estimated at almost 10.8 million barrels per day. But for a little over two years, Russian President Vladimir Putin has had to wrestle with a major problem: he does not have enough buyers who will buy all of the crude oil he wants to sell.

The Ukraine war has created a situation where president Putin has been isolated by the western nations and clobbered by tough economic sanctions.

The Kremlin has been forced to find buyers who would be ready to run the gauntlet of western threats of similar action against nations looking to buy cheap Russian oil that was immediately on offer. Both China and India have chosen to brazen it out, arguing that they would not tolerate any attempt to trammel their sovereign right to defend their economic interests.

I had buttressed that argument in an article titled "Crude Imports: The High Stakes In A Game Of Russian Roulette" which appeared in Petro Intelligence column of www.indianoilandgas.com on April 25, 2024: "President Putin knows that India is a dependable market for Russia which can consume a significant portion of Russia's gas and oil. The US and EU may have their own reasons to invoke sanctions against Russia...The Russian President knows that a customer like India cannot afford Russian crude unless it can offer an attractive price. The swapping mechanism can be used to reduce transportation costs. But before that Russia should agree to make its crude cheaper for India, a special deal which calls for a political will on the part of that country. India's leadership can take the initiative in broaching the idea. Nothing is difficult for an imaginative political leadership especially when it wrestles with the compulsions arising from the fact that India's crude import dependency is poised to swell to 90 per cent by 2030."

Last week, I was pleasantly surprised to read a Reuters report saying that Mukesh Ambani-controlled Reliance Industries Limited had signed a one-year deal with Russia's Rosneft to buy at least 3 million barrels of oil a month in roubles. It went on to say that the deal was struck soon after Putin pushed Moscow and its partners to find alternatives to the Western financial system to facilitate trade in the face of US and European sanctions.

I examined the report but felt disappointed over the sketchy details of the deal. Reliance is a private company and cannot be expected to divulge all the details of the deal. However, the deal accounts for about 2% of India's crude imports annually and under7% of Reliance's annual crude consumption! What I found truly mystifying was the fact that the discounts/premiums over the Dubai benchmarks amounted to just $ 1-3 per barrel.

The only real benefit, as far as I could see, was the fact that it was a year-long contract (instead of spot purchases on the high seas) and denominated in roubles (instead of the usual mix of INR, UAE Dirhams and Chinese renminbi). The deal was with Rosneft which is Russia's largest oil producer, and accounted for 33% of annual production and 40% of refining capacity in 2023, according to the US Energy Information Administration. Rosneft holds a 49 per cent stake in a refinery in Gujarat and is in talks for another green field refinery in India. There have also been reports that the Government of India has started to nudge Indian public sector companies to strike deals similar to the one that Reliance negotiated with Rosneft.

There are no details about any of these claims in the public domain. No one, for example, knows whether these discounts are based on landed costs at Reliance's refinery gate or FOB quotes? And how much will Reliance save or lose at the Jamnagar Refinery gate? At what parity has the Ruble been fixed? Is this just a 12-month deal? What happens after that?

In my column, I had suggested a concerted effort to strike a "real" deal -- sanctioned by the leaders of India and Russia - which would protect the economic interests of both the nations. It ought not to be piecemeal deals. After all, Putin needs a market like India; equally, India needs cheaply priced crude in large quantities. Russia emerged as India's top oil supplier in 2023. Cheap crude from Russia helped shrink India's crude oil import bill by 15.9 per cent to $132.4 billion in FY 2023-24, down 5 billion in the previous year.

 India's crude import dependency is poised to swell to 90 per cent by 2030. India's energy planners have been wrestling with a variety of options. They have been trying to diversify the sources of crude imports, both for term and spot purchases, even though there are no problems with the availability of crude oil in the market.

Energy security is the compelling imperative that is driving this effort. However, the recent emergence of Russian crude in the Indian market in large quantities has demolished the argument for diversified sources of supply. It now turns out that price is the most important factor in the equation -- and this factor has swamped all other considerations. There is a growing belief that it is better to concentrate on a few countries instead of farming out contracts to all parts of the globe.

Quantity matters: a large buyer is seen as a heavy weight with a lot of bargaining power. India is large. President Putin needs a buyer like India. India's leadership, irrespective of the party in power, has always enjoyed good relations with its Russian counterpart.

The US administration may not be too pleased about India's growing dependency on Russian crude. The Indian leadership can work its way through a diplomatic kerfuffle over oil sourcing. The US Administration is aware that China is the biggest beneficiary of Russian crude oil. It has not been able to do anything to stop Xi Jinping and Putin from cosying up to each other. China gets nearly 800,000 barrels per day from Russia via a pipeline in addition to imports by sea.



To download the latest issue 'Volume 31 Issue 21 - February 10, 2025', click here
Petro Intelligence [FREE Access]
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What Am I Missing?
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The Oil Marketing Companies (OMCs) Have Fuelled Inflation
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Foreign Investment
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Overseas Investment
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Gas Scene
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India’s Total And Sector-Wise Natural Gas Consumption During April-November 2024
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Dismal Domestic Natural Gas Scene In November 2024
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India’s Increasing CGD Sales
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India’s Liquefied Natural Gas (LNG) Import: A Total Picture
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Coal Bed Methane Development in India
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Poor Capacity Utilisation of LNG Terminals In India
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CGD Gets The Single Largest Share In Gas Allocation
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Domestic Natural Gas Scene In September 2024
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Decline In Natural Gas Prices Continues In All Major Global Hubs
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Sector-Wise Consumption Of Natural Gas
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Widening Gap Between Targets And Actual Production In Natural Gas
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Amazing Growth In LPG Coverage
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Data Section
Monthly Upstream Data
Monthly Downstream Data
Historical database
Data Archives
Special Database
Share Of imported And Domestic Crude In Processing
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India’s Crude Production Falling In Domestic As Well As Overseas Projects
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India’s Refining Capacity as on 1st April 2024
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Petrol & Diesel Prices in India & Developed Countries
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Break-Up Of Petroleum Products Consumption
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Worldwide Active Rig Count 2024
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The Story of India’s steadily Declining Domestic Crude Production
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India’s Exports Of Petroleum Products Decline, Imports Increase Sharply In December 2025
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Production Of Petroleum Products Up By 2.9% In December 2024
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How Much Crude Oil Did Indian Refineries Process In December?
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Marginal Increase In India’s Crude Oil Imports, OPEC Share Up
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Analysis Of The Consumption Trend In Petroleum Products During The Current FY
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Retail selling price of major petroleum products in India & neighbouring countries
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Weightage of Crude Oil, Natural Gas and Petroleum Products In India’s Wholesale Price Index
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Impressive Growth in Diesel, Petrol Consumption In December
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India’s Crude Oil Imports Since FY 2018-19,Year-wise Break Up
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Refining Margins On The Rise In Global Hubs
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Fuel& Loss In Indian Refineries
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Yet Another Downward Revision In Global Oil Demand Growth Forecast
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Tenders [FREE Access]
Cairn Oil & Gas
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