During their maiden meeting on June 26, Prime Minister Narendra Modi and US President Donald Trump agreed to deepen the engagement in the energy sector.
Soon, Indian companies started purchasing crude from the US. Two Indian oil giants, Indian Oil Corporation and Bharat Petroleum, placed orders for over four million barrels. With this India, the world's third-largest oil importer, joins Asian countries like South Korea, Japan and China to buy American crude after production cuts by the Organisation of the Petroleum Exporting Countries drove up prices of Middle East heavy-sour crude, or grades with a high sulphur content.
"New breakthroughs! oil shipments from US to India has started," the Indian Embassy in Washington tweeted yesterday after Indian Ambassador to the US, Navtej Sarna, handed over papers for the shipment to Texas Governor Greg Abbott. The first lot of two million barrels costs $100 million, but given the volume being contemplated by Indian companies, this new development is expected to boost the bilateral oil trade to $2 billion.
"Opening New Vistas in India US cooperation," tweeted the Indian Embassy which also posted several pictures and a video of the event. Consignments of American crude oil left the US shores between August 6-14 and is likely to reach Paradip (Odisha) in the last week of September.
The development was welcomed by Trump in his phone call with Modi on Monday, on the eve of India's Independence Day. "In his call with Prime Minister Modi on Monday, President Trump welcomed the first-ever shipment of American crude oil to India...," a State Department spokesperson told PTI.
"The President pledged that the United States would continue to be a reliable, long-term supplier of energy," the spokesperson said in response to a question. "During the Prime Minister's June visit to the White House, President Trump and Prime Minister Modi committed to a comprehensive review of their trade relations with the goal of creating a fair and reciprocal trading relationship and removing obstacles to growth and jobs creation, including in the energy sector," the spokesperson added.
The Indian Oil Corporation (IOC) Ltd placed its first order in July and the second order on August 10. Bharat Petroleum Corp Ltd (BPCL) made its first purchase of US oil, buying high Sulphur crudes Mars and Poseidon. BPCL has bought a cargo containing 500,000 barrels each of Mars and Poseidon for delivery from September 26 to October 10. Hindustan Petroleum Corp Ltd (HPCL) is also looking at buying US crude oil.
IOC Director (Finance) A K Sharma told PTI recently that buying US crude has become attractive for Indian refiners after the differential between Brent (the benchmark crude or marker crude that serves as a reference price for buyers in western world) and Dubai (which serves as a benchmark for countries in the east) has narrowed.
Even after including the shipping cost, buying US crude is cost competitive to Indian refiners, he had said. "We are not looking at any term (or fixed quantity) deal from US as of now. We will tender to buy crude and if the US crude is competitive as compared to others, we will buy it," he said.
Over the next 20 years, India's energy consumption growth is projected to be the fastest among all major economies. And by 2035, China and India will have the largest share of global demand (35 per cent).
While this is the first crude oil import from the US, Indian companies have made significant investments in purchasing energy assets in the United States. Four Indian public and private sector companies have invested nearly $5 billion in shale assets in the US.
Indian companies have also contracted 9 million metric tonnes per annum (MMTPA) of LNG from the US and the first shipment is expected in January 2018. Of this, GAIL has contracted 5.8 MMT per annum, including 3.5 MMTPA of LNG from Sabine Pass Liquefaction terminal (Louisiana) and 2.3 MMTPA from Cove Point LNG liquefaction project (Maryland).
In a tweet a day earlier, Texas Senator Ted Cruz said his state would provide crucial oil exports to India and serve as a reliable long-term supplier of energy. In a certificate issued to Ambassador Sarna, the Texas Governor said in the decades to come "this relationship will continue to be one of the world's most significant" as the US and India work toward common goals of prosperity, strength and peace.
"As a top exporter to India with over $2 billion annually in exports and as the nation's leader in crude oil
reserve and production, Texas looks forward to our growing relationship with India," Abbott said.
(Except for the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)