Sanctions Effect! Indian Oil Buys Colombian Crude for First Time

In a first, state-owned Indian Oil Corporation has reportedly agreed to buy crude from Colombian government oil company Ecopetrol. The move comes amid New Delhi’s effort to pivot oil imports away from Moscow.

Indian Oil Corp is set to import Colombian crude for the first time under an optional supply arrangement with state-run producer Ecopetrol, according to a report by Reuters. Citing sources, it claimed that IOC has bought 2 million barrels of Castilla crude, scheduled for delivery in late February.

The refiner holds an option to lift up to 12 million barrels in total, equivalent to six very large crude carriers (VLCCs), with each vessel carrying around 2 million barrels. The agreement was originally signed in late 2021 and has been renewed every year since.

The report noted that IOC sources most of its crude from Russia and the Middle East and has only occasionally sourced oil from South America, despite having optional contracts with suppliers in Mexico, Brazil and Colombia.

These commercial terms, including pricing, must be acceptable to both parties, and South American grades have often struggled to compete with Russian and West Asian crude on cost.

Amid the threat of sanctions from the United States and the European Union, Indian refiners have begun cutting their reliance on Russian crude. A Reuters report said India’s imports of Russian oil are expected to fall to a three-year low of about 1.2 million barrels per day (bpd) in December, compared with 1.84 million bpd in November.

An earlier Bloomberg report noted that the drop in December shipments followed a halt in purchases by Mukesh Ambani’s Reliance Industries, the largest buyer of Russian oil.

Data from Kpler also showed reduced volumes heading to the HPCL-Mittal Energy Ltd terminal at Mundra, while Mangalore Refinery and Petrochemicals Ltd did not receive any Russian crude this month for the first time since September 2022.