First US oil shipment arrives at Paradip; comes cheaper than Dubai oil

The first US crude oil cargo of 1.6 million barrels bought by Indian Oil Corporation from the US Gulf Coast refiners has arrived at Paradip Port in Odisha and as reports point out, it has come $2 per barrel cheaper than the Dubai crude that India buys often.

VLCC MT New Prosperity

A function, attended by officials of IOC, oil ministry and the US Embassy, was held at the Paradip port to mark the arrival of the consignment.

MT New Prosperity, a very large crude carrier (VLCC), which left US Gulf Coast on 19 August, arrived at Paradip on Monday.

This is part of the order for 2 million barrels of oil placed recently by IndianOil Corporation Ltd (IOC) and Bharat Petroleum Corporation Ltd (BPCL) from the US.

Joint secretary (international cooperation) in the ministry of petroleum and natural gas Sunjay Sudhir received a sample of the crude from Anish Aggarwal, director (pipelines), Indian Oil, at the function, which was also attended by joint secretary in the ministry of external affairs Munu Mahawar and US Consul General in Hyderabad Katherine B Hadda.

This is one of the first shipments to India since the US stopped oil exports in 1975 and has the potential to boost bilateral trade by up to $2 billion, according to a US embassy statement.

''This event marks a significant milestone in the growing partnership. The US and India are elevating our cooperation in the field of energy, including plans for cleaner fossil fuels, renewables, nuclear, and cutting-edge storage and energy efficiency technologies. We look forward to working together on further sales of US crude and exploring opportunities to expand the role of natural gas in India,'' MaryKay Carlson, chargé d'affaires at the US embassy in New Delhi, said.

In a statement released by the ministry of external affairs, Sudhir said the oil shipment has opened a new chapter in the history of Indo-US trade, particularly in the oil and gas sector. The inclusion of the US as a source for crude oil imports by India's largest refiner will go a long way in mitigating the risks arising out of geopolitical disruptions and also usher in price stability and energy security for India, he added.

IndianOil, the first state-owned Indian refiner to contract US crude, plans to process the crude at its east coast refineries, located at Paradip, Haldia, Barauni and Bongaigaon.

IndianOil has placed a cumulative order of 3.9 million barrels from the US while BPCL and Hindustan Petroleum, the other two state-run refiners, have placed orders for about 2.95 million barrels and 1 million barrels, respectively, for their Kochi and Vizag refineries from the US.

The three state-run Indian refiners have so far contracted to buy about 7.85 million barrels of crude from the US. These refiners are sourcing sweet, sour and heavy crudes for their refineries which are equipped to handle complex mix of crude oils.

Indian companies, both public and private, have made sizeable investments in US shale assets with a total investment of approximately $5 billion.

Indian firms have also contracted LNG from the US and the first shipment is expected to be delivered to India in January 2018. Both India and the US are the world's largest and third largest consumers of energy, respectively.

The sourcing of crude from the US is a step towards strengthening India-US bilateral relations in the hydrocarbon sector.

India-US bilateral relations have developed into a strategic partnership of global significance. Prime Minister Narendra Modi, during his visit to the US in June this year had mentioned that India was looking to strengthen its hydrocarbon engagement with the US.