The Indian Oil Corporation plans to nearly double sourcing of crude oil from Nigeria through a term contract.
This is in line with the government’s strategy to increase imports from African nations and diversify the crude sourcing basket and strengthen the energy security.
“Nigeria has now agreed to increase the term contract from 1.7 million tonne per annum to 3 million tonne per annum,” Dharmendra Pradhan, Minister of State (Independent Charge) Petroleum and Natural Gas said at the sidelines of the 4{+t}{+h} India-Africa Hydrocarbons Conference.
While the Indian Oil buys 8 million tonne of crude oil every year from Nigeria, most of it is through the spot market. It only procures 1.7 million tonne per annum through fixed-term contracts.
Pradhan said India currently sources 1.7 million tonne per annum from Nigeria and the increase is expected to happen this year.
Term contracts offers not just assured supplies, but also protection from price variations.
Nigeria had last month overhauled oil contracts and for the calendar year 2016, it signed term contracts for nearly half of its oil production. Indian Oil Chairman B Ashok said Nigeria selected the company based on the trading experience and track record.
Nigeria’s crude oil sales to India stood at 11.59 million tonne in the first half of fiscal 2015-16, behind only Saudi Arabia at 19.56 million tonne and Iraq at 17.01 million tonne.
Overall, crude oil sourced from African countries was almost one-third of the total 99.36 million tonne imported by India in the first half of the fiscal.
“In the field of hydrocarbons, we want to increase our cooperation with Africa. The experience with Africa has been very good in the past and whether oil prices increase or decrease, our engagements with Africa will increase,” Pradhan said.
“We imported 32 million tonne of crude in 2014 from Africa, including 3 million tonne from North Africa and 29 million tonne from West Africa, mainly from Nigeria and Angola. This constitutes approximately 16 per cent of our consumption. This is going to increase in the coming years.”