Energy firms plan joint hunt for foreign supplies

Public sector oil refiners will increasingly team up to negotiate oil and gas supplies from abroad, two people aware of the plans said, in a departure from the existing practice of negotiating separately. The joint negotiations are expected to improve their bargaining power, and ensure that they don't compete against each other for the same contracts and drive up prices.

“The requirement for supplies should be looked at as that for the Indian market as a whole. Prices, discounts and other preferential terms are expected to be the same for all the public sector companies; only the quantum would differ. The government is encouraging this trend of holding joint negotiations by the Indian companies," said one of the two people mentioned above, both of whom spoke on condition of anonymity.

For long-term supplies

The energy companies would sign separate contracts with the supplier, but the terms of the deals are expected to be same.

Queries mailed to Indian Oil Corp. Ltd, Bharat Petroleum Corp. Ltd, Hindustan Petroleum Corp. Ltd, GAIL and the petroleum ministry remained unanswered till press time.

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There has already been a step in this direction: On 5 July, Mint reported that Indian Oil Corp. Ltd (IOCL), Hindustan Petroleum Corp. Ltd (HPCL) and Bharat Petroleum Corp. Ltd (BPCL) are jointly negotiating with Brazil's Petroleo Brasileiro SA (Petrobras) for long-term crude oil supplies. Going ahead, such negotiations will be the norm.

Prashant Vasisht, senior vice-president and co-group head of corporate ratings, ICRA Ltd said: “India is a large consumer of oil and gas and has a major say in the market. If Indian companies come together for long-term contracts, it would add more heft to the talks. So, far this has not been a common practice and everybody has been scouting for term contracts individually. Whenever these companies come together, they would have much more bargaining power in negotiating a deal."

Better deals on credit

He further said that in the case of oil, companies may be able to get better deals on credit and discounts as in the case of Russian oil, and in the case of liquefied natural gas (LNG), they may be able to sweeten the pricing formula.

In May, Union petroleum minister Hardeep Singh Puri had told reporters that domestic oil marketing companies should come together to negotiate long-term contracts.

On 19 May, Mint reported that with discounts on Russian crude oil dwindling, India has assembled state-owned and private oil refiners to jointly negotiate for higher discounts and better terms with Russian suppliers, including Russia’s largest oil company Rosneft PJSC.

India is the third largest importer of oil and gas and imports about 85% of its energy requirement. In FY24, it imported 233.1 million metric tonne (mmt) of crude oil, compared to 232.7 mmt in the previous fiscal (FY23)

India's LNG imports in FY24 were 31,795 million metric standard cubic metre (mmscm), 17.5% higher than 26,304 mmscm in the previous fiscal.