ONGC to sell crude oil from Mumbai offshore to HPCL
India’s top oil and gas producer prefers term contracts over auctions where refiners hammer deep discounts
ONGS’s Oil Deals
•Sells 4.5 mn tonnes per annum of crude oil to HPCL Mumbai refinery
•Sells 4 mn tonnes per annum plus optional 0.5 mn tonnes crude oil to BPCL
•Produces 13-14 mn tonnes per annum of crude oil from Mumbai coast
New Delhi: State-owned Oil and Natural Gas Corporation (ONGC) has signed an agreement to sell crude oil it produces from Mumbai offshore fields to HPCL - the second such agreement in as many months, as India’s top oil and gas producer prefers term contracts over auctions where refiners hammer deep discounts.
In a post on X, formerly known as Twitter, ONGC said it has inked “term agreement with HPCL for sale of crude oil from Mumbai offshore.” While it did not give details, sources aware of the matter said the pact for sale of about 4.5 million tonnes per annum of crude oil to Hindustan Petroleum Corporation Ltd’s (HPCL) Mumbai refinery.
“This is the second term agreement sealed for sale of Mumbai Offshore crude oil post marketing freedom,” ONGC said. Last month, ONGC had signed a similar pact to sell 4 million tonnes per annum plus an optional 0.5 million tonnes of crude oil to Bharat Petroleum Corporation Ltd (BPCL), which too has a refinery to convert the crude oil into fuels like petrol and diesel at Mumbai. ONGC produces 13-14 million tonnes per annum of crude oil from its fields in the Arabian Sea, off the Mumbai coast. In June last year, the government abolished a rule that said oil from blocks awarded prior to 1999 must be sold to government-nominated customers, mostly state refiners. The old rule had led to producers such as ONGC and Oil India not getting the best market price.
Subsequent to that rule change, ONGC started quarterly auctions of crude oil produced from Mumbai High and Panna/Mukta fields in the western offshore. While the company got a slight premium over Brent - the crude oil its Mumbai offshore is closest in quality to - in the initial auction, refiners like Indian Oil Corporation (IOC) started seeking discounts equivalent to one they got on Russian oil, sources said. Following Moscow’s invasion of Ukraine in February last year, Russian oil was sanctioned and shunned by European buyers and some in Asia, such as Japan. This led to Russian Urals crude being traded at a discount to Brent crude (the global benchmark).
