India, the world's third-largest oil importer, will import crude oil from the United States for the first time after Indian Oil Corp bought a cargo that will be delivered in October.
The purchase comes after Prime Minister Narendra Modi's visit to the U.S. in June when President Donald Trump said his country looked forward to exporting more energy products to India.
IOC bought 1.6 million barrels of U.S. Mars crude, a heavy, high-sulphur grade, and 400,000 barrels of Western Canadian Select that will be delivered onboard a Very Large Crude Carrier, IOC's head of finance, A.K. Sharma, told Reuters.
PetroChina was awarded the tender to sell the cargoes and is expected to load the oil off the U.S. Gulf Coast, said a trading source with direct knowledge of the sale.
The cargo was priced on a delivered ex-ship basis, which is "very competitive" to that of Basra Light, Sharma said.
"So long as the prices remain competitive, we will buy more of the U.S. crude," he said.
IOC had to obtain special permission from the shipping ministry to buy the cargo on a delivered basis as local regulations favour the use of Indian flagged carriers for imports, Sharma said.
India is the latest Asian country to buy U.S. crude after South Korea, Japan, China, Thailand, Australia and Taiwan as the countries seek to diversify oil imports from other regions after the OPEC cuts drove up prices of Middle East heavy-sour crude, or grades with a high sulphur content.
Indian refiners are seeking these heavy, high-sulphur grades as feedstocks after modifications at their plants make it easier to process these types of crudes, which typically sell at a lower cost relative to other oil types. The U.S. could become an alternative source for the Indian companies for these grades.
A second Indian refiner Bharat Petroleum Corp Ltd also planned to buy its first ever U.S. crude oil cargo and has issued a purchase tender.