BPCL takes rare risk to bring Iraqi crude through Strait of Hormuz

State-owned refiner Bharat Petroleum Corporation Limited (BPCL) has hired a tanker to carry Iraqi crude through the Strait of Hormuz, taking on a shipping risk that has kept many Indian refiners away from oil supplies through the Persian Gulf, Bloomberg reported on Thursday.

The refiner bought about 1 million barrels of crude from Iraq last week, its first Iraqi oil purchase in the financial year that began April 1, BPCL Director Finance Vetsa Ramakrishna Gupta told reporters.

The purchase was made on a free-on-board basis, meaning BPCL is responsible for arranging the shipment.

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Tanker To Be Transferred Near Fujairah

The tanker hired by BPCL has already crossed the Strait of Hormuz safely, Gupta said. The crude will be transferred to another tanker near Fujairah in the Gulf of Oman on Thursday or Friday before being shipped to India.

The approach, known as shuttling, involves moving crude from a tanker that enters the Persian Gulf through Hormuz to another vessel outside the strait.

Major oil producers, including Saudi Arabia and the UAE are already using the method to move large volumes through the chokepoint.

Indian refiners have largely avoided loading crude from inside the Persian Gulf because of a shortage of vessels willing to make the crossing.

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Iraq Offers Discounts

Iraq was India's second-largest oil supplier before the war in West Asia disrupted shipments. Iraq has also offered buyers the option of collecting crude from outside Hormuz in its latest tender, the first such offer since the war began.

Iraq is offering steep discounts to attract refiners and traders. The prices are attractive enough for some buyers to accept the risks of crossing the narrow waterway.

"We are exploring all commercially available crude," Gupta said. BPCL's refineries can process as much as 2 million barrels of Iraqi crude a month, he said.

"Once we are successful through this route, maybe from next month we can plan certain cargoes from SOMO and others available this side."