The move will allow IOC to import around 3 million tons of U.S. crude oil into India as part of its strategy to diversify crude sources.

India’s top oil refiner, Indian Oil Corp. (IOC) has recently inked a $1.5 billion deal to buy U.S. crude oil in the fiscal year starting April 1st, 2019. IOC said that it has finalized the contract terms for importing around 3 million tons of U.S. crude oil as a part of its strategy to diversify its crude sources. It said that move marks the first term contract finalized by any Indian PSU oil firm for import of U.S. crude oil grades.

According to Times Now, the USD 1.5 billion deal follows IOC’s prior deal to buy crude oil from the U.S. through a term-tender contract in August 2018. During that time IOC had bought around 6 million barrels of U.S. crude oil under a single tender which was to be delivered between November 2018 to January 2019.

Prior to the recent move, IOC and other state-owned oil firms purchased crude oil from the U.S. through on the spot or present tender basis which included just one oil shipload. However, as the company had already entered into annual term import deals with national oil companies of the Middle East countries, the present policy restricted IOC from entering into large contracts with non-state foreign firms.

To overcome this restriction, IOC in 2018 proposed a tender to buy three U.S. crude shiploads instead of the usual practice of one cargo, an IOC official said.

For the record, the U.S. is the biggest producer of crude oil in the world, and in a bid to gain a presence in the Indian market, it is increasingly offering terms that offset the disadvantages it faces compared to its Middle-eastern rivals. Increased U.S. crude oil supplies can reduce India’s dependence on Middle-East suppliers such as Saudi Arabia, Kuwait and Iraq and enhance the country’s bargaining power with them.