India’s ONGC struggling to move Russian oil to Asia

India's ONGC struggling to move Russian oil to Asia

April 27, 2022

According to sources, India's Oil and Natural Gas Corp (ONGC) is battling to secure a vessel to transfer 700,000 barrels of petroleum from Russia's Far East, indicating that Western sanctions are disrupting complex trades involving one of Moscow's biggest partners. ONGC is one of several Indian corporations with investments in Russian oil and gas assets, and India has been acquiring more Russian crude since Moscow attacked Ukraine, snatching up the popular Urals crude grade, while other consumers have rejected Russian shipments.

ONGC owns a 20% stake in the Sakhalin 1 project, which provides Sokol, a Russian grade that ONGC exports via tender. Sokol is usually purchased and loaded in South Korea by North Asian customers.

But, due to worries from shippers about reputational risk and the increasing difficulty for Russian assets to secure insurance coverage, Moscow's capacity to export that grade, which requires vessels that can break through ice, is becoming more difficult. Usually, shipments of Sokol oil are carried to South Korea using ice class tankers from the De-Kastri facility in Russia's Far East, where they are then unloaded onto a regular tanker.

Because of the difficulty of logistics, Indian refiners rarely purchase Sokol grade crude. The global merchant fleet has a limited number of ice class vessels that can be deployed at any time. ONGC depends heavily on ice-class vessels supplied by Russia's state-owned Sovcomflot (SCF) to carry crude to Yeosu port in South Korea, from which the Indian company exports to buyers primarily in North Asia.

India's ONGC struggling to move Russian oil to Asia

According to shipping sources, sanctions imposed on Russia by the United States, the United Kingdom, the European Union, and Canada, as well as various constraints on SCF, are making it tough for Russian ships, including SCF's fleet, to sustain insurance and reinsurance cover for voyages.

Shipping companies are also less eager to transfer Russian oil in Asia since they are concerned about the potential reputational implications associated with charters. In the previous month, ONGC received no offers in its tender for the export of Sokol because purchasers withdrew transactions owing to Western sanctions.

As a result, ONGC sold one cargo each to Hindustan Petroleum Corp and Bharat Petroleum Corp (BPCL) of India. As per shipping sources, BPCL's cargo was planned to be lifted early next month from South Korea's Yeosu port, while HPCL was granted the cargo for lifting in late May.

According to the reports, BPCL inquired about chartering a vessel from the South Korean port and attempted to reserve the MV Atlantis for early May exports. The arrangement, unfortunately, failed since ONGC was unable to arrange a vessel to Yeosu port, due to challenges with obtaining insurance for the voyage.

ONGC, HPCL, and BPCL did not answer requests for comment from Reuters. This year, India has purchased more crude from Russia in the two months since its invasion of Ukraine than it did in the entire year of 2021. 

Russia's marine sector is dealing with the discontinuation of services such as ship certification by leading overseas providers such as the United Kingdom's LR and Norway's DNV. According to Reuters, marine gasoline suppliers have stopped fueling vessels carrying the Russian flag at major European hubs such as Spain and Malta, giving an additional setback to Moscow's exports.

Source: Marine Link