Indian Oil Corporation Alters Crude Procurement Strategy Amid Geopolitical Shifts

Introduction

Indian Oil Corporation is India’s largest government-owned energy company and a Fortune Global 500 enterprise, headquartered in the Centre of India. It operates across the entire hydrocarbon value chain from refining and pipeline transport to petrochemicals, natural gas and renewable energy. As of FY2025, the company recorded revenues of more than ₹7.6 trillion and is actively expanding its refining capacity to 98.4 million tonnes per annum by 2028.

IOC also leads the country’s fuel retail network with more than 63,000 customer touchpoints and is investing ₹1.66 lakh crore over five years to strengthen its presence in green hydrogen, sustainable aviation fuel and renewable electricity. With a strong ESG footprint and a strong commitment to net-zero emissions by 2046, Indian Oil remains a cornerstone of India’s energy security and transition strategy. 

Recently, the IOC has changed the way it buys crude oil in its latest purchase. Instead of buying oil from the United States, it started buying from West Africa and the Middle East. Experts believe this change is due to rising costs, global trade issues, and political pressures.

In its September deal, IOC bought a total of four million barrels of crude oil. This includes:

• Two million barrels from West Africa
• One million barrels of Nigerian oil (Agbami and Usan grades) from the French company ‘TotalEnergies’
• One million barrels of Das crude from Abu Dhabi, supplied by Shell

The Nigerian oil was bought on a “free-on-board” basis, which means IOC will handle the shipping from the port. The Das crude was bought on a “delivered” basis, meaning Shell will take care of the delivery to Indian ports. These shipments are expected to arrive between late October and early November.

This is a change from IOC’s earlier purchase, where it bought five million barrels of U.S. oil (West Texas Intermediate). Although U.S. oil was cheaper for a while, the overall cost to bring it to India has gone up. Even though the price difference between Brent and WTI oil is about $4 per barrel, other grades are now more affordable.

India had been buying more U.S. oil recently to help reduce its trade gap with America. But the U.S. government has increased tariffs on Indian goods to 50%, partly because India continues to buy oil from Russia. This has made U.S. oil less attractive.

By choosing oil from West Africa and the Middle East, IOC is trying to save money and avoid political complications. This move also helps India keep its energy supply stable while dealing with global challenges.

This procurement decision marks a departure from IOC’s previous tender activity, in which the refiner had acquired five million barrels of U.S. West Texas Intermediate (WTI) crude. While U.S. oil had recently benefited from a favourable arbitrage window, the landed cost of WTI has remained comparatively high, despite the Brent-WTI front-month differential hovering around $4 per barrel.

Who Can Apply: Eligible Suppliers and Strategic Partners

The tender was open to global crude suppliers with established compliance credentials and delivery capabilities aligned with IOC’s port infrastructure. Typically, eligible participants include:

• International oil majors with FOB and delivered cargo options (e.g., Shell, TotalEnergies)
• National oil companies from the Middle East and West Africa with bilateral trade agreements
• Trading houses with access to spot cargoes and flexible delivery terms
• Entities with prior IOC registration and proven performance in crude delivery and documentation

Suppliers were expected to meet IOC’s technical specifications, including sulphur content, API gravity, and compatibility with Indian refining configurations. Preference was reportedly given to suppliers offering competitive pricing, transparent freight terms, and geopolitical risk mitigation.

How to Apply

IOC’s crude procurement is carried out through its eProcurement portal (IOC Tender Portal) that allows transparent bidding and documentation. The process generally entails:

Tender Notification: Published through IOC’s portal and trade bulletins, indicating grade specifications, volume, delivery window, and submission deadlines.

Bid Submission: Online submission of technical and commercial bids by suppliers, including cargo origin, pricing structure (FOB or delivered), and compliance documents.

Evaluation Basis: The bids are evaluated upon landed cost, grade compatibility, reliability of delivery, and geopolitical factors.

Award and Confirmation: A confirmation by the IOC’s procurement team follows successful bidders, leading to scheduling and coordination of logistics.

Here, the awarded cargoes demonstrate IOC’s strategic shift toward diversified sourcing, with Nigerian and Middle Eastern grades providing more economic and lower tariff-exposure volatility.

India’s crude procurement strategy has come under increasing scrutiny following the Trump administration’s decision to impose a 50% tariff on Indian exports, citing New Delhi’s continued purchase of Russian oil. While Indian refiners had previously increased U.S. oil purchases to help narrow the trade surplus, the landed cost of American crude, combined with tariff escalations, has prompted a reassessment.

Watchers point out that India’s dealings with Russian petroleum, typically bought at a $2–$3 per barrel discount to Dubai crude, have helped refiners keep fuel prices steady in the domestic market. This has drawn diplomatic pressure from Washington, which sees such purchases as backhanded support for Moscow’s military action.

Indian refiners, including IOC, have in turn sought to diversify their import basket, trading off economic profitability for geopolitical risk. The recent tender result reiterates this strategic flexibility, with West African producers like Nigeria and Angola set to gain from the higher demand in India.

Additionally, the transition fits into wider energy security goals. IOC Chairman A.S. Sahney recently stated that the company is steadfast against global price fluctuations, with crude procurement being driven by market rationale and not political alignment. IOC’s ₹34,000 crore FY26 capital spend plan further supports its aim at expanding refining capacity and operational flexibility.

Conclusion

IOC’s September crude tender is a strategic shift in India’s energy purchasing environment. Prioritising West African and Middle Eastern grades over U.S. crude, the refiner has indicated a pragmatic shift in response to tariff pressures, cost differentials, and geopolitical restrictions. The shift diversifies India’s import basket, but also bolsters economic relationships with new oil-producing countries.

For stakeholders and suppliers, the tender result provides a glimpse into India’s shifting procurement rationale, where cost-effectiveness, delivery certainty, and geopolitical impartiality increasingly drive decision-making. While global energy markets remain uncertain, Indian refiners will be bound to continue using nimble sourcing strategies to enhance national energy security and economic stability.

FAQs

1. Why did Indian Oil Corporation avoid U.S. crude in its recent tender?

IOC is said to have avoided buying U.S. West Texas Intermediate (WTI) crude because of higher landed cost and recent tariff hikes. Even though there was a conducive Brent-WTI price spread, overall economics, considering freight, insurance, and geopolitical risk, preferred West African and Middle Eastern grades.

2. Which grades did IOC buy instead?

Indian Oil Corporation (IOC) has reportedly purchased four million barrels of crude in its latest tender. This includes two million barrels from West Africa, one million barrels of Nigerian grades Agbami and Usan from TotalEnergies on a free-on-board basis, and one million barrels of Abu Dhabi’s Das crude from Shell on a delivered basis. All cargoes are expected to arrive at Indian ports between late October and early November.

3. What do “FOB” and “delivered basis” mean in this context?

FOB (Free-on-Board): IOC takes responsibility for shipping the crude from the supplier’s port.

Delivered basis: The transporter (e.g., Shell) undertakes shipping and delivery to the IOC’s specified port in India. This difference impacts freight charges, insurance, and logistics management.

4. How does this change affect India’s trade with the U.S.?

India had raised U.S. crude imports in recent months to assist in mitigating its trade surplus with the U.S. Yet, Washington’s move to double tariffs on Indian imports, on account of ongoing Russian oil purchases, has made the trade balance more complicated. IOC’s smaller U.S. sourcing could further increase the surplus, unless counterbalanced by other trade actions.

5. Is this change part of a larger trend among Indian refiners?

Yes. Some Indian refiners have been increasing the diversity of their crude sources to deal with cost volatility as well as geopolitical risk. West African and Middle Eastern grades are relatively priced competitively as well as less diplomatically complicated, particularly in the context of ongoing Russian oil import scrutiny.

6. What are the economic benefits of West African and Middle Eastern grades?

West African and Middle Eastern crude grades are often preferred by Indian refiners due to their lower freight costs, given geographical proximity, and more flexible delivery arrangements. Compared to U.S. and Russian grades, they tend to offer more competitive pricing and carry fewer risks related to international sanctions or trade tariffs. These factors make them attractive options for refiners seeking economical and politically neutral sources of oil.

7. What impact does this have on domestic fuel prices in India?

Although crude procurement choices don’t directly determine retail fuel prices, reduced landed prices can enable refiners to keep margins steady. This consequently helps the government to ensure that fuel prices remain affordable to consumers amid volatility in the global oil market.

8. Will the IOC keep on importing Russian oil?

IOC and other Indian refiners have kept importing Russian crude, mostly at reduced prices. These purchases are under international observation and could affect trade ties with Western allies. The tender issued now indicates a guarded diversification policy rather than an exit from Russian grades.

9. How do suppliers engage in IOC’s crude tenders?

The eligible suppliers will have to:

Register on the IOC’s eProcurement portal

Comply with technical and regulatory requirements

Provide bids with transparent pricing, terms of delivery, and documentation. Tenders are normally published through the IOC’s official media and trade newsletters.

10. What are the wider implications for India’s energy security?

The procurement strategy of IOC is a manifestation of India’s energy diversification and resilience efforts. By procuring from various regions, India avoids over-reliance on a single supplier and enhances its capacity to absorb global disruptions, sanctions, or price shocks.