The largest producer of gas and oil in India, ONGC, has entered into long-term agreements with refiners to sell the crude oil it extracts from offshore resources in Mumbai at a premium to the global benchmark Brent, according to sources. The Oil and Natural Gas Corporation (ONGC) has agreements with Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) to sell each company around 4.5 million tonnes of crude oil.
ONGC objected to the reductions, claiming that by imposing a windfall profit tax, the government has eliminated any benefits of the recent spike in oil prices. Additionally, it proposed the idea of a term contract as a workaround, which would include selling a set amount of oil at the predetermined benchmark for a year. It initially made a deal with BPCL, which has a refinery in Mumbai that can turn crude oil into fuels like petrol and diesel, to sell 4 million tonnes of crude oil annually plus an optional 0.5 million tonnes.
A similar agreement with HPCL, which also owns a refinery in Mumbai, came after this. According to them, ONGC also inked a deal to sell smaller amounts to Mangalore Refinery and Petrochemicals Ltd (MRPL), a subsidiary. ONGC had put up 33 lots of 412,500 barrels apiece in the first auction held last year; these lots included seven cargoes from Mumbai offshore and 26 cargoes from Uran near Mumbai. The lots were to be sold commencing November 1, 2022, at a minimum premium of USD 0.5 over the average monthly price of Brent.
Due to local taxes, uran cargoes are valued at a lesser premium than offshore supply. Pipelines from offshore fields in Mumbai immediately link to the refineries in Mumbai owned by BPCL and HPCL.
