Russian exports via India encounter shipping difficulties

The Oil and Natural Gas Corp (ONGC) of India has encountered a problem when it comes to finding a tanker that is willing to ship 700,000 barrels of crude from Russia’s Far East, reported Reuters, citing unnamed sources.

ONGC is one of several Indian companies that has a stake in Russian oil and gas assets, and India has been careful in trying to maintain good relations with both Russia and the West ever since the war in Ukraine began on February 24th. With Russia being cut off from many markets as a result of sanctions, the price of Russian crude has fallen, and as a result, India has been buying more Russian crude over the past couple of months. It has been a keen buyer of Urals crude grade.

This year, India has bought more than twice as much crude from Russia in the two months since its invasion of Ukraine as it did in all of 2021.

ONGC has a 20% stake in the Sakhalin 1 project that produces a Russian grade known as Sokol, which ONGC exports through tenders. Sokol is mostly bought by North Asian buyers and loaded from South Korea.

A particular point about Sokol grade is that it requires vessels that can break through ice, restricting the number of vessels that can be hired to move the commodity. With many shippers wary not just of regulation but also of reputational risk and problems with insurance, ONGC is finding it hard to move the crude.

Cargoes of Sokol grade would normally first be shipped on ice-class vessels from the De-Kastri terminal in Russia’s Far East to South Korea, where they would be reloaded onto a conventional tanker.

Sokol grade is rarely bought by Indian refiners, and there are only a limited number of ice class vessels in the global merchant fleet that can be deployed at any time. ONGC relies on ice-class vessels provided by Russia’s state-owned Sovcomflot (SCF) for the transportation of crude to Yoesu port in South Korea, and from there the Indian company exports to buyers, mostly in North Asia.

However, Sovcomflot is losing its P&I insurance with the 13 Group Clubs following sanctions imposed by countries and blocs in the West. Even without those hurdles, shipping companies that trade in the West appear to be seeing any such deals involving Russian crude as not worth the risk. Reuters noted that in March ONGC did not receive any bids in its tender for export of Sokol. As a result, ONGC sold one cargo each to Indian state refiner Hindustan Petroleum Corp and Bharat Petroleum Corp (BPCL). BPCL’s cargo was scheduled for lifting early next month from Yeosu port in South Korea, while HPCL was awarded the cargo for lifting in end-May, said Reuters, citing unnamed shipping sources.

BPCL had floated an enquiry to charter a vessel from the South Korean port and sought to book the vessel Atlantis for early May shipments. But that did not come off, as ONGC could not arrange a vessel to Yeosu port. This was thought to be at least partly because of issues with securing insurance for the voyage.