India’s state-owned oil refiners are preparing to reduce their dependence on long-term crude oil contracts with Middle Eastern producers following supply disruptions caused by the recent Iran conflict, according to people familiar with the matter.
The planned shift would see refiners purchase a greater share of crude through the spot market while also pursuing supply agreements with global trading houses that can source oil from multiple regions. The strategy is aimed at improving energy security and reducing the risk of future supply shocks.
The Iran war exposed India’s heavy reliance on the Middle East for crude oil and liquefied petroleum gas (LPG), leading to supply shortages, higher prices and financial losses for refiners.
India imports roughly 90 per cent of its crude oil, consuming about five million barrels per day. State refiners, including Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation, currently secure nearly half of their crude through long-term contracts, with the remainder purchased on the spot market.
As part of its diversification strategy, India is looking to increase imports from emerging suppliers such as Guyana, Brazil and the United States, while also exploring agreements with international trading firms that can provide more flexible sourcing during periods of geopolitical instability.
The conflict also prompted an intensive diplomatic effort to safeguard India’s energy supplies. During the crisis, Indian officials reportedly engaged with Iran and other Gulf nations to ensure fuel shipments continued, including requests for safe passage of LPG tankers through the Strait of Hormuz.
Senior Indian leaders also undertook high-level diplomatic outreach in the region. External Affairs Minister S. Jaishankar visited the United Arab Emirates, Prime Minister Narendra Modi travelled to the Gulf, National Security Adviser Ajit Doval visited Saudi Arabia, and Petroleum Minister Hardeep Singh Puri held discussions in Qatar to help secure energy supplies.
The planned overhaul represents one of India’s most significant changes to its oil procurement strategy in years. Even before the conflict, Indian Oil had been exploring the creation of a trading desk in partnership with global commodities trader Vitol Group as part of efforts to modernize its purchasing operations.
In addition to diversifying crude imports, the Indian government is moving to strengthen its strategic energy reserves. The Oil Ministry has established a committee to examine plans for expanding reserves of crude oil, LPG and liquefied natural gas, with the goal of maintaining stockpiles sufficient to meet up to one month of domestic demand in the event of future disruptions.
