A planned equal trading joint venture between Indian Oil Corp (IOC) and global commodities trader Vitol has been put on hold as the companies seek resolution on a number of contractual provisions, according to sources familiar with the discussions.
Central to the impasse are disagreements over how much of IOC’s crude import volume would fall under the joint venture’s control and the schedule for an exit clause that would allow the trader to leave the partnership. The exact volume to be managed by the JV and the timing and duration of an exit option remain subject to negotiation, the sources said.
IOC had aimed to sign the agreement at the India Energy Week conference last week as it looks to use Vitol’s trading expertise and global distribution network to broaden its role in international crude and fuel trading - an ambition the company hopes will mirror the trading footprints of major oil companies. The source material indicates IOC envisaged the proposed JV handling only a fraction of the company’s total imports.
On specific terms, Vitol is seeking control over 10% to 15% of IOC’s spot crude import volume, though the final share had not been settled and remains part of ongoing discussions, the sources added. Both IOC and Vitol did not respond to emailed requests for comment on the negotiations.
The companies planned to register and base the joint venture in Singapore, which serves as Asia’s oil trading hub. Earlier planning indicated the JV would operate initially for a period of five to seven years, with an exit clause incorporated for both partners. Sources reported that Vitol is pushing to lengthen the effective tenure before triggering that exit option to at least 10 years.
Traders internationally have increasingly focused on India, driven by the country’s growing fuel demand and expanding refining capacity. At the same time, Indian refiners have been diversifying their crude procurement, increasing purchases from the Middle East and South America while reducing reliance on Russia.
Within India’s refining sector, Indian Oil together with its subsidiary Chennai Petroleum account for roughly 31% of the nation’s total refining capacity, estimated at 5.2 million barrels per day. Separately, state refiner Bharat Petroleum Corp Ltd (BPCL) is reported to be planning the launch of a trading desk in Singapore in February.
What remains unresolved
- The precise share of IOC’s crude imports to be routed through the joint venture.
- The timing and length of exit provisions, with Vitol seeking a longer effective period.
- The final commercial structure that will determine how much operational control Vitol would have over spot import volumes.