A deal between Indian Oil Corp and global trader Vitol to form an equal trading joint venture has been delayed due to differences over some clauses in the contract, two sources familiar with the matter said.
These include the volume of IOC’s crude purchases that will come under the joint venture’s control and the timing of an exit clause for the trader, the sources said.
IOC had hoped to sign the deal with Vitol at the India Energy Week conference last week as the country’s top refiner wanted to leverage the trader’s expertise and global network to expand its footprint in international crude and fuel trading similar to majors like Exxon Mobil and Shell.
IOC was expecting the proposed joint venture to handle a fraction of its overall imports, sources said.
Vitol wants to control 10 per cent to 15 per cent of IOC’s spot crude import volume, the sources said, adding that the firms were still negotiating the volume.
IOC and Vitol did not respond to emails seeking comment.
The joint venture, which the companies had planned to set up in Asia’s oil trading hub Singapore, will initially operate for five to seven years, a source had previously said, adding that an exit clause would be included for both partners.
Vitol is asking to extend the tenure of exit clause to at least 10 years, the sources said.
Globally, traders have turned their focus to India, amid its rising fuel demand and refining capacity. Indian refiners are also widening their crude import sources, buying more from the Middle East and South America as it cuts imports from top supplier Russia.
Indian Oil, along with its subsidiary Chennai Petroleum, controls about 31 per cent of India’s 5.2 million barrels per day (bpd) of refining capacity.
Another state refiner Bharat Petroleum Corp (BPCL) plans to set up a trading desk in Singapore in February.
