Indian refiners are exploring options to import crude oil from Canada to diversify their sourcing basket amid intensifying global energy market uncertainties, according to Atanu Mukherjee, CEO of Dastur Energy. The move comes as Indian oil companies aim to reduce dependence on traditional suppliers such as West Asian producers and Russia, ensuring supply security while negotiating better pricing terms.
Why Are Indian Refiners Looking at Canadian Crude?
Speaking at an industry event, Mukherjee highlighted that Canada’s abundant heavy oil reserves, stable political environment, and technological advancements in extraction and carbon management make it an attractive supplier for Asian markets. India, the world’s third-largest oil importer, currently relies heavily on West Asian countries like Iraq, Saudi Arabia, and UAE, and has ramped up Russian oil imports post-Ukraine war due to steep discounts.
However, with geopolitical risks rising in the Middle East, OPEC production decisions influencing price volatility, and potential secondary sanctions tightening Russian trade, Indian refiners are proactively assessing new supply corridors, including North America.
Key Factors Driving Indian Interest in Canadian Oil
- Supply Diversification Strategy: The Ministry of Petroleum has mandated state refiners to widen the import portfolio to enhance national energy security.
- Improved Shipping Economics: Advances in tanker design and potential long-term contracts could offset higher transportation costs from Canada’s west coast.
- Long-term Pricing Stability: Canadian oil sands production is less influenced by short-term geopolitical disruptions compared to West Asian suppliers.
- Carbon Management Synergies: Canadian producers’ investments in carbon capture align with Indian refiners’ decarbonisation targets under net-zero commitments.
Current Indian Crude Oil Import Profile
| Supplier Country | Share of India’s Imports (FY24) | Key Grades Imported |
|---|---|---|
| Iraq | 23% | Basrah Light, Basrah Heavy |
| Russia | 19% | Urals |
| Saudi Arabia | 17% | Arab Light, Arab Heavy |
| UAE | 10% | Murban |
| US | 7% | WTI Midland, Mars |
| Canada | Negligible | Limited trial cargoes |
Challenges in Sourcing Canadian Oil
While Canada offers strategic advantages, logistical and economic hurdles remain:
- Lack of Direct Pipeline to Asia: Canada’s west coast export capacity is constrained, though the Trans Mountain Expansion Project (TMX) is expected to add 590,000 barrels per day capacity, primarily targeting Asian buyers.
- Freight Costs: Longer voyage durations translate to higher shipping costs, though these may be balanced by grade discounts or long-term supply contracts.
- Refinery Configuration Compatibility: Indian refiners predominantly process medium sour crudes; Canadian heavy crudes like Western Canadian Select (WCS) require technical adjustments or blending.
Canadian Export Readiness
Canada has been actively seeking to diversify its export markets beyond the US. TMX, expected to be operational in 2025, will enable Canadian producers to access Pacific markets, including India, South Korea, Japan, and China. Analysts note that:
- Canada produces ~4.5 million barrels per day, with ~3.8 million bpd exported, primarily to the US.
- Asia-bound volumes are minimal but poised to grow post-TMX commissioning.
Potential Benefits for Indian Refiners
| Benefit | Explanation |
|---|---|
| Supply Security | Reduces geopolitical risk concentration by adding a G7 source |
| Price Negotiation Leverage | Diversification improves bargaining power with Middle East suppliers |
| Strategic Reserves Diversification | Canadian heavy crudes offer storage and blending flexibility for Indian SPR facilities |
| Carbon Strategy Alignment | Collaboration on carbon capture technologies for heavy crude refining |
Industry Expert View
Mukherjee of Dastur Energy emphasised that Canadian producers are keen to establish long-term contracts with Asian refiners to ensure steady offtake, especially as ESG pressures grow on oil sands projects. He added:
“India is in a strong position to negotiate mutually beneficial deals with Canada, ensuring both energy security and strategic alignment on decarbonisation technologies.”
India’s Strategic Petroleum Reserve (SPR) Implications
India’s SPR programme, with facilities in Visakhapatnam, Mangalore, and Padur, holds around 5.3 million tonnes capacity currently, with expansions underway. Diversifying SPR fill grades to include Canadian heavy crude:
- Enhances blend flexibility for domestic refining systems
- Expands supplier base for emergency inventory planning
Broader Geopolitical and Trade Implications
A long-term Indian pivot towards Canadian oil could:
- Strengthen India-Canada Bilateral Relations: Energy trade will complement ongoing negotiations on an Early Progress Trade Agreement (EPTA) to deepen economic ties.
- Counterbalance Russian Discounts: Provides Indian refiners leverage amid possible tighter enforcement of the Russian oil price cap mechanism.
- Impact Middle Eastern Supplier Dominance: OPEC producers may need to adjust pricing to retain market share in India, their key Asian customer.
Recent Developments Strengthening This Trend
| Month | Development |
|---|---|
| March 2025 | TMX pipeline construction enters final commissioning phase, targeting late 2025 operations |
| April 2025 | Indian Oil Corporation delegation visits Canada to explore direct crude procurement deals |
| May 2025 | Canadian producers announce new carbon capture partnerships, enhancing ESG acceptability |
| June 2025 | ONGC and Canadian firms initiate technical discussions on heavy oil refining compatibility |
Outlook
Indian refiners are expected to:
- Conduct technical assessments of Canadian heavy grades compatibility with their facilities.
- Evaluate freight economics under long-term FOB contracts.
- Finalise trial cargo imports post-TMX commissioning to establish grade reliability and operational performance.
Analysts believe India’s move to include Canadian crude in its import basket is part of a larger strategic realignment to de-risk supply chains and strengthen energy diplomacy with non-traditional partners.
Conclusion
Indian refiners’ growing interest in Canadian oil reflects New Delhi’s proactive approach to energy security amid volatile geopolitical and commodity market conditions. While logistical and compatibility challenges remain, emerging infrastructure developments like TMX and strategic decarbonisation synergies could pave the way for deeper energy ties between India and Canada in the coming years.
Disclaimer: This news analysis is based on publicly available statements, industry data, and market forecasts. It does not constitute investment advice or official policy recommendations and is intended purely for informational and journalistic purposes.
