Indian state refiners have asked Abu Dhabi National Oil Co (ADNOC) to offer pricing its crude on a delivered basis as well to manage costs, three refining sources said, after fresh U.S. sanctions disrupted supplies and caused freight rates to spike.

Refiners in India, which imports over 80% of its oil, have been hit hard by a spike in global oil prices and shipping rates after Washington recently imposed sweeping new sanctions targeting Russian insurers, tankers and oil producers.

The world’s No. 3 oil importer and consumer became the top buyer of discounted Russian seaborne oil after the European Union shunned purchases and imposed sanctions on Moscow following its invasion of Ukraine in 2022.

Russian oil accounted for more than a third of India’s imports last year, but U.S. sanctions are tightening supply, pushing the buyer back to traditional Middle East sources.

While most Middle East crude producers sell oil on a free-on-board (FOB) basis via long-term contracts to Asian buyers, Russian oil traders have been supplying crude to India on a delivered at port (DAP) basis that includes insurance, shipping and other services borne by the seller.

State-owned Indian refiners including Indian Oil Corp IOC, Hindustan Petroleum Corp (HPCL) HINDPETRO and Bharat Petroleum Corp BPCL have asked ADNOC for DAP price quotes, the sources said.

“We want our term supplier to give both FOB and DAP quotes,” one of the sources said.

“There is a possibility we may get better pricing in DAP, especially when freight rates are going to go up.”

It was not immediately clear if ADNOC would agree to such terms.

The Indian state refiners and ADNOC did not immediately respond to Reuters’ emails seeking comments.

ADNOC sets its monthly official selling prices (OSPs) on an FOB basis and has rarely, if ever, sold term supplies to Asian buyers on a delivered basis, three traders familiar with long-term Middle East oil deals said.

In addition to their request to ADNOC, the refiners, which own around 60% of India’s 5.14 million barrels per day (bpd) crude processing capacity, planned to put in similar requests with other Middle East suppliers including Saudi Aramco 2222, the sources said.

Under DAP terms, Indian companies would be liable for such cargoes only after they are discharged.

While freight rates have mainly risen for Russian oil, that has a ripple effect on the broader markets.

“In our spot tender also we give bidders an option to give quotes for both DAP and FOB cargoes. So now we want to extend that option to our term purchases as well,” a second of the sources said.

“After our due diligence we can decide whether to go for DAP or FOB.”

Indian state refiners negotiate their term contracts individually. Their combined purchase from ADNOC could be higher in the next fiscal year from April 1 than this year as HPCL operates its upgraded Vizag refinery at full capacity and starts up its new 180,000 bpd Barmer refinery in the desert state of Rajasthan this quarter, the sources said.

Source: Reuters