Nepal signed a historic oil trade deal with China on Wednesday, ending a four-decade supply monopoly of the Indian Oil Corporation (IOC).

A memorandum of understanding (MoU) was signed between the Nepal Oil Corporation (NOC) and China National United Oil Corporation (PetroChina) in Beijing to supply petroleum products to Nepal.

“Finally, we have the second oil trade partner. We can bring any amount of fuel as per our needs when required from the north,” said NOC spokesperson Deepak Baral. “A larger business-to-business agreement will be signed between the two state-owned oil companies within one and a half month,” he said.

As the country’s fragile economy continues to reel under severe fuel shortage due to an “unofficial trade embargo” imposed by India, the government took an unprecedented move to appoint its second oil trading partner.

Wednesday’s agreement provides the framework for the imports of petroleum products from China to break the cycle of short-term fuel crisis in Nepal, the NOC said. Fuel supply to Nepal has been curtailed by as much as 90 percent for the last one month due to the ongoing “blockade”.

In a separate deal on Wednesday, China also agreed to immediately supply 1.2 million litres of fuel to Nepal on grant.

Subsequently, there would be a larger commercial oil trade deal between the two countries, which would make China an additional long-term oil source, the NOC said, adding that a modality would be prepared on the required quantity, transportation route, quality and pricing, before signing the business-to-business deal.

Nepal could import 35-40 percent of its total fuel needs, it said. The country imported fuel worth Rs107.13 billion and Rs131.73 billion in 2012-13 and 2013-14 respectively. The fuel bills dropped considerably last fiscal year in the wake of a global drop in fuel prices even as imports grew. Due to extended power cuts and increase in development works, demand for petroleum products in Nepal has been growing by 10 percent annually.

Meanwhile Press Trust of India report adds China has expressed readiness for “friendly” talks with India to stabilise Nepal, reeling under acute fuel shortage due to a blockade of border points with India. “Both India and Nepal are friendly neighbours to China,” China’s foreign ministry spokesman Lu Kang told a media briefing when asked about reports of backchannel talks between New Delhi and Beijing over resolving the constitutional crisis in Nepal. “We hope that in maintaining regional stability and state-to-state friendship, all relevant countries can sit together and have friendly consultations so that consensus can be reached,” he said.

About Beijing stepping up fuel and food supplies through its recently reopened border in Tibet, Lu said “as a friend and neighbour of Nepal, China hopes that Nepal can have stable domestic situation after the passage of the new constitution”.

Asked whether China has commenced supplies to Nepal, currently hit by the Indian-origin Madhesis’ protests over the new constitution, Lu said “in view of their (Nepal’s) request, we will do our best to provide assistance and both sides are in communication”.

NOC asked to send tankers to Kerung

KATHMANDU: The Chinese government has asked Nepal Oil Corporation (NOC) to send 12 fuel tankers at the Kerung-Rasuwagadhi border point on Saturday to take delivery of fuel that China had promised as grant.

“As it is not feasible to bring in fuel from the border point at once, China has informed us through its embassy here to send the said number of tankers,” said NOC spokesperson Deepak Baral. “We will bring in fuel gradually.”

The NOC has provided details of 40 oil tankers to the Chinese authority to facilitate their entry into China. The Chinese authority has also notified the NOC that they would take care of issues regarding insurance, transport and labour law once the Nepali vehicles enter their territory, Baral added.