India's Essar Oil will scrap its annual term crude deal with Saudi Arabia from 2012 because the refiner is not getting the grades it wants, revelaed a source with direct knowledge of the deal.

Essar has an agreement to import 20,000 barrels per day (bpd) oil from the kingdom.

Essar has recently upgraded its sole Vadinar refinery to process higher volumes of heavy and ultra sour grades that are cheaper to earn better refining profits. It also raised the capacity of the refinery by 25 per cent to 375,000 bpd.

"Essar wanted Arab Medium and Arab Heavy grades while Saudi Aramco was offering Arab Super Light and Arab Extra Light," the source said. "As the volumes are less, so Essar decided against renewing the deal for next year."

It was not immediately clear from where the Indian refiner would source additional barrels.

An Essar spokesman declined to comment.

Essar was in talks to buy crudes from Latin America as it upgrades its Vadinar plant, Chief Executive Officer Naresh Nayyar said in July.

According to data available with Reuters, other than Saudi Arabia, Essar imported oil from Brunei, Iran, Iraq, Qatar, Kuwait and the UAE.-Reuters