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Indian state refiners near first annual deals to buy Russian oil

January 24/2020

MOSCOW (MRC) -- Indian state refiners are close to signing their first annual deals to buy Russian oil, three sources privy to the development said, as the nation moves to tap new sources to hedge against geopolitical risks, said Reuters.

India, the worlds third biggest oil consumer and importer, which ships in over 80% of its needs, usually relies on the Middle East for the majority of its supply. However, its imports from that region slid to a four-year low last year.

Its acquisitions from Russia had typically been low, as transportation costs for its crude tend to be higher than those for Middle Eastern grades, and were made through the spot market rather than under contract.

However state refiners - Indian Oil Corp, Hindustan Petroleum Corp Ltd and Bharat Petroleum Corp Ltd - are now moving towards signing deals for Russian oil. The countrys top refiner IOC has already told Russias Rosneft that it intends to buy as much as 40,000 bpd of Russian crude, one of the sources said, some 2.5% of its total refining capacity.

"It is almost certain to sign a contract, a proposal has been sent to Rosneft, the source said. These are optional volumes. (IOC) will see the pricing then will decide when to draw the volumes." "IOC will take Russian oil whenever it is economical"

Bharat Petroleum (BPCL) and Hindustan Petroleum (HPCL) are also planning smaller deals, sources said. "We have the capabilities to process Russian oil. We are evaluating procuring Russian crude directly from the producers," said R. Ramachandran, head of refineries at BPCL.

BPCL currently buys Urals from traders. "We will be interested in Russian crudes if the price is right," he said. BPCL plans to raise its crude processing in 2020/21 by 1 million tonnes as operations at its Kochi and Bina refineries stabilize after an upgrade.

"There is some Russian crude in our basket, HPCL Chairman M. K. Surana said. We will consider buying Russian oil on techno-economic considerations."

Neither Rosneft nor the other Indian refiners named responded to Reuters emails seeking comments. Under Prime Minister Narendra Modis leadership since 2014, India has overhauled its crude import rules to give state refiners more flexibility to buy oil swiftly from varied regions, taking advantage of price differences between them.

The source said pricing of the crude will be linked to a complex formula, with reference to Brent and freight among other elements.

As MRC informed earlier, state-owned Bharat Petroleum Corporation Ltd (BPCL) will invest about Rs25,000 crore to set up an ethylene cracker plant at Rasayani, 50 kilometres from its Mumbai refinery, as the firm pushes further into the petrochemicals business to fuel growth.

BPCL will commission its Rs5,236 crore Propylene Derivative Petrochemical Project (PDPP) at Kochi refinery for manufacturing niche petrochemicals in the next six months. To expand its product portfolio further, BPCL is investing Rs11,130 crore to set up a facility in Kochi refinery for manufacturing Polyols, Propylene Glycol and Mono-Ethylene Glycol.

Ethylene and propylene are feedstocks for producing PE and polypropylene (PP).

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 1,904,410 tonnes in the first eleven months of 2019, up by 6% year on year. Shipments of all PE grades increased. PE shipments increased from both domestic producers and foreign suppliers. The PP consumption in the Russian market was 1,161,830 tonnes in January-November 2019, up by 7% year on year. Deliveries of all grades of propylene polymers increased, with the homopolymer PP segment accounting for the largest increase.

Bharat Petroleum Corporation Limited (BPCL) is an Indian state-controlled oil and gas company headquartered in Mumbai, India. Bharat Petroleum owns refineries at Mumbai, Maharashtra and Kochi, Kerala (Kochi Refineries) with a capacity of 12 and 9.5  million metric tonnes per year.
Author:Anna Larionova
Tags:PP, PE, India.
Category:General News
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