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India aims to diversify crude oil supplies, which maybe hard to achieve due to harsh realities of the global market

April 19/2021

MOSCOW (MRC) -- Indias obvious displeasure with restrictions on output imposed by OPEC and its allies, and its aim to diversify crude oil suppliers, may run into the harsh realities of the global market, reported Reuters.

The worlds third-biggest oil importer and consumer has told state-owned refiners to speed up the diversification of crude imports in order to cut dependence on its main source of supply, the Middle East, reported Reuters in March, citing two sources with knowledge of the plan.

Indias supply is dominated by members of the group known as OPEC+, which includes the long-standing producer group and allies such as Russia. The OPEC+ decision to continue its output cuts of around 7 million barrels per day (bpd) into April was met with anger in India, which imports 84% of its crude needs, with more than 60% coming from the Middle East.

Buying crude from the Middle East has made sense for India, given its close proximity to the region, which cuts down on shipping time and costs and allows Indian refiners to be flexible in their purchases. But with the output restrictions helping drive crude oil prices to a 14-month peak, India is worried that its recovery from the economic hit from the coronavirus pandemic may be hurt by high fuel prices.

Brent has been climbing steadily in recent months and the futures contract has gained 30% since the end of last year. Already, the rising prices are starting to affect demand in India, especially since the reform of the fuel taxation and subsidy system means consumers are now more directly exposed to changes in crude prices.

Indias oil imports appear to have fallen sharply in February, with Refinitiv Oil Research estimating that 4.1 million barrels per day (bpd) were discharged in the month, a four-month low and down from 4.39 million bpd in January and 4.75 million bpd in December. Indias biggest supplier in recent months has been Iraq, with Refinitiv shipping and port data pointing to imports of 900,000 bpd in February, in line with Decembers 890,000 bpd.

However, imports from Saudi Arabia, the leading member of the OPEC+ group, have slumped, with just 590,000 bpd arriving in February, down from 730,000 bpd in January and 910,000 bpd in December. India has made up some of the losses from Saudi Arabia from Russia, with February imports pegged at 180,000 bpd, up from just 60,000 bpd in January and 130,000 bpd in December.

India is also buying more from the United States, with February arrivals estimated at 590,000 bpd, up from 480,000 bpd in January and 260,000 bpd in December.

However, if India is to meaningfully diversify away from the Middle East, it will run into the problem of sourcing the medium to heavy grades of crude preferred by many of its refineries. There is plenty of crude available from west African exporters such as Nigeria and Angola, but this tends to be lighter grades, which yield more gasoline and less diesel.

There is an opportunity to buy crude from emerging exporter Guyana, with the South American nation ramping up output of its medium to light crude, but its unlikely India could obtain sufficient volumes to make much of an impact. In reality, the best sources of alternative supplies for India are both OPEC producers, but both outside the current output restrictions, and both subject to political considerations.

The two exporters in question are Iran and Venezuela, which are both subject to US sanctions on their crude exports, measures which India has so far observed. India hasnt officially imported any Iranian crude in more than a year, and it last imported cargoes from Venezuela in November. Both these countries supply the heavier crude grades preferred by India, and both are capable of shipping volumes large enough to allow the South Asian nation to cut reliance on Saudi Arabia and other Middle East producers such as Kuwait.

But resuming purchases from Iran and Venezuela would likely require some kind of understanding to be reached between New Delhi and the administration of new US President Joe Biden. Until this is reached, and its by no means certain that an accommodation can be reached, India may find itself scrambling to source suitable crude grades from a limited pool of suppliers, and paying handsomely for the privilege.

As MRC informed before, earlier this month, Mammoet completed the lifting of three columns for the Guru Gobind Singh Polymer Expansion Project in Bathinda, Punjab, India. Thus, the team lifted a 1,305t ethylene fractionator, and 2 propylene fractionators weighing 1,200t and 2,490t - the second of which was lifted in two sections. The completed project is part of an expansion plan to build an integrated petrochemical manufacturing site within Guru Gobind Singhs current refinery complex. The refiner aims to increase Indias refined hydrocarbon product capacity.

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

According to MRC's ScanPlast report, Russia's estimated PE consumption totalled 241,030 tonnes in January 2021 versus 217,890 tonnes a year earlier. Only shipments of low density polyethylene (LDPE) and high density polyethylene (HDPE) increased. At the same time, PP shipments to the Russian market reached 141,870 tonnes in January 2021 versus 123,520 tonnes a year earlier. Supply of homopolymer PP and PP block copolymers increased.
Author:Margaret Volkova
Tags:Africa, Near East, PP, PE, crude and gaz condensate, PP block copolymer, homopolymer PP, propylene, LDPE, HDPE, ethylene, petrochemistry, Venezuela, India, Iran, Russia, Saudi Arabia, USA.
Category:General News
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