India’s crude oil import basket is diversifying with firms looking for hedging against possible supply disruptions and many newer PSU refineries being keen to process heavier crude to improve margins...
India’s crude oil import basket is diversifying with firms looking for hedging against possible supply disruptions and many newer PSU refineries being keen to process heavier crude to improve margins, reports Siddhartha P Saikia in New Delhi. The shift, although gradual, is away from West Asia, conventionally the largest supplier of crude oil to India of around 60%, and towards South America and Africa.
Imports from West Asia dropped 5.16% in FY15 to 109.88 million tonnes (mt) from the previous year; however, African suppliers exported 33.05 mt of crude oil to India in FY15, up 8.75% from the year earlier, and South American explorers supplied 34.46 mt to Indian refiners in FY15, 8.6% higher than in FY14.
The trend has sustained in the first half of the current fiscal, especially in the case of Africa, which exported 20.7 mt of crude oil to India during the period.
Industry watchers attribute the rise in procurement from Africa and South America to cheaper supplies. Indian refiners witnessed a price gap in the range of $5-7 per barrel between crude flowing in from countries such as Brazil, Columbia, Venezuela, Angola and Nigeria and those from Kuwait Qatar or the UAE, they said.
Also, buying heavier crude could help the PSU refiners — Indian Oil Corporation (IOC), Bharat Petroleum and Hindustan Petroleum — improve their gross refining margins by about $1-1.50 a barrel. Private refiners such as Reliance Industries and Essar Oil had been processing heavier crude oil, which is why their GRMs remained higher. Many Indian refiners have entered into are in the process of clinching long-term (15-20 year) contracts with countries like Venezuela.
However, some Indian refineries are facing difficulty in processing dirtier crude oil procured from South America or Africa. The bad crude grades are often mixed with lighter ones from West Asia.
The supplies from South America, sources said, are likely to rise further once state-run IOC fully commissions its new greenfield 15 million tonnes per annum (mtpa) refinery at Paradip in Odisha in FY17. The country’s biggest refiner processed 174 different grades of crude in FY15 against 146 in FY13. IOC has already started processing crude from Venezuela, Brazil and Mexico.
India’s refining capacity has more than tripled over the last 15 years — from 67 mtpa in 1999 to 215 mtpa in 2014. Domestic consumption of petroleum products was 158 mt during FY14 compared with 165 mt in FY15.