IOC, BPCL, HPCL are the main state-run refiners in India
The key challenge of pricing such long-term transactions: Platts Analytics
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Indian state refiners, bitten by soaring crude prices, are working on a plan to jointly negotiate forward crude import deals with the goal that committing to larger volumes could potentially help get relatively lower prices, said Hindustan Petroleum Corp. chairman Mukesh Kumar Surana. on the sidelines of the India Energy Forum by CERAWeek.
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The comments from one of the country’s major state-owned refiners come at a time when the country, which imports more than 80% of its crude oil needs, has seen its oil import bill increase nearly three times in some quarters of this year, compared to the same time a year ago.
“We are exploring the path of common term agreements with our suppliers. But this is still in the discussion stage,” Surana told S&P Global Platts.
Lim Jit Yang, Asia-Pacific Oil Markets Advisor at S&P Global Platts Analytics, said the biggest challenge with this initiative, if it comes to fruition, would be how to finalize pricing for these long-term deals. .
“High oil prices will undermine the global economic recovery, and the idea of ââlong-term supply contracts offering predictable and stable prices can be a win-win situation for both consuming and producing countries,” he said. .
“However, the pricing of such deals can be complicated by the rapidly changing energy landscape as the world embraces the energy transition,” he added.
Surana said he expects world crude prices to hover between $ 80 / bbl and $ 90 / bbl through December, while Indian refiners would be comfortable when prices hit between $ 60 / bbl. $ / b-$ 70 / b.
Indian Petroleum Minister Hardeep Singh Puri earlier told the Indian Energy Forum that India’s crude import bill, which accounts for around 20% of the country’s overall import bill, had risen to $ 24 billion in the quarter ended in June, compared to $ 8.8 billion in the same quarter of the year. earlier.
âCrude prices above $ 90 / bbl can destroy demand in consuming countries like ours,â Surana said.
Surana’s comments echoed a similar sentiment from the country’s petroleum minister who told the Indian Energy Forum earlier that soaring oil prices could potentially create obstacles to a post-pandemic economic recovery, and urged major global producers to take action to potentially rectify the current supply. and demand imbalances.
But Saudi Energy Minister Prince Abdulaziz bin Salman told the forum that OPEC and its allies see no shortage of crude oil in the market. Dated Brent prices have more than doubled in the past year, with S&P Global Platts pricing the benchmark at $ 83.70 / bbl on October 21.
“We expect crude prices to moderate from January. Even the decline in US crude reserves has a significant impact on high world crude prices,” he said.
Surana said India’s demand for most petroleum products had already reached pre-pandemic levels, thanks to strong demand for transportation fuels, gasoline and diesel.
âThe higher demand levels for transportation fuels like diesel and gasoline will be sustainable from November in the absence of any new wave of COVID-19,â Surana said.
India’s demand for petroleum products in September rose 5.2 percent year-on-year to 15.92 million tonnes, or 4.2 million bpd, according to provisional data from the Petroleum Planning and Analysis Cell.
Race rates rebound
Surana said that the average cycles of HPCL at its three refineries in Mumbai, Vizag and Bhatinda are now 100%, mainly due to above-average cycles at the Vizag refinery, although the refinery in Mumbai is still operating at around 85% of its capacity.
He said HPCL refineries would continue to seek a blend of high and low sulfur crude grades for processing, as demand for gasoline and diesel now trended upward.
Delegates to the Indian Energy Forum said the country’s refiners are increasingly looking to dramatically improve their petrochemical portfolios. This would serve the dual purpose of meeting growing domestic demand, while providing a cushion for the future in case the demand for transportation fuels slows due to the shift to cleaner forms of energy.
âThe decision to invest in the Indian refining segment will depend on the changing landscape of fuel demand, the life cycle of a refinery and the speed of the energy transition. Investment decisions will also depend on the plan to reduce the risks of the business from refining to petrochemicals, âSurana told the Indian Energy Forum.