Has India peaked in Russian oil imports?


From the fort located on an island outside the heart of historic Mumbai, visitors can spot giant oil tankers unloading cargo at two oil refineries on the city’s south-east coast. Just a year ago, these ships were almost certainly transporting crude oil from one of a dozen or so major suppliers: the Middle East, the United States, and West Africa. Currently, it is more likely that it will be Russian oil. According to data from the analytical company Kpler, last month Moscow accounted for 46 percent. Indian oil imports, a staggering jump from less than 2% to before its invasion of Ukraine. In absolute terms, May was record-breaking in this respect. It is true that China has also used much more Russian oil over the past year and imports have reached record levels, but it is India – a strategic partner of the US – that has supported the Russian economy. Experts are wondering if and how long this shopping frenzy can last? “Rebates” for India are shrinking while financial pressure on the Kremlin is mounting. Funds are needed more urgently than ever to quell domestic threats to Vladimir Putin’s rule. This also worked for India, which was eager to buy cheaper fuel to keep inflation in check. In April, the average cost of Russian oil delivered to India’s coast was $68.21 a barrel, while Saudi oil cost $86.96.
“Indian refiners have achieved a very high level of purchasing from Russia, beyond what we thought was possible,” said Jamal Qureshi, managing director of strategy and analysis at Petro-Logistics. “They quickly replaced species [ropy – red.] similar to the Urals, which we expected, but they also phased out other grades.” Refineries on India’s Elephanta Island suggest that the surge in Russian oil imports is set to subside. The reason is the infrastructure. While the analyzes used to determine the optimal feedstock for the refinery largely pointed to a Russian Ural blend, none of the factories were designed to accept Russian barrels. For example, the Bharat Petroleum Corp. Ltd (BPCL) was built to process domestic Indian crude oil, which is less sulphated than that imported from Russia. More Russian barrels would mean producing more fuel oil, sludge that is often sold at discounted prices, or costly redevelopment of Indian refineries, which executives interviewed by Bloomberg would not like to undertake. “Refineries at this stage are not looking for any configuration changes,” said Rajiv Agarwal, technical director at Engineers India Ltd., a state-owned firm that advises on such projects. , sulphurous crude oil, such as Russian, and for this reason, only a tenth of the crude oil processed there comes from Russia, points out one of the directors, who requested anonymity because he is not authorized to speak to the media. That’s less than some of the newer plants, where the proportion of Russian oil is as high as 40 percent. Refinery configurations have been the biggest limiting factor – along with the fear of being too dependent on a source of supply, which could be interrupted if sanctions tighten. “Urals has never been the oil of choice in the past,” said R. Ramachandran, a former director of BPCL’s refinery. “If prices are right and refineries have to process the Urals as the majority crude, then investments will be needed that could take three to four years.” No one responded to emails sent to BPCL’s media department seeking comment. Unlike some of Russia’s other customers, such as China, India also suffers from a relative lack of commercial mixing tanks. Experts emphasize, however, that India does not need to move away from Russia. By mixing different types of crude oil in storage tanks, some Russian crude oil shipments may become more attractive to plants that have difficulty accepting larger volumes. This could allow for an increase estimated at 200,000 to 400,000 barrels a day. There is also the question of other suppliers. Several refinery officials said they were concerned that the long-term switch – as opposed to opportunistic purchases – would hurt relationships with existing partners, especially producers in the Middle East. So far, buyers have focused on Russian spot purchases, which works well when supplies are plentiful. Recently, Indian refiners have also been in talks to secure more stable flows from Russia, but discussions have been slow. Further growth, however, would require a renewed enthusiasm by the government to run refineries. “The question for the future is whether state-owned refineries can be made to accept more Russian barrels than they have done so far. This is where there is the most potential space,” added Qureshi from Petro-Logistics. There are, of course, political issues behind all this. While Russia has less influence on the global economy than it used to, the two countries have a close relationship that goes back decades, deeply rooted in security, with Moscow being India’s biggest arms supplier. Source: bloomberg.com

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