AS EUROPE shuns Russian crude and petroleum fuels, Indian private sector refiners — Reliance Industries and Nayara Energy — have emerged as major beneficiaries, with a disproportionately high share of India’s fuel exports to the European continent, despite accounting for only about a third of India’s refining capacity , according to an analysis of data shared by energy cargo tracker Vortex.
Given the prevailing geo-politics, two private sector refineries appear to be playing an increasingly prominent role on the global crude oil and fuel supply map.
Both the public sector as well as private sector refiners in India have increased their imports of discounted Russian crude following Moscow’s invasion of Ukraine. However, the data suggests that while public sector refiners remained focused on supplying fuel to the domestic market, private sector players stepped up exports to Europe in an attempt to partially bridge the fuel supply gap in the region.
According to analysts and industry insiders, Reliance Industries and Nayara Energy have emerged as significant winners of the Western punitive action against Russia’s energy sector. This is because, on the one hand, they are able to buy Russian oil at a discount, and on the other hand, they make large margins on the delivery of products to Europe.
Why pvt oil cos sells abroad
PRIVATE refineries saw no point in selling gasoline and diesel on the domestic market because they could not match the prices of state-owned oil companies, which have maintained retail prices since April last year despite losses. Therefore, they prioritized the export of fuel for better margins.
Indian refiners exported close to 2,24,900 barrels per day (bpd) of petroleum fuels to Europe in April-February, with private sector refiners accounting for a whopping 95 percent, or over 2,13,300 bpd, Vortex data showed. Public sector refiners such as Indian Oil, Bharat Petroleum and Hindustan Petroleum exported just over 11,500 bpd of fuel to Europe.
Namely, in the four months until the European Union’s ban on the import of refined products from Russia on February 5, Indian refineries from the public sector did not export fuel to Europe at all in two months – November 2022 and January this year. In the same four-month period, private sector refiners shipped an average of about 2,45,500 barrels of oil per day to Europe, about 22 percent more than their average export volume to the continent in the previous six months, the data showed.
India imported a little over 9,40,600 bpd of crude oil from Russia during April-February, with private sector refineries accounting for about 45 percent, though their cumulative refining capacity of about 88 million tonnes per annum (mtpa) accounts for only 35 percent of the total capacity soil processing of about 251 mt per year. This means that Reliance Industries and Nayara Energy together imported more Russian oil per mtpa of processing capacity than their public sector rivals.
Public sector refiners and fuel retailers have not revised retail prices of petrol and diesel since April last year due to high volatility in global energy prices. This forced them to post heavy losses. As public sector players control most of the retail fuel market, private sector refineries have also been unable to revise domestic fuel prices in line with global levels. These circumstances in the domestic market, together with the high demand for fuel in Europe, clearly made the export of fuel much more lucrative for private sector refiners.
Given the super-normal exports of private sector refineries, the government introduced a windfall tax on fuel exports from July.
“It is important to understand that for OMCs (public sector oil marketing companies) the main priority is to supply the domestic market well. This is not the case when it comes to private refineries. So it makes sense for private refiners to prioritize fuel exports to earn higher margins,” a senior executive at a public sector refinery told The Indian Express.
According to data from Vortex, India imported a record 1.62 million barrels of Russian oil per day in February, which is 29 percent more than January’s 1.26 million barrels per day, which is also a record. Russia, which was India’s marginal oil supplier before the war in Ukraine, retained its newfound position as India’s largest oil source in February. Data showed that India’s oil imports from Russia in February were higher than the cumulative volumes supplied by heavyweights Iraq and Saudi Arabia, India’s second and third largest sources of oil.
While India, the third largest consumer of crude oil, depends on imports to meet over 85 percent of its oil needs, the country is a net exporter of petroleum products as its refining capacity exceeds domestic demand.
