Mumbai: Nayara Energy may have to offer a $1-2 per barrel discount to India’s state-run oil marketing companies (OMCs) to sell petrol and diesel that the Russian-owned refiner cannot export due to European sanctions, people close to the development said.
The Rosneft-backed company, which operates a 20-million-tonne refinery in Gujarat, has been in talks with Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation to place its refined fuel with them. These state-run oil OMCs have sought a discount to buy the fuel products, the people said.
“Generally, inter-oil-company exchanges happen at a fixed formula based on the price of crude oil. Now since Nayara is using discounted Russian crude at its refinery, it is only natural that the OMCs seek a discount,” said an industry executive aware of the matter.
The latest discount on Russian Urals is around $2-3 per barrel.
Nayara Energy and the OMCs did not respond to emails seeking comment until press time Monday.
Nayara Energy runs India’s second-largest single-location refinery at Vadinar, Gujarat, delivering about 8% of India’s refining output. The company sells about 70% of its refined fuels through over 6,600 retail outlets in India and exports the rest.
The company is currently expanding capacity to enhance its presence in the petrochemical and alternative energy sectors.
Nayara Energy is operating its refinery at a throughput of around 60%, down from over 100% in July, as it is unable to export refined fuel after the European Union imposed sanctions on Russia on July 18, said the executive. Following the sanctions, the company cannot export fuel such as petrol and diesel to European countries.
Sources said the company is exploring export of fuel to Asian markets, Latin America and the Middle East.
The European sanctions include restrictions on imports of fuels refined from Russian crude, slashing the price cap on Russian oil to $47.60 per barrel, from $60, and targeting the shadow fleet involved in its transport.
Nayara Energy is caught in this crossfire of sanctions owing to its Russian ownership wherein Russia’s national energy major Rosneft has a 49.13% stake. The Trafigura Group of Singapore and Russia’s UCP consortium have 24.5% each, with the rest owned by retail shareholders.
