Bharat Petroleum Corp (BPCL), a state-run Indian refiner, is increasingly purchasing crude oil from the Middle East to compensate for the reduced availability of cheaper Russian oil. This shift comes as Indian refiners face significant shortfalls in Russian crude supplies.
Key Details:
Current Supply Challenges:
Indian state refiners typically acquire Russian oil on the spot market rather than through long-term contracts. They are currently unable to secure approximately 8 to 10 million barrels of crude for January loading that were previously available.
BPCL’s finance head, Vetsa Ramakrishna Gupta, confirmed in a recent interview that the company is not receiving its full quota of Russian oil.
Shift to Middle Eastern Crude:
Gupta stated, “There may be a shortage of two to three cargoes per month… whatever is the shortage of Russian crude, we are purchasing that from the Middle East only,” mentioning recent acquisitions of Omani oil.
Russian oil constitutes about 35% to 37% of the crude processed at BPCL’s three refineries, which have a combined capacity of 706,000 barrels per day (bpd).
Future Supply Plans:
Looking ahead, Gupta indicated that if there are significant impacts on Russian supplies next year, BPCL will explore alternative sources, including West Texas Intermediate (WTI) and other Middle Eastern crudes, depending on pricing.
Russian Oil Market Dynamics:
Russian oil exports are declining due to increased domestic demand and output quotas set by OPEC. The country’s production is expected to decrease in 2024 compared to the previous year.
Additionally, Russian state oil firm Rosneft has signed a deal with Indian private refiner Reliance to supply 500,000 bpd of crude over ten years starting in 2025, further limiting available supplies for other traders.
Diversification Efforts:
BPCL is actively diversifying its oil sources, with around 53% of its supply coming from term deals. The company recently made its first purchase of Argentinian crude.
For the fiscal year 2025/26, BPCL plans to import 10,000 bpd of crude oil from Qatar under an annual agreement while maintaining contracts with other suppliers.
Investment Plans:
BPCL aims to invest 1.7 trillion rupees ($19.94 billion) over the next five years, with half of this amount financed through debt.
The company has secured about 320 billion rupees in loans from Indian banks for the expansion of its Bina refinery.
BPCL plans to refinance 40 billion to 50 billion rupees in loans next year and is considering external borrowings in 2026/27 for major investments.
The company holds $2 billion in foreign debt, which includes investments in overseas exploration projects, and plans to invest 250 billion rupees in oil and gas projects in Mozambique and Brazil over the next five years.