IOC edges out pvt refiners in Russian oil buys in May, Moscow share at high

IOC imported around 783,000 barrels per day (bpd) of Russian oil in May, up 66.5 per cent over April. RIL imported close to 525,000 bpd of Russian crude in May, just 1.3 per cent higher than what it imported in April. NEL’s Russian oil imports for the month were close to 196,000 bpd, down 7.2 per cent month-on-month.

IOC is the country’s largest refiner with a consolidated capacity of 80.55 million tonnes per annum (mtpa), which includes the refining capacity of its arm Chennai Petroleum Corporation. RIL is India’s second-largest refiner with a crude processing capacity of 68.2 mtpa. NEL operates a 20-mtpa refinery.

Overall, Indian refiners imported 2.16 million bpd of Russian crude oil in May, or 45 per cent of India’s overall crude oil imports for the month, marking a new all-time high mainly driven by the surge in imports by IOC and consolidating Moscow’s newfound position as New Delhi’s top source of crude, Kpler data shows.

Prior to May, there were three instances – June, July, and October of 2022 – when IOC bought more Russian oil than RIL in a month ever since Indian refiners started stepping up purchases of discounted Russian barrels following Moscow’s February 2022 invasion of Ukraine. In those months, however, India’s overall oil import volumes from Russia were about half of the May 2023 volumes.

Except for May, July 2022 was the only other month when IOC imported more Russian oil than RIL and NEL put together. Ever since the European Union (EU) and other major Western powers imposed a price cap on Russian seaborne crude from early December, RIL had been the biggest Indian buyer of Russian oil month after month.

“Reliance has been remarkably stable in buying 500,000-600,000 bpd every month of this year, so the change is really coming from IOC ramping up purchases. First of all, they (IOC) are the only Indian refiner to have a term contract with a Russian oil exporter,” Kpler’s Lead Crude Analyst Viktor Katona said.

IOC had signed a term contract with Rosneft in December 2021 to buy up to 2 million tonnes of Russian oil in 2022. In March this year, IOC and Rosneft inked a term deal to “substantially increase” supplies of Russian oil, but did not indicate any volume. To be sure, IOC continues to buy a large chunk of its Russian oil purchases through spot deals, but higher volumes in the term deal mean higher guaranteed offtake for the refiner. All of RIL’s Russian oil purchases, on the other hand, are through spot deals, Katona said.

RIL is India’s largest exporter of refined petroleum products and NEL is also seen as an export-oriented refiner, while IOC and other public sector refiners sell most of their production in the domestic market.

According to Katona, the focus on the domestic market translates to relatively lower profitability for IOC vis-a-vis private sector players, which makes any margin boost coming from cheaper crude feedstock – discounted Russian oil in this case – all the more welcome for the state-owned refiner and fuel retailer.

IOC did not respond to a request from The Indian Express for comments on the reasons behind the recent surge in the refiner’s Russian oil volumes.

Public sector refiners and fuel retailers led by IOC have not revised petrol and diesel prices since early April of 2022 and, therefore, for a majority of the past 13 months, they incurred under-recoveries on fuel sales. On the other hand, being marginal players in India’s fuel retail market, export-oriented private sector refiners managed to make far better margins on fuel exports to markets like Europe.

The RIL also buys 120,000 to 130,000 bpd of Russian fuel oil as secondary refining feedstock for diesel and petrol production, which means that its overall purchases of refinery feedstocks from Russia would be higher than what the crude import data suggest, Katona said. However, in May, IOC’s Russian oil imports beat even RIL’s cumulative refinery feedstock import volumes from Russia.