An oil cocktail

•Can’t India meet its fuel requirements indigenously?

We don’t have in our country large finds of crude oil that can meet the processing needs of our refineries. Our two explorers — Oil & Natural Gas Corp and Oil India Ltd — as well as some private ones could collectively provide only 34.1 million tonnes out of the required 156.1 million tonnes of crude. The rest has to be imported.

•Where is our fuel sourced from, what are their types?

There is no single source that has the volumes that we require. And if there is one, it does not want to be wedded to a single buyer. There are various producers—mostly national oil companies like ONGC and OIL—scattered throughout the world. And depending on their geographical location, they have an array of crude oils: some light, some heavy depending on the number of carbon atoms; some sweet, some sour depending on the presence of unwanted pungent sulphur. The heavier the crude oil, the higher its boiling point, and hence, more cost incurred in extracting products out of them. On the other hand, the presence of sulphur in sour crudes requires stripping it out to produce environment friendly fuels, an expensive exercise.

•What is the crude basket?

Refineries like to process crude suiting their refining configuration and marketing strategy to maximise returns and have to consider shipping and logistics costs, among others, to achieve a healthy margin. But besides these techno-economics, their selection of crude also hinges on its availability, India’s political and trade relationship with the supplier country, and the national need to broadbase vendors as large dependance on a single source cannot be relied upon from a strategic point of view. As a result, a cocktail of crudes are imported by refineries—at last count, there were more than 20 grades from over a dozen countries. To give a taste, the sweet imports were Nile (Sudan), Minas (Indonesia), Labuan, Miri (Malaysia), Bonny Light, Qua Iboe (Nigeria) and Sokol (Russia) among others. The sour ones were Iran Mix; Murban, Umm Shaif, Zakum (Abu Dhabi), Arab Mix (Saudi Arabia), Masila (Yemen), Oman and Basrah Light (Iraq) among others.

•How is the basket price arrived at?

As these crudes sell at a premium or a discount to market markers West Texas Intermediate (WTI), North Sea Brent or Dubai/ Oman crude, the government aggregates the country’s crude basket (including our sweet Mumbai High) in proportion to the sweet and sour volumes planned for the year to arrive at the average price. (See box). The present retail price of petroleum products has been fixed assuming an average price of $67 for the Indian basket. But due to the devaluation of the Rupee, the government plans to wait until the price drops below $61 to consider any change in retail prices.