BPCL buys Middle East grades to replace Russian shortfall

Bharat Petroleum Corp (BPCL) is buying Middle Eastern crude to make up for less supply of cheaper Russian oil. Indian state refiners, which typically buy Russian oil in the spot market rather than under long-term contract, are unable to procure about 8 million to 10 million barrels of crude for January loading that they have previously seen available in the market.

India became a top buyer of Russian seaborne oil after the European Union shunned purchases and imposed sanctions on Moscow following its invasion of Ukraine in 2022. Russian oil accounts for more than one-third of India’s energy imports as the country has sought to take advantage of discounts on the crude. BPCL is not getting its full Russian oil supply from the spot market. Russian oil makes up about 35% to 37% of the crude BPCL processes at its three refineries, which have a combined capacity of 706,000 barrels per day (bpd).

Russian oil exports have fallen as domestic demand is rising and as Moscow has to meet output quotas under its pact with the Organization of the Petroleum Exporting Countries (OPEC). The country’s output is also set to decline in 2024 from last year. Additionally, Russian state oil firm Rosneft has signed a deal with Indian private refiner Reliance to supply 500,000 bpd of crude for 10 years starting in 2025. That contract will account for about half of the company’s exports, reducing the supply available for other traders. BPCL is constantly diversifying its oil sources and buys about 53% of its supply through term deals. It recently bought Argentinian crude for the first time.

For the fiscal year 2025/26, BPCL plans to lift 10,000 bpd of crude oil from Qatar under an annual deal while keeping contracts with other term suppliers intact, Gupta said. BPCL plans to invest 1.7 trillion rupees ($19.94 billion) in the five years to 2028/29, with half of that met through debt.

The company has already tied up about 320 billion rupees of loans with Indian banks for the expansion of its Bina refinery in central India. BPCL will refinance 40 billion to 50 billion rupees in loans next year and would go for external borrowings in 2026/27, when it plans major investments. More interest rate cuts are required by the US to make overseas borrowing attractive. BPCL has foreign debt of $2 billion at the group level that include investment in overseas exploration projects. It will invest 250 billion rupees for the development of its oil and gas projects in Mozambique and Brazil in the next five years.