OMCs review business with European banks

Many are also looking to buy low-cost crude oil from Syria.

Oil-marketing companies are reviewing their counter-party arrangements with European banks in the wake of the euro zone crisis encompassing defaults and downgrades of European countries' ratings. After all, India's public sector units (PSUs) run accounts mainly with banks from Europe and the US besides other investment banks, according to official sources. Thus, counter-party agreements are maintained for purchase payments and international credit lines. These are also for managing freight risk, insurance and trade. "Globally,though," notes an official, "these mostly depend on the origin of crude purchase, unlike bank accounts that are mainly concentrated in the banks of the US and Europe."

The sources, however, maintain that most companies have banking counterparts in the UK, France and Germany. Meanwhile, firms are looking at Africa to buy more crude, with Brent crude rates stabilising and the Middle East having lost prominence. "Brent crude has light sulphur content and, hence, refining costs are lower. Currently, most Brent crude purchases are on a spot basis," informs a source.

As for West Asia, it supplies heavy crude, with high content of sulphur. Many companies are also looking to take advantage of pricing by buying crude from Syria, where a sanction from the European Union is leading to a supply overhang.

Reportedly, ONGC Videsh Ltd is looking to ship crude oil from Syria to India, after the European Union imposed an embargo on oil imports from an African nation.

OVL's majority-owned unit, ONGC Nile Ganga BV, holds 16.66 to 18.75 per cent stake in four production-sharing contracts.

These comprise 36 for producing on land fields (and operated by Syria's Al Furat Petroleum Co, which had to scale down crude oil output due to the EU sanctions). China National Petroleum Corp (CNPC) holds a stake in Syria's main oil-producing consortium, Al Furat Petroleum Co, operated by state-run Syrian Petroleum Co and Shell.

The European Union countries had imposed sanctions on Syria on September 3, after which European countries having contracts with Syria stopped importing Syrian crude. Hindustan Petroleum is also looking to buy crude from sanctions-hit Syria, and has asked state-run Shipping Corp of India to arrange a vessel, sources say.

At present, India imports no crude from Syria. A trade source says Indian firms may be attracted to Syrian crude, because of the potential discounts. Syrian crude represents less than one per cent of the daily global production, but accounts for a vital portion its government's earnings.