With no exports, sanctions-hit Nayara Energy ups fuel supply to HPCL

Sanctions-hit Nayara Energy is operating at 60-80% of refining capacity and has raised supply of refined products to HPCL as EU curbs ended its exports

Nayara Energy has increased supply of refined petroleum products to state-run Hindustan Petroleum Corporation Limited (HPCL) as Russia’s Rosneft-backed refinery’s exports tanked to zero following sanctions by the European Union (EU), a top government official said.

 

“Nayara would supply (petroleum) products to domestic companies, mainly to HPCL, and some other small players such as Shell,” the official said on the sidelines of an event here.

 

Nayara Energy, which is 49 per cent owned by Russian oil major Rosneft, was directly sanctioned by the European Union under the group’s 18th sanctions package announced on July 18. The sanctions completely eroded the refinery’s petroleum exports to Europe.

 

Nayara’s increased supply of refined products to HPCL would aid the company in offsetting the impact of sanctions. The company could access trucks and pipelines to supply products from its Vadinar refinery in Gujarat to HPCL’s terminals, the official said.

 

Nayara is primarily increasing supply to HPCL as India’s other oil marketing companies (OMCs), including Indian Oil Corporation (IOCL), Bharat Petroleum Corporation (BPCL) and Reliance Industries (RIL) have sufficient refining capacity to meet their demand.

 

In the absence of exports and restricted crude oil supply, Nayara is currently operating at “sub-optimal levels” of 60-80 per cent of its refining capacity, the official added.

 

Post the July sanctions on Nayara’s Gujarat refinery, Russia has been the sole crude oil supplier to the company. Other suppliers, including Iraq and Saudi Arabia, have halted crude oil supply to the refinery.

 

Nayara’s crude oil imports tanked to zero from both Iraq and Saudi Arabia in August and September, showed data from Kpler, a global shipping data and analytics provider. The refinery’s oil imports from the two nations stood at 93,000 barrels per day (bpd) and 32,000 bpd, respectively, in July.

 

Meanwhile, the company’s crude oil imports from Russia came in at 331,000 bpd in the first-half of September, while August imports were at 242,000 bpd, showed the data. 

 

“Post-sanctions, the refinery has been facing operational challenges related to compliance, shipping, payment channels, and lower crude imports. However, we now see these issues gradually being resolved, and expect the refinery to manage operations closer to its economical or rated capacity,” said Sumit Ritolia, lead research analyst, refining & modelling, Kpler.

 

The EU sanctioned the refinery in an attempt to pressure Russia to end war with Ukraine and limit the financial capabilities of Moscow. Nayara imports significant quantity of Russian crude oil, which is processed in its Gujarat refinery to be later exported to several markets, including Europe.

 

The Vadinar refinery, with a capacity of 20 million metric tonne per annum (mmtpa), started commercial production in May 2008 and accounts for eight per cent of India’s total refining capacity. Nayara has a retail network of 6,500 petrol pumps spread across the country.