India expected to increase oil imports from Mideast

India, world's fifth-largest energy consumer, is set to increase its crude oil imports from Middle East, to fuel its massive upcoming refining capacities.

India already imports over three-fourth of its crude oil requirements and is planning to add a massive capacity of 78 metric million tonnes per annum (mmtpa) to its existing capacity of 178 mmtpa.

This will make India a major refining hub in the Subcontinent with 256 mmtpa capacity by 2012.

"With the aggressive capacity additions by the Indian refiners, Gulf will continue to be the major crude supplier. Saudi Arabia is India' s largest crude oil import partner, followed by Iran. Indian firms mostly procure crude from Adnoc, Saudi Aramco, Kuwait Petroleum, and Somo on term contracts." said Deepak Pareek, research analyst of Mumbai-based Angel Broking.

Bharat Petroleum Corporation (BPCL), India's second-largest state-owned oil refiner with capacity of processing 22 mmtpa crude in its Mumbai, Kochi and Numaligarh refineries, will import more than 13.5 mmtpa of crude this year.

BPCL plans to buy four mmtpa from Saudi Aramco and two million tonnees each from Abu Dhabi's Adnoc and Kuwait's KPC to fuel the expanding capacities of its existing refineries.

"We have always been importing oil from the Gulf. Saudi Arabia, Abu Dhabi, Iran, Iraq and Kuwait have been our traditional partners. With our new refinery, we will have to rely heavily on the Middle East for oil supplies. We will also buy from the spot market," said a senior BPCL official.

It also proposes to re-start its oil imports from Iran and Iraq to cater to its upcoming six mmtpa refinery in Bina, Madhya Pradesh.

Similarly, Manglore Refinery and Petrochemicals Limited (MRPL), plans to buy more crude oil from Gulf as it expands its capacity by 2.5 mmtpa to 15 mmtpa by 2011.

LK Gupta, Director Finance of MRPL, told Emirates Business: "We import crude from Abu Dhabi, Iran and Saudi Arabia. We buy Murban and Umm Shaif crude from Abu Dhabi's Adnoc. This year imports will be about 1.65 million tonnes from 1.1 million tonnes last year. This year, we will import around seven mmtpa from Iran and and a million tonnes from Saudi Arabia."

State-owned Hindustan Petroleum Corporation (HPCL) imports around 11mmtpa or 2,20,000 bpd of crude oil has tripled its crude oil imports from Iran over last year. HPCL imports around 9.5 mmtpa on term contract from national oil companies, while its sources 1.5 mmtpa from the spot market.

"With the upcoming 9 mmtpa Bathinda refinery, our crude oil sourcing from the Gulf is only to go up," said B Mukherjee, Director Finance, HPCL.

Hindustan Mittal Energy Limited (HMEL), a joint venture between HPCL and steel baron LN Mittal, is executing this refinery expected to be operational by March 2011.

India's biggest state-owned refiner, Indian Oil Corporation, imports around 48 mmtpa of its installed 64 mmtpa of refining capacity. Of this more than 30 mmtpa will be through term contract from Iraq, Iran, Saudi Arabia, Abu Dhabi, Kuwait, Malaysia and Nigeria national oil firms and the balance through spot market.

A Dubai-based energy professional said: "It may be a good opportunity for the Gulf national oil firms to pick up stakes in Indian refining projects as Saudi Aramco is doing it in China. It will ensure a long-term crude supply and product off take arrangement and will be win-win situation for both countries."

Saudi Aramco is in talks with Sinopec of China to buy 25 per cent stake in Qingdao refinery project.

IOC had invited Saudi Aramco to pick up an equity stake in its upcoming 15 mmtpa grass root refinery in Paradip, Orissa. This was to secure long-term crude-supply and product off take agreement with the biggest oil producer. However, no decision has been taken yet.

Recently, Oman Oil Company (OOC) increased its stake in BPCL's Bina refinery to 26 per cent. The refinery is likely commence operations in second quarter of 2010.

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