Whalesbook
Bharat Petroleum Corp. (BPCL) is adopting a flexible approach to crude oil imports, reassessing its needs almost daily and substantially increasing purchases from the spot market. This shift comes as the conflict involving Iran has disrupted traditional Middle East supply routes. India, a major oil consumer, is facing rising crude prices and supply volatility, worsened by the closure of the Strait of Hormuz.
Refinery Operations Under Pressure
BPCL had initially planned to secure most of its crude through annual contracts, primarily from Middle Eastern producers. However, force majeure declarations from several Gulf suppliers have forced an increase in spot buying to keep its refineries running at full capacity of 706,000 barrels per day. Chairman Sanjay Khanna stated that uncertainty has led to a considerable rise in spot volumes.
Russian Crude and Narrowing Discounts
BPCL continues to rely on Russian crude for about 40%-45% of its needs, mostly bought on the spot market. While U.S. waivers previously allowed this, the discounts on Russian crude have significantly reduced, now around $5-$6 per barrel compared to $10-$12 earlier, according to Finance Director Vetsa Ramakrishna Gupta. Despite recent retail price hikes for petrol and diesel, the company is still experiencing revenue losses on these fuels.
Future Supply Outlook
BPCL expects to reduce its reliance on spot purchases if supplies from Saudi Arabia improve, especially after the restoration of the Kingdom's east-west pipeline capacity. Saudi Arabia's current commitment via this pipeline is limited. The refiner is also seeking new annual supply agreements with competitive prices and flexible terms, preferring nearby suppliers over those farther away like Venezuela and Canada. BPCL also has an optional annual crude purchase agreement with Brazil.