Indian Oil bought 3 million barrels of Russian oil a few days ago. All purchases are from spot market traders, with deliveries expected in May-June. Since the seller is a non-Russian entity, these purchases are unlikely to face any payment issues.
Indian Oil, HPCL, Bharat Petroleum Corporation (BPCL) and MRPL are also likely to participate in ONGC Videsh’s new tender to sell its oil share in Russia’s Sakhalin field, sources said. ONGC Videsh received no bids to sell Sakhalin oil last week. Refiners can pay ONGC in rupees without worrying about dollars or sanctions, the sources said.
Industry executives believe it would be difficult to pay any Russian seller even if energy trade were not sanctioned and some Russian lenders were not cut off by the SWIFT settlement system, the people said.
Refiners, banks and officials are working with the Reserve Bank of India (RBI) to establish alternative payment channels.
Oil refiners may avoid buying Russian feed because of the sanctions, a Reliance Industries executive said at an industry event, according to an agency report.
All Indian refiners combined buy less than 2 percent of their crude from Russia, but deep discounts have prompted state-run refiners to double purchases from the country. Urals, a type of Russian oil, hit an all-time high of $33.36 at a discount to base-date Brent on March 15, according to a Platts assessment by S&P Global Commodity Insights.
Refiners choose the type of crude oil based on the profit that will ultimately be generated, calculated using the number of different products that can be produced from a particular crude oil and the profit available for each product. Cheap crude oil from Russia can be blended with other varieties used by refineries, even if Russian grades are not their main feedstock. This will help improve the refinery’s profit margin.
Indian refiners are benefiting from strong global refining margins but suffer losses of Rs 18 and Rs 24 per litre of gasoline and diesel, respectively, sources said. The losses will shrink quickly as oil prices fall to $100 a barrel from $139 a barrel last week.
Refiners such as BPCL, Indian Oil and Reliance have delayed planned maintenance shutdowns at some units to benefit from current refinery margins.