Indian refiners delay shutdowns
New Delhi   22-Mar-2011

Indian state refiners have dropped shutdown plans for April in a sign of the widening impact of Japan's crisis on global oil markets, and calls for Reliance to be allowed to sell domestically from its export-focused plant revive.

BPCL Chairman RK Singh said his firm has decided to defer a planned April shutdown of units at its plants, while Hindustan Petroleum is also considering delaying maintenance from April.

The country's diesel demand, which peaks in the summer, is expected to be even higher this year as five key states hold elections from April and the fuel will be used extensively in transport on top of power generation.

"Current diesel demand growth is around 10 per cent and it will rise further in next two months mainly due to higher demand from agriculture and for transportation due to elections," said GC Daga, head of marketing at IndianOil.

India's domestic diesel sales, which make up over a third of refined products consumption, rose an annual 6.3 per cent in January.

Refiners who had scheduled maintenance for April had been looking for at least 400,000 tonnes of imports in the month - sharply up from about 110,000 tonnes bought in January.

Last week, IOC could not get price offers for a diesel tender and had to abandon it while Bharat Petroleum had to pay a hefty premium for importing just one of the four cargoes it had sought.

Gasoil prices internationally are likely to stay firm, underpinned by Japan's need for diesel imports as it gets reconstruction underway after a massive earthquake and tsunami.

Asian gas oil swaps hit a 2-1/2 year peak over $24 a barrel last week although they have since weakened slighty, with cracks below $23 a barrel now as some Japan refineries restarted and run rates increased.

"I am a state-run firm, I have to run for the country," said BN Bankapur, head of refineries at IOC, adding if required his firm would defer shutdown plans.

"It makes sense for state refiners to defer their shutdown plans as the monsoon arrives in Kerala in the first week of June and reaches Mumbai in the the latter part of the month, reducing demand for transportation fuel," said an industry expert.

Private refiners Essar Oil and Reliance Industries, which prefer to sell diesel to state-run firms than make direct sales as they don't get federal compensation for sale of fuel at government-capped prices, plan to go ahead with scheduled shutdowns.

An Essar Oil spokesman said as of now there was no change in plans to shut completely the Vadinar refinery in western Gujarat state in May-June for 35 days for maintenance and expanding capacity to 360,000 barrels per day (bpd).