State-run refiners join forces in bid for better Opec oil deals
New Delhi   24-Feb-2016


IndianOil's 15-MMTPA Paradip Refinery.

Officials from IndianOil, BPCL, HPCL and MRPL visit Abu Dhabi, Kuwait and Saudi Arabia to negotiate FY17 deals

State-owned refiners are jointly negotiating oil purchase deals with the Organization of the Petroleum Exporting Countries, or Opec, producers for the first time, as India, the world's third biggest consumer seizes on low prices to wrest better terms in a market awash with crude.

In a sign of the shift in power from oil sellers to buyers, India is reviewing its import policy at a time when Opec members are focused more on protecting market share than boosting prices that are down some 70% in the last 20 months.

While producers have shown no sign yet of willingness to discount long-term price benchmarks, or official selling prices (OSPs), they have discussed concessions on loan terms and shipping that would reduce costs, said industry and government officials familiar with the talks.

In the last two months officials from Indian Oil Corp. Ltd (IOC), Bharat Petroleum Corp. Ltd (BPCL), Hindustan Petroleum Corp. Ltd (HPCL) and Mangalore Refinery and Petrochemicals Ltd (MRPL) visited Abu Dhabi, Kuwait and Saudi Arabia to negotiate deals for the next fiscal year beginning in April.

The four refiners together control about 60% of the country's 4.6 million barrels per day (bpd) capacity. “Joint negotiation increases your bargaining power. When you jointly negotiate, even a customer of a small quantity gets the (same) advantage (as) buyers of huge volumes,” H. Kumar, managing director of MRPL, told Reuters.

The UAE, Kuwait and Saudi Arabia declined to give discounts on OSPs to Indian refiners, people familiar with the matter said, but there was some leeway on other commercial terms. “UAE and Kuwait said they may increase the credit period, and offered concessions on shipping if Indian refiners raise volumes,” said an industry official privy to the talks.

“Saudi said they are open for discussion (on some terms) provided volumes are raised,” the official added. State oil officials from the three exporting countries were not immediately available for comment on the talks.

Featured in Mint Edition dated 24 February, 2016.