Indian Oil Corporation Ltd (IndianOil) may emerge as one of the contenders for Numaligarh Refinery Ltd (NRL) once the Centre initiates its disinvestment process.

The Centre recently announced plans to divest Bharat Petroleum Corporation Ltd’s (BPCL) 61.65 per cent shareholding in NRL, along with the transfer of management control, to a Central public sector enterprise operating in the oil and gas sector.

Asked if IndianOil will look at NRL as an asset, IndianOil Chairman Sanjiv Singh told BusinessLine: “Let us see how it comes (the offer). The process is all the same, whichever company pitches in.”

On further prodding, he said: “No, we are not ruling out anything.” He, however, hinted that competition could come from Oil India Ltd, one of the key PSUs in the oil exploration business, which has high stakes in the North-East.

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IndianOil, one of the nation’s biggest oil refinery-cum-retailing PSUs, does not foresee any oil supply constraint due to geopolitics.

“In the second half of the current financial year, there will be a lot of pipeline infrastructure coming up for taking out more crude oil. We are still not seeing enough crude oil coming out from the US. The US is exporting the same volumes. The spare capacity in the US can help in balancing the oil market gain to offset any cuts that are happening. The key will remain outside OPEC and OPEC+,” said Singh.

IndianOil imports about 70 million tonnes per annum of crude oil. Today, over 50 per cent of its crude requirements are met through term contracts and the remaining from spot. Iraq and Saudi Arabia remain its largest suppliers, besides Nigeria, Kuwait, Angola and the UAE.

Sourcing mix

Asked if IndianOil has seen a shift in its crude sourcing mix, Singh said: “We have yet to do the formal tying up for next year because a couple of countries follow the calendar year and the majority follow the financial year. We don’t foresee any major drastic change happening in our sourcing mix. There would be a few changes because we tie up the majority of our requirements through term (contracts)...more than 50 per cent. Our spot has slightly increased over the years. But you don’t change these term volumes very drastically.”

Term quantities are not changed drastically because they come mostly from national oil companies, which sell the bulk of their crude through such contracts, Singh added. Once the term contracts end, gaining those volumes from those countries might take time as diplomatic processes are involved, he said.

On American crude oil, Singh said: “From the US, we have contracted close to 4 million tonnes of crude — both firm and optional . It’s a term contract but we also take US crude from spot. They are giving it so cheap that even after loading the transportation cost it remains competitive.”

Asked if it is a distress sale by the US, Singh said: “It is not a distress sale because if that were the case, every time I should be getting US crude. The spot pricing negotiations work on a projected price after two months and we are not sure if they are assessing the price movements that we are. We have never seen US crude come under a distress sale. Repeatedly, they are competitive, but there are times they are just not there, too.”

Problem of logistics

Where does Russia feature in the scheme of things? “We are in very advanced talks with Russia for bringing crude to India. From western Russia, they are able to sell to Europe through pipelines. From eastern Russia, Korea, Japan and others get crude. The challenge for us is logistics. We cannot get VLCC (very large crude carriers) through the Suez Canal. Besides, they do not have surplus oil either. Probably some of their existing supplies to some other player can come to us. Now we have to find a way to make it attractive for both of us,” Singh said.

On Iran, he said: “We are still following the sanctions. It’s a dynamic thing; if something comes up, we may open again.”

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