Take a look at Mumbai-based Gatik Ship Management. In less than a year, Gatik has amassed a fleet of 44 ships, spending an estimated $1.39 billion. In the last month alone, it spent $400 million, according to Splash 247, an online site covering the maritime and shipping sectors.

Where the money is coming from isn’t exactly clear, but the reason for assembling the fleet is obvious. Gatik’s ships are focusing on bringing Russian oil to India. Says Splash 247: “In June last year, Gatik entered the ship-owning business as one of a host of new names shuttling oil from Russia to India.”

In the last year, the Russia-Ukraine war and resulting sanctions have changed the global oil industry’s dynamics. In February, India imported a record 1.8 million barrels per day (bpd) of Russian oil, up from virtually zilch a year ago. February’s imports were up from 1.4 million bpd in January and 1.2 million bpd in December, both also records. In March, too, India will import 1.92 million bpd to hit another peak. Russian discounted oil now comprises 35 per cent of India’s oil imports.

Interestingly, almost all Sokol-grade oil exported from Sakhalin in which ONGC holds a 20 per cent stake is coming to India. India is now the world’s biggest buyer of seaborne Russian oil, notes Viktor Katona, lead crude analyst at data-analytics company Kpler.

About half the crude processed at private-sector refineries like Reliance and Nayara Energy is now from Russia. Reliance is exporting a refined product called virgin gas oil (VGO) to the US — which used to buy the product from Russia. India is also exporting finished products to Europe. It’s also believed Russian oil is supplying the domestic market and that the crude from elsewhere is being exported.

The great question is what will happen as and when the Russia-Ukraine war finally ends? Will the oil industry return to the way it used to operate, with Russia selling to its next-door markets in Europe and India buying from nearby Gulf countries like Iraq and Saudi Arabia, usually the two countries from which we buy the most oil?

There’s been so much bad blood between Russia and the rest of Europe, it’s tough to imagine a return to business as usual if presumably sanctions are lifted. Says Katona: “The European market is geographically closer but the Indian and Chinese markets are politically safer as things stand currently.”

Despite India getting $10-12 discounted oil from Russia, exports haven’t risen as much as might have been expected. That’s because the refineries are already working at close to full capacity.

Oil demand to spike

India’s oil demand and refining capacity are both slated to rise sharply in the next few decades. OPEC forecasts India’s oil demand will be 5.14 million bpd in 2023. Demand is expected to rise to 7.2 million bpd by 2030 and 9.2 million bpd by 2050, according to the International Energy Authority, making us probably the world’s fastest-growing oil market.

But India’s refinery capacity is expected to rise even quicker. India’s oil companies are expanding old refineries and building new ones at a tremendous pace. Refining capacity is now at 250 million tonnes of oil annually. That’s slated to rise to 450 million tonnes by 2030. Take a look at Hindustan Petroleum’s (HPCL’s) Vizag refinery, on course to almost double its capacity from its 8.33 million tonnes per annum (mpta) to 15 mpta. And IndianOil’s Panipat refinery is working to enlarge capacity from 15 mtpa to 25 mpta by September 2024.

HPCL is also working to complete the giant Rajasthan Refinery by early 2024 in Barmer that will be able to process 9 mtpa of crude and 2.4 million tonnes of petrochemicals. Says Katona: “India’s consumption will rise rapidly, but refining capacity will rise even faster. That means international oil markets will see more of Indian exports.”

It’s unlikely Europe-Russia trade will return to the ‘old normal’ for a while due to festering acrimony. Sanctions probably won’t be lifted immediately. Even if the fighting stops, there’ll be questions about who’ll pay for rebuilding Ukraine which has seen destruction of its cities and industrial plants. And Russia is expected to keep selling discounted oil to India, giving us clear advantages over refiners globally.

Indian refiners are anyway considered highly competitive. And India could become a supplier offering strong advantages to the entire Asian market. Besides that, it could keep exporting to the US and Europe if trade with Russia remains disrupted.

The fact is the world still needs Russian oil. And most countries are likely to turn a blind eye if it comes via India.