India Now Biggest EU Fuel Exporter, Russian Oil Refinement Loophole
India’s export of fuels like diesel to the European Union jumped 58 per cent in the first three quarters of 2024, with a bulk of them likely coming from refining discounted Russian oil, according to a monthly tracker report. The EU/G7 countries in December 2022 introduced a price cap and an embargo on the imports of Russian crude oil in a bid to cripple Kremlin’s revenue and create a vacuum in its funding for the invasion of Ukraine. However, a lack of a policy on refined oil produced from Russian crude meant that countries not imposing sanctions could import large volumes of Russian crude, refine them into oil products and legally export them to the price-cap coalition countries. India has become the second biggest buyer of Russian crude oil since the invasion, with purchases rising from less than one per cent of the total oil imported in the pre-Ukraine war period to almost 40 per cent of the country’s total oil purchases. The rise was primarily because Russian crude oil was available at a discount to other internationally traded oil due to the price cap and the European nations shunning purchases from Moscow. Fuel exports were, however, at full price. “Capitalising on the refining loophole, India has now become the biggest exporter of oil products to the EU. In the first three quarters of 2024, exports to the EU from the Jamnagar, Vadinar (in Gujarat) and new Mangalore refinery – which are increasingly reliant on Russian crude – saw a 58 per cent year-on-year rise further,” the Centre for Research on Energy and Clean Air (CREA) said its latest report. Reliance Industries Ltd has oil refineries at Jamnagar while Russia’s Rosneft-backed Nayara Energy has a unit at Vadinar. Mangalore Refinery and Petrochemicals Ltd (MRPL) is a subsidiary of the state-owned Oil and Natural Gas Corporation (ONGC). This, it said, amplified “the fact that EU Member States continued imports are expanding the refining loophole and Russian revenues from crude exports to third countries”. Europe typically imported an average of 1,54,000 barrels per day (bpd) of diesel and jet fuel from India before Russia’s invasion of Ukraine. This has almost doubled. While CREA did not give an absolute number for imports, the European think tank had in a previous report stated that Euro 8.5 billion of price cap coalition countries’ imports of oil products in 13 months to December 2023 were made from Russian crude. These imports in 13 months were equivalent to 68 per cent of the EU’s annual commitment to aid Ukraine between 2024 and 2027. “In the 13 months since the oil price cap took effect (in December 2022), over one-third of India’s exports of oil products to sanctioning countries was derived from Russian crude (EUR 6.16 billion or USD 6.65 billion),” the Finland-based CREA had said in the previous report. While there are no restrictions or sanctions on buying/using Russian crude oil and exporting fuels like diesel derived from it, the Group of Seven (G7) rich nations, the European Union and Australia – called the price cap coalition countries – first set a crude price cap of USD 60 per barrel starting December 5, 2022, and later on products like diesel to keep the market supplied while limiting Moscow’s revenue. CREA in the latest report said India, the world’s third largest oil-consuming and importing nation, in October bought Euro 2 billion worth of crude oil from Russia, down from Euro 2.4 billion in the previous month. “China has bought 47 per cent of Russia’s crude exports (in October), followed by India (37 per cent), the EU (6 per cent), and Turkey (6 per cent),” it said. “India was the second-largest buyer of Russian fossil fuels in October, contributing 19 per cent (EUR 2.6 billion) to Russia’s monthly export earnings from its top five importers. An estimated 77 per cent of India’s imports (valued at EUR 2 billion) comprised crude oil.” In September, India contributed 21 per cent (EUR 2.8 billion) to Russia’s monthly export earnings from its top five importers. Almost 85 per cent of India’s imports (valued at EUR 2.4 billion) comprised crude oil. “From December 5, 2022, until the end of October 2024, China purchased 46 per cent of all Russia’s coal exports, followed by India (17 per cent), Turkey (10 per cent), South Korea (10 per cent), and Taiwan (5 per cent) to round off the top five buyers list,” the agency said. India is more than 85 per cent dependent on imports to meet its crude oil needs. In October, the discount on Russian Urals grade crude oil increased 77 per cent to an average of USD 5.14 per barrel compared to Brent crude oil. The discounts on the ESPO grade narrowed by 5 per cent and traded at an average discount of USD 4.58 per barrel, while that on the Sokol blend widened by 8 per cent to USD 6.77 a barrel. According to CREA, 34 per cent of Russian seaborne crude oil and its products in October were transported by tankers subject to the oil price cap. The remainder was shipped by ‘shadow’ tankers and was not subject to the oil price cap policy. Cargoes of Russian crude can access western services like insurance and shipping only if sales are capped below USD 60 a barrel. To circumvent this, a dark or shadow fleet of oil tankers emerged. The shadow fleet consists of second-hand decrepit oil tankers with opaque ownership structures that make it difficult to ascertain who controls them or forces them to follow Western laws.
India Defends Propping Up Russian Oil – Prices “would have hit the roof”
India, the world’s third largest oil importer and consumer, has become the top buyer of discounted Russian sea-borne oil shunned by Western countries since Ukraine’s invasion began in early 2022. Before that, India bought little oil from its long-running defence partner, Russia. New Delhi has repeatedly defended its purchases from Russia as necessary to keep prices in check in the developing country of 1.42 billion people. “What many around the world don’t seem to realise is that global oil prices would have hit the roof if India had not bought oil from Russia,” India’s oil minister, Hardeep Singh Puri, wrote on X late on Friday. “We owe it to our citizens – India will buy oil from wherever our companies get the best rates.” India’s crude oil imports from Russia rose by 11.7% to about 1.9 million barrels per day in September, accounting for about two-fifths of the South Asian nation’s overall crude imports in the month. Russia was followed by Iraq and Saudi Arabia as India’s biggest suppliers.
Northeast gas grid to be operational by 2026: Indian Gas Exchange CEO
Ongoing work for Northeast Natural Gas Grid are as per the schedule and will likely be operational by 2026 according to Rajesh K Mediratta, Managing Director and CEO of Indian Gas Exchange (IGX). India’s northeast region has tremendous potential in the production of natural gas. The region has a deposit of 6 million MMSCMD Natural Gas which can be monetized by the existing producers, said Mediratta, addressing the ‘Gas Market Development for North East’, where leading energy producers and stakeholders participated in Guwahati. “This (grid) will add to the country’s energy security as IGX will help Gas producers to monetise stranded gas who can sell the surplus gas to the other regions,” Mediratta added, as per a statement by the gas exchange
Bangladesh said to scrap Darshan Hiranandani’s gas supply plan, India unlikely to intervene
India is aware of reports that Bangladesh has cancelled a proposed agreement with the Darshan Hiranandani-led H-Energy group to supply gas, but New Delhi is unlikely to intervene in the matter. The Mumbai-based company was to supply regasified liquified natural gas (LNG) to the energy deficient neighbour. The Bangladesh newspaper The Business Standard reported in April that state-owned Petrobangla is close to signing agreements on import of regasified LNG from an Indian private company through a cross-border pipeline. However, a recent report on Twitter suggested that the Bangladesh government is planning to cancel the project and imports after a US company, Excelerate Energy, which already has operations in Bangladesh, showed an interest in expanding its supplies to the country. ‘New Delhi is aware’ New Delhi is “aware” of the reports concerning the Hiranandani-led H Energy and Bangladesh, said a senior official in the know of the developments. “The (Indian) government would not intervene in this matter. It concerns with a private company. There are several other significant issues that can be taken up,” the official added.
OIL to form 3 JVs for CBG and CGD
Oil India Limited (OIL) has got a nod from its board for formation of three joint venture companies with HWTPL, GPS Renewables, and BPCL. Formation of a Joint Venture Company (JVC) with Hindustan Waste Treatment Pvt. Ltd. (HWTPL) to take up initiatives for establishment of Compressed Biogas (CBG) projects with equity holding in the ratio of 50:50, subject to approval of DIPAM and other authorities. Formation of a Joint Venture Company (JVC) with GPS Renewables Pvt. Ltd. (GPSRPL) to take up initiatives for establishment of Compressed Biogas (CBG) projects with equity holding in the ratio of 50:50, subject to approval of DIPAM and other authorities. Formation of a Joint Venture Company (JVC) with Bharat Petroleum Corporation Limited (BPCL) with equal equity shareholding, subject to necessary approvals from DIPAM and any other authorities, to execute City Gas Distribution (CGD) project in the Arunachal Pradesh State Geographical Area as authorised by Petroleum and Natural Gas Regulatory Board (PNGRB)
Oil Prices Fall as Trump Inches Toward Victory
Crude oil prices trended lower in midmorning Asian trade today, pressured by the first results from the U.S. elections and the latest weekly U.S. oil inventory report from the American Petroleum Institute. At the time of writing, Brent crude was trading at $73.68 per barrel, with West Texas Intermediate at $70.26 per barrel. Both were down by over 2.4% from the market’s opening. “The initial signs have been favourable for the Republicans and while it’s still early days, U.S. yields and the U.S. dollar are both trading higher,” IG analyst Tony Sycamore told Reuters. “This in turn is weighing on the crude oil price which has had a good run in recent sessions,” he added. “US foreign policy is shaping up to be a potential factor for oil markets in the near term,” especially with regard to Iran, Commonwealth Bank of Australia analyst Vivek Dhar told Bloomberg. He added that “markets now must consider whether OPEC+ will perennially be forced to push their decision to reverse their voluntary oil production cuts.” “If Trump wins, it is bullish for the oil market in the short-term due to prospects of tighter sanctions on Iranian oil,” ANZ Research analyst Soni Kumari told Reuters. Bloomberg meanwhile reported that oil traders are piling into bullish bets in case of a spike in Middle Eastern tensions that could lead to much higher oil prices. The report cited data showing that on Monday alone, some 10 million barrels worth of call options for December were traded at a price spread of $90/$100 per barrel. The expiry date for the contracts is November 15. The Monday trade volume is an extension of a rather bullish October: interest in call options on higher oil prices reached a record high last month, per Bloomberg, which also noted that even after the price retreat following Israel’s retaliatory strike against Iran, premiums on call options versus put options remain at the highest since Russia’s invasion in the Ukraine in February 2022.
HPCL to Boost Iraqi Oil Imports in 2025
According to a report by Reuters, India’s state-owned Hindustan Petroleum Corp Ltd plans to increase its yearly oil import agreement with Iraq to 100,000 barrels per day (bpd) in 2025, which would represent a 43% increase from this year. According to the report, HPCL has an annual agreement to purchase 70,000 barrels of Iraqi oil per day in 2024. As it activates certain residue upgrade units at its 274,000 bpd Vizag refinery in Southern India, the company’s imports of crude oil are expected to increase in the upcoming year. To reach 300,000 bpd, the refinery is being expanded. In western India, HPCL also runs the Mumbai refinery, which produces 190,000 barrels per day. By the end of December or the beginning of next year, it also plans to begin operations at its 180,000 bpd Barmer refinery in Rajasthan, a desert state in India.
Subsidies to oil & gas sector reduce 85% to $3.5 bn in 10 years: MNRE
Subsidies to the oil & gas sector saw a reduction of 85 per cent from a peak of $ 25 billion in 2013 to $ 3.5 billion by 2023, according to an official note on Monday. Since 2010, India has steadily reformed its fossil fuel subsidies, adopting a “remove, target, and shift” approach, the Ministry of New and Renewable Energy (MNRE) said. The ministry said, as per a report of Asian Development Bank (ADB), structured approach, including adjusting retail prices, tax rates, and subsidies on select petroleum products collectively reduced fiscal subsidies in the oil and gas sector by 85 per cent from a peak of $ 25 billion in 2013 to $ 3.5 billion by 2023. “A significant step in this journey was the gradual phasing out of petrol and diesel subsidies, coupled with incremental tax hikes. These reforms created fiscal space for greater government support in renewable energy initiatives, electric vehicles, and critical electricity infrastructure,” it said. From 2014 to 2017, tax revenues were further boosted by rising excise duties on petrol and diesel, implemented strategically during a period of low global oil prices. The additional revenues were then redirected toward targeted subsidies that expanded access to liquefied petroleum gas (LPG) for rural communities, addressing both environmental goals and social welfare. India’s fossil fuel subsidy reforms mark a decisive shift, channelling resources toward sustainable energy and laying the foundation for cleaner energy alternatives. The petrol and diesel subsidies were phased out gradually from 2010 to 2014, followed by measured tax hikes on these fuels till 2017, the report said. These moves were made to create fiscal year breathing room for renewable projects, allowing the government to channel funds into clean energy initiatives at an unprecedented scale, it added. Subsidies for solar parks, distributed energy solutions, and state-owned enterprises by the government reflects its purpose and commitment to clean power, setting a strong example for others looking to shift toward a more resilient energy future, the report noted. India steadily whittled down its fossil fuel support, opening doors to new investments in solar power, electric vehicles, and a stronger energy grid, it said.
India Diesel Demand Growth Slows
The growth in demand for diesel fuel in India is slowing down, the latest sales figures have suggested, with the total for October flat on the year, per a report by Bloomberg citing government data. Sales of diesel fuel in the country stood at 7.64 million tons last month, the data showed, with sales over the first ten months of the year up by a modest 1.8%, which according to the report suggests a slackening pace of demand growth for oil products overall. If confirmed, this slackening pace of growth would have implications for global oil demand prospects seeing as India is the world’s third-largest importer of crude after China and the United States. “The consumption of goods in smaller towns and cities of India has not picked up at the pace that was expected,” R. Ramachandran, former director of refineries at Bharat Petroleum Corp Ltd., told Bloomberg. “This has in all likelihood impacted the movement of trucks that transport goods, hurting diesel demand. Also, rains this year got extended, further adding to pressure on diesel sales for farm sector.” There is, however, another element in this change in demand. According to Kpler, diesel demand may be slowing but gasoline demand is on the rise as India’s middle class continues to expand, driving higher consumer spending, including on personal transport. What’s more, Kpler analysts believe demand for diesel will pick up next year, to grow by 2.5%, after booking growth of 2.2% for this year. “We observe a moderation in the growth rate compared to the post-pandemic recovery,” Kpler senior demand analyst Esteban Moreno Cots told Bloomberg. India is seen by analysts as the future biggest driver of global oil demand, set to replace China, which is electrifying its transport sector fast and expected to reach peak oil demand growth in the not too distant future.
Aramco and ADNOC Look To Seize More Market Share in Asia
As Asia is driving almost all of the global oil demand growth today and is set to continue to do so in the coming decades, some of the world’s biggest oil producers, those in the Middle East, are looking to expand their presence in the key demand growth market. Saudi oil giant Aramco and Abu Dhabi’s ADNOC plan to expand their downstream businesses, especially in Asia, to lock in future demand for their crude in the petrochemicals sector. Over the past two years, Saudi Arabia has announced a flurry of downstream deals in Asia, including in China and south and Southeast Asia, as it seeks to capture more markets for its crude oil. China may soon see a peak in its demand for road transportation fuels, such as gasoline and diesel, due to booming electric vehicle (EV) sales and LNG-powered trucks, respectively. While OPEC, whose de facto leader is Saudi Arabia, recognizes a structural shift in road fuel demand in China, it hasn’t backed down from its estimate that global oil demand will continue to grow, and peak oil demand is not on the horizon. Both OPEC and the International Energy Agency (IEA) – far apart as they are about long-term global oil demand trends – expect India to overtake China soon to become the biggest oil driver of demand growth. OPEC’s World Oil Outlook 2050 says that India, Asia outside China, Africa, and the Middle East will be the key sources of incremental demand in the coming years. Combined demand in these four regions is set to increase by 22 million barrels per day (bpd) between 2023 and 2050. India alone will add 8 million bpd to its oil demand by 2050. China, for its part, will see its oil demand increase by 2.5 million bpd, according to OPEC. Petrochemicals in China and refining and petrochemicals in India, south Asia, and Southeast Asia will be driving global growth. And the Middle East’s top oil producers want to be in pole position to capture this demand growth. From Abu Dhabi, ADNOC – in a consortium with Borouge and Borealis – announced in July a project collaboration agreement with China’s Wanhua Chemical Group to launch a feasibility study to develop a 1.6 million tons per year specialty state-of-the-art polyolefin complex in Fuzhou, China. The world’s single largest crude oil exporter, Saudi Aramco, signed additional agreements with China’s Rongsheng Petrochemical and Hengli Group in September to advance talks on cooperation in the refining and petrochemical sectors in China and Saudi Arabia. Aramco’s agreement with Hengli Group advances talks about Aramco’s potential acquisition of a 10% stake in Hengli Petrochemical Co., Ltd., subject to due diligence and required regulatory clearances. Earlier this year, Aramco entered into discussions with Hengli Group about the potential acquisition of 10% in Hengli Petrochemical. “China is an important country in our global downstream growth strategy, and we look forward to building on a relationship that spans more than three decades to unlock new opportunities in this crucial market,” Mohammed Al Qahtani, Aramco Downstream President, said in September. Saudi Aramco continues to be on the lookout for acquisition opportunities in the downstream segment and LNG, Yasser Mufti, Aramco’s Executive Vice President for Products and Customers, told Reuters in an interview earlier that month. In recent years, the Saudi oil giant has been pursuing deals to expand its international downstream presence, especially in demand centers such as Asia. Last year, Aramco entered Pakistan’s downstream market by acquiring a 40% stake in Gas & Oil Pakistan Ltd, one of the country’s largest retail and storage companies. In 2023, Aramco also announced two major refinery and petrochemical deals in China, which not only give the world’s largest oil firm a share of the Chinese downstream market but also an additional export outlet for 690,000 bpd of Saudi crude in China. Just last week, Aramco signed a collaboration agreement with Vietnam’s oil firm Petrovietnam for potential cooperation spanning the storage, supply, and trading of energy and petrochemical products. During the signing of one of the deals with China, Aramco Downstream President Al Qahtani, said in April, “We continue to explore new opportunities in important markets, as we seek to progress in our liquids-to-chemicals strategy.”