Plan B, C, D: India looks for alternative suppliers to fill imminent void of Iran oil supply

Plan B, C, D: India looks for alternative suppliers to fill imminent void of Iran oil supply

Saudi Arabia, Iraq may help plug immediate supply gap; Refinery maintenance to reduce prompt crude demand; Companies eye Latin American oil -Reuters

July 25, 2011 12:52 by Reuters

Indian Oil is considering importing oil from Africa and South America for its 300,000 bpd Paradip refinery in eastern India, due to start up next year. MRPL plans to lift 110,000 bpd from Venezuela by 2017. Selling to India fits into Venezuela’s strategy to divert cargoes from the US.

“There is growing production from Latin America and in some cases like Venezuela they want to divert supply away from the U.S. – that’s a political decision,” said Victor Shum, an analyst at Purvin and Gertz.

Reaching out to Latin America even though freight costs could add to expenses for refiners that already incur billion of dollars of losses selling fuel at government controlled prices highlights the desire of India’s refiners to diversify supply.

There are other challenges aside from distance for India in switching to Latin American grades. Only the country’s newer and more complex refineries have the units needed to refine the oil.

“Much of the Latin American oil is lower quality – heavy and with high sulphur. But as Indian refiners become more sophisticated with installation of crackers and cokers, more of this oil can be refined,” said Tossetti. (By Nidhi Verma; Reporting by Nidhi Verma; Editing by Simon Webb and Manash Goswami)

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