BPCL to enter into term agreement with Russia for cheaper crude

State-owned Bharat Petroleum (BPCL) is considering to enter into a term agreement with Russia for imports of crude oil. While talks are at a preliminary stage, a source said, ‘BPCL officials are already on the job’.

“The plan to enter into the term agreement with Russia is purely a commercial decision, based on the cost advantage that Russian crude can offer now. The company has taken the call and the government has no role in it. BPCL is open to procure crude from any part of the world that will reduce its procurement cost,” said the source.

However, the source added the price discount by Russia is not as high as $30 per barrel, quoted in some reports.
“Transportation cost is very high. The cost of crude procurement is quite high. The suppliers there have got their own cut.”

Sanction imposed by the West on Russia for its Ukraine invasion has pushed Russian crude spot prices down. Indian refiners, which did not use much Russian crude, grabbed the opportunity, propelling Russia to become the second biggest supplier of crude in May, piping Saudi Arabia.

“The discussion is at the preliminary stage. We are in the process of testing the crude, testing the limitations, etc,” the source said.

He said a final decision on entering into term contract with Russia will depend upon multiple factors such as the capacity of the refineries to handle such crude. “There are many permutations and combinations.”

BPCL has, in the past, imported crude from Russia procuring it from the spot market, but in a very limited way. “Given a choice, we will want to get some term in the long-run.”

BPCL operates three refineries – one each in Kerala, Maharashtra and Madhya Pradesh – with a cumulative 35.3 MMTPA capacity. The company is in the process of finalising detailed project (report) for expansion of Bina refinery’s capacity in Madhya Pradesh to 12 MMTPA with an estimated cost of up to Rs 40,000 crore.