India’s state-owned oil and natural gas company Hindustan Petroleum Corporation Limited (HPCL) will be buying low-sulfur oil from the US for its166,000-barrel-per-day (bpd) Vizag refinery in southern India for the next few months.
HPCL Chairman M.K. Surana said at a news conference that they found certain grades that are suitable for the company. “We should have a wider basket and more options. US crude is an additional option for us,” he said.
India is the latest Asian country to buy U.S. crude, following South Korea, Japan, China, Thailand, Australia and Taiwan, after OPEC cuts drove up prices of Middle East heavy-sour crude, or grades with a high sulfur content.
Indian refiners stepped up purchases of US oil after Indian Prime Minister Narendra Modi’s visit to the Washington in June when President Donald Trump said the United States looked forward to exporting more energy products to the world’s third-biggest oil buyer.
Since then, state-run Indian Oil Corp and Bharat Petroleum Corp have bought US oil, as Indian refiners seek to diversify their crude import sources as arbitrage opens due to global oil supply cuts.
HPCL’s finance chief J. Ramaswamy said the company is evaluating if Nigerian sweet oil can be replaced with US oil. He said HPCL has the appetite to import a very large crude carrier containing 2 million barrels of US oil every month.
HPCL reported a 56% drop in net profit for the fiscal first quarter on Friday, as inventory losses dragged down its refining margins.
Net profit for the quarter ended June 30 came in at Rp9.25 billion (US$145.26 million), from Rp20.98 billion a year earlier.
HPCL suffered an inventory loss of Rp15.95 billion in the June quarter compared to a gain of Rp19.35 billion a year ago, Surana said.
Gross refining margins, or profit earned on each barrel of crude processed, dropped to US$5.86 per barrel, compared to US$6.83 per barrel in the same period last year.
The Indian government has decided to sell its 51.1% stake in HPCL to state explorer Oil and Natural Gas Corp.
Surana said HPCL’s investment plans will not be hit by its integration with ONGC. HPCL aims to invest Rp71 billion in this fiscal year to expand its refining capacity and strengthen its marketing and pipeline network.
HPCL plans to boost the capacity of its Mumbai refinery to 190,000 bpd by July 2019 from 130,000 bpd while its Vizag refinery will be ramped up to 300,000 bpd by July 2020.