BPCL to strike forward deal with Russia for cheaper crude

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State-owned Bharat Petroleum (BPCL) is considering entering into a forward agreement with Russia for crude oil imports. While the talks are at an early stage, a source said “BPCL officials are already hard at work.”

“The plan to enter into a forward agreement with Russia is a purely commercial decision, based on the cost advantage that Russian crude can offer now. The company has answered the call and the government is not playing any part in it. BPCL is open to sourcing crude from any part of the world, which will reduce its supply costs,” the source said.

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However, the source added that the price discount by Russia was not as high as $30 per barrel, quoted in some reports.
“The cost of transportation is very high. The raw supply cost is quite high. The vendors there have their own cut.

The sanction imposed by the West on Russia for its invasion of Ukraine has depressed spot prices for Russian crude. Indian refiners, which did not use much Russian crude, seized the opportunity, propelling Russia into the second largest supplier of crude in May, by supplying Saudi Arabia.

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“The discussion is at the preliminary stage. We are testing the raw, testing the limits, etc. “said the source.

He said a final decision on entering into a futures contract with Russia will depend on several factors such as refineries’ ability to process that crude. “There are many permutations and combinations.”

BPCL has in the past imported crude oil from Russia on the spot market, but on a very limited basis. “If we have a choice, we will want to get a long-term mandate.”

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

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