Bharat Petroleum Shifts to Middle Eastern Crude Amid Reduced Russian Oil Supplies

Bharat Petroleum Corporation Limited (BPCL), a state-run Indian oil refiner, is increasing its reliance on Middle Eastern crude to offset a drop in the availability of discounted Russian oil, according to the company’s finance chief, Vetsa Ramakrishna Gupta.

Gupta revealed that BPCL has been facing a shortfall of Russian crude from the spot market, prompting the company to source additional supplies from the Middle East, including Oman. “There may be a shortage of two to three cargoes per month… whatever is the shortage of Russian crude, we are purchasing that from the Middle East only,” Gupta said during an interview with Reuters.

India, which emerged as a leading importer of Russian seaborne oil after European sanctions on Moscow in 2022, has leveraged discounted prices on Russian crude to meet its energy demands. Russian oil now accounts for over one-third of India’s imports. However, BPCL’s access to Russian supplies has been affected by rising domestic demand in Russia, production cuts under its pact with OPEC, and a reported decline in output expected in 2024.

Russian oil constitutes approximately 35% to 37% of the crude processed at BPCL’s three refineries, which together have a capacity of 706,000 barrels per day. Gupta noted that BPCL would explore additional sources, including West Texas Intermediate (WTI) crude, if Russian supply disruptions persist next year.

Compounding the situation, Russian state oil firm Rosneft recently signed a deal to supply 500,000 barrels per day to Indian private refiner Reliance for 10 years starting in 2025. This agreement will account for about half of Rosneft’s exports, further limiting availability for other buyers like BPCL.

Diversification and Investment Plans

BPCL has been diversifying its supply sources, purchasing about 53% of its crude through term agreements. The company recently added Argentinian crude to its portfolio and has secured a deal to lift 10,000 barrels per day from Qatar for the fiscal year 2025-26.

The company also plans to invest ₹1.7 trillion ($19.94 billion) by 2028-29, with half of this funding coming from debt. A significant portion will be directed towards expanding its Bina refinery in central India and developing overseas oil and gas projects in Mozambique and Brazil, with an allocation of ₹250 billion over five years.

Gupta stated that BPCL would refinance ₹40 billion to ₹50 billion in loans next year and might turn to external borrowing in 2026-27 for planned major investments. He emphasized the need for additional US interest rate cuts to make international borrowing more attractive.

BPCL’s strategic moves highlight its adaptability as it navigates the complexities of global oil markets and rising domestic energy demands.