Mumbai, Nov. 9 -- Mangalore Refinery and Petrochemicals (MRPL) is increasing its purchases of crude oil on a delivered basis to reduce exposure to shipping risks linked to the Iran conflict and lower freight costs, its chief financial officer said at an analyst meeting. The Karnataka-based refiner is also diversifying supplies to keep its 300,000 barrels-per-day refinery operating at full capacity.
Attacks on vessels travelling through the Strait of Hormuz during the eight-month conflict have prompted Middle Eastern producers to offer more crude through ship-to-ship transfers outside the waterway. Producers are also offering freight discounts on delivered-basis supplies, under which the supplier bears contractual responsibility for delivering cargo to its destination.
MRPL's finance chief, Devendra Kumar, said the company would continue to seek delivered-at-port (DAP) cargoes to reduce risk. He added that once market conditions stabilised, the refiner would assess purchases primarily on their delivered economics rather than relying on a fixed preference for a particular supply arrangement.
The company sourced about 20 per cent of its crude requirements from the Middle East and around 33 per cent from Russia during the September quarter, Kumar said. Domestic crude contributed about 25 per cent, while the balance came from regions including West Africa and the Americas.
Kumar said some Middle Eastern producers could offer delivered cargoes through annual supply agreements, representing a possible shift from traditional free-on-board arrangements, under which buyers organise shipping. He said MRPL expected some of the supply variations introduced by producers during the disruption to remain available in the future.
Meeting domestic fuel demand remains MRPL's priority, Kumar said. The refiner's fuel exports could decline over the next couple of months as rising consumption in India directs more production towards the local market.
Published by HT Digital Content Services with permission from Construction World.