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Cheap Russian crude imports turn not so profitable for Indian oil companies
India managed to reduce its overall expenditure on crude oil imports by taking advantage of discounted Russian oil. However, Indian Oil Marketing Companies (OMCs) failed to maximise the benefits from this favorable situation. Kotak Institutional Equities in a report said that, “We also note that while India’s overall crude imports costs have benefitted from Russian imports, OMCs’ reported raw material costs do not show any increased advantage versus Dubai crude.”
Kotak Institutional Equities say that the benefit of Russian crude will be higher for companies like Nayara Energy, which is owned by Rosneft, a Russian OMC. Indian oil companies have to spend more on transportation and insurance costs as compared to Nayara Energy which saves cost and benefits from the discounted Russian crude oil.
Indian Oil Corporation’s (IOC) raw material costs in Q2FY23 was around $115 billion per barrel, while Dubai crude oil was around $105 billion per barrel. This means IOC was not able to monetise the benefits of Russian imports.
Similarly, Bharat Petroleum Corporation’s (BPCL) raw material costs in Q2FY23 was around $115 billion per barrel compared to Dubai crude oil, which was around $105 billion per barrel.
Dubai crude is used as a benchmark. Thus, if Indian refiners’ crude costs decline (versus Dubai crude), it not only boosts their refining GRMs, but also offers improved advantage over Singapore GRM
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