• Indian refiner BPCL to set up Singapore trading unit

    Bharat Petroleum Corp plans to become the first Indian state refiner to open a trading unit in Singapore to take advantage of new crude import rules to buy cheaper oil and get better terms from producers. The move also underscores the growing clout of the world’s third-largest oil-consuming country and its desire to diversify import streams. BPCL, India’s No.2 state refiner, wants to exploit the shifting dynamics of the international oil trade caused by a supply glut to boost its margins.

    India this month began allowing state refiners – which control two-thirds of the country’s 4.6 million barrels per day (bpd) in refining capacity – to set their own crude import policy, freeing them from the grip of decades-old regulations. This has put state firms on par with private refiners Reliance Industries and Essar Oil that have global trading arms and achieve better margins.

    “Very shortly we will be opening … we will do it as fast as possible and scale up thereafter,” B. K. Datta, head of refineries at BPCL, told Reuters in an interview. He declined to say exactly when BPCL would be opening a Singapore office.

    Setting up shop in Singapore would give BPCL access to international trading talent and market intelligence, but the unit is expected to be headed by a company insider. It will initially procure spot crude for BPCL, which along with its subsidiary, Bharat Oman Refineries Ltd (BORL), controls 550,000 bpd in refining capacity. “Slowly we will try to shift all major activities there,” Datta said, handling products and crude trading and shipping.

    BPCL on average buys 100,000-120,000 bpd of crude oil from spot markets. The state refiner also handles about 240 vessels for crude imports, including some for its subsidiary BORL, according to data compiled by Reuters. “In an over-supplied market it is better to buy spot crude and if you have a trading firm you will have access to first hand information. This will help in getting feed stock at cheaper rates,” said Ehasan Ul-Haq, senior consultant at UK-based consultancy KBC Energy Economics.

    The trading arm will also give BPCL more flexibility in its operations, giving it the option to resell crude to other refiners or supply its own refineries to boost profitability, Haq said.
    BPCL is aiming to set up its Singapore trading operation just ahead of refinery capacity expansions. The company will by October complete the expansion of its Kochi refinery in southern India to about 300,000 bpd from 190,000 bpd. BPCL also wants to increase the capacity of its 120,000 bpd Bina plant in central India to 156,000 bpd by 2018.

    “This is an ideal time to enter into the trading business as crude prices are low and you can test the waters without spending money for leasing the storage. You can trade through floating vessels,” Haq said. In addition to its refinery expansions, BPCL will invest 40 billion rupees ($600 million) to upgrade the quality of fuels produced at its Mumbai and Kochi refineries to Euro VI norms by September 2019 – ahead of a government deadline of April 1, 2020. 

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