India shuns Gulf producers, diverts oil to strategic reserves

A view of the Guru Gobind Singh oil refinery in the northern Indian state of Punjab. (REUTERS file photo)
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Updated 15 April 2020

India shuns Gulf producers, diverts oil to strategic reserves

  • Indian fuel demand has collapsed following a nationwide lockdown to prevent the spread of COVID-19

India will divert 19 million barrels of Gulf oil from state-run firms to strategic petroleum reserves (SPRs), skipping direct purchases from producers to help refiners get rid of extra oil as their storage is full, three sources said.

India’s decision to divert cargoes meant for state refiners will not soak up excess oil from the market following the demand collapse caused by the coronavirus pandemic, but it will help local companies to avoid demurrage charges at a time of expensive freight.

It also secures purchases at a low price.

The Indian Strategic Petroleum Reserves Ltd. (ISPRL), a company charged with building SPRs, had planned to buy oil directly from Saudi Arabia and the UAE to fill the caverns, sources said last month.

Since then situation has changed as Indian fuel demand has collapsed following a nationwide lockdown to stem the spread of the coronavirus, leading some refiners to declare force majeure on crude purchases.

Force majeure exonerates parties from contractual obligations because of circumstances beyond their control.

“It is good for ISPRL as it is getting crude at the April official selling prices of Saudi and U.A.E,” one source said on condition of anonymity.

Global oil prices rose to around $32 a barrel on Wednesday, continuing a recovery from 18-year lows hit last week, ahead of a meeting on Thursday of the Organization of the Petroleum Countries and other producers on output cuts to prop up the market.

India’s state refiners have resorted to exporting refined products to avoid full closure of their plants after local fuel demand collapsed.

The world’s third biggest oil importer, India has built SPRs at three locations in southern India to store about 37 million barrels of oil or about 5 million tons to protect against supply disruption.

Another source said that Indian refiners have until the third week of May to supply oil as the unloading of Very Large Crude Carriers (VLCCs) at Mangalore port stops then because of monsoon rains.

Hindustan Petroleum will supply 400,000 barrels of Iraqi oil to fill the nearly 7.5-million-barrels Vizag storage in the southern state of Andhra Pradesh, the sources said. India has already stored Iraqi oil in Vizag cavern.

The UAE’s Abu Dhabi National Oil Co. (ADNOC) has leased half of the nearly 11-million-barrel Mangalore storage, while the ISPRL has bought 4 million barrels of Saudi oil for 18.5-million-barrel Padur storage. The facilities are in Karnataka state.

Indian Oil Corp. will divert 2 million barrels of Saudi oil and 5.7 million barrels of ADNOC oil, they said.

Mangalore Refinery and Petrochemicals Ltd. will move its 6 million barrels and Bharat Petroleum Corp. will provide 4.6 million barrels of Saudi oil for the caverns, the sources said.

The four state refiners did not respond to Reuters emails seeking comments. ISPRL’s managing director H.P.S. Ahuja declined to comment.

ISPRL has signed memorandum of understandings with ADNOC to lease half of Padur facility and with Saudi Aramco for a quarter.

Pending final agreements with ADNOC and Saudi Aramco, India decided to help state refiners, one of the sources said.

“It is cheaper to divert the cargoes rather than keeping them floating . . . it is a win-win situation for all,” this source said. 


Flydubai plane returns after inaugural service to Tel Aviv

Updated 26 November 2020

Flydubai plane returns after inaugural service to Tel Aviv

  • “Welcome to Dubai,” an immigration officer said as the passengers from Israel filed off the plane and into the glitzy Gulf city
  • The United Arab Emirates in September signed a landmark US-brokered deal to formalize relations with Israel

DUBAI: A flydubai aircraft landed in Dubai from Tel Aviv on Thursday, the first scheduled commercial flight between the two cities following the normalization of ties between the UAE and Israel.
“Welcome to Dubai,” an immigration officer said as the passengers from Israel filed off the plane and into the glitzy Gulf city, some of them waving and giving the peace sign.
Israeli Prime Minister Benjamin Netanyahu, who was on hand in Tel Aviv earlier when the flight arrived after the four-hour journey from Dubai, called it “a moment of history.”
“As-salaam alaikum (Peace be upon you),” he said to arriving passengers. “Come again and again and again.”
The United Arab Emirates in September signed a landmark US-brokered deal to formalize relations with Israel, the first such agreement by an Arab state in the Gulf.
Commenting on the accord in a tweet on Thursday, UAE President Sheikh Khalifa bin Zayed Al-Nahyan said it would foster “prosperity and progress” in the Middle East.
With their economies hard hit by the coronavirus pandemic, the UAE and Israel are hoping for rapid dividends from the normalization deal, including an influx of tourists as Dubai enters its winter high season.
“The start of scheduled flights will contribute to economic development and create further opportunities for investment,” flydubai chief executive Ghaith Al-Ghaith said when the service was announced earlier this month.
The Dubai carrier will fly the route twice daily, and Israeli airlines El Al and Israir are both expected to launch their commercial services between the cities next month.
Etihad Airways, based in the UAE capital Abu Dhabi, has said it will begin flying to Tel Aviv in March 2021.
The UAE became only the third Arab country to normalize ties with Israel, following Egypt in 1979 and Jordan in 1994.
The two countries have already signed treaties on visa-free travel — although that is yet to come into force — along with accords on investment protection, science and technology.
Since the historic agreement, Bahrain has also forged ties with Israel, while Sudan has agreed to do so in principle.