India shuns Gulf producers, diverts oil to strategic reserves

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

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. 


WEF: Coronavirus to remain ‘clear and present danger’

WEF: Coronavirus to remain ‘clear and present danger’
Updated 20 January 2021

WEF: Coronavirus to remain ‘clear and present danger’

WEF: Coronavirus to remain ‘clear and present danger’
  • Disease the top risk to global security and livelihoods over the next two years
  • ‘The immediate human and economic cost of COVID-19 is severe’

DUBAI: The risk from infectious diseases remains a “clear and present danger” even as vaccines are being rolled out to counter the effects of the coronavirus disease (COVID-19) pandemic, according to the World Economic Forum (WEF).

In its latest annual Global Risk Report, most respondents said that disease was the top risk to global security and livelihoods over the next two years.

In the medium to long term, they were worried about financial crises in the shape of asset bubbles arising from the pandemic economic crisis, and over the next 10 years the “existential threat” of weapons of mass destruction was the biggest fear.

In the gloomiest risk report for many years, the WEF said: “The immediate human and economic cost of COVID-19 is severe. It threatens to scale back years of progress on reducing poverty and inequality and to further weaken social cohesion and global cooperation.

“Job losses, a widening digital divide, disrupted social interactions, and abrupt shifts in markets could lead to dire consequences and lost opportunities for large parts of the global population.

“The ramifications — in the form of social unrest, political fragmentation, and geopolitical tensions — will shape the effectiveness of our responses to the other key threats of the next decade; cyberattacks, weapons of mass destruction and, most notably, climate change,” it added.

Environmental issues were also a key concern of respondents to the risk survey, with the likelihood of extreme weather, climate change failure, and human environmental damage the top three risks rated most likely.

Klaus Schwab, the founder and executive chairman of the WEF, and Saadia Zahidi, its managing director, said that the WEF had been warning of the danger of pandemics since 2006.

“In 2020, the risk of a global pandemic became reality. As governments, businesses, and societies survey the damage inflicted over the last year, strengthening strategic foresight is now more important than ever.

“In some cases, disparities in health outcomes, technology, or workforce opportunities are the direct result of the dynamics the pandemic created. In others, already present societal divisions have widened, straining weak safety nets and economic structures beyond capacity,” they added.

Some countries in the Middle East have handled the pandemic crisis relatively well, the WEF said. “Capacities and responses varied greatly but relatively young populations may have spared the region from higher death tolls; however, data in some locations are uncertain.

“Some nations with advanced medical systems and regimes able to enforce lockdowns and other social restrictions along with border controls have managed successive waves of infections.

“Other, poorer nations, and those that are fragile and in conflict situations, however, are suffering exacerbated economic and humanitarian challenges,” the report said.

The WEF highlighted the problems of young people, whom it labelled “pandemials.” It said: “The world’s youth have faced exceptional pressures in the past decade and are particularly vulnerable to missing out altogether on the opportunities of the next.”