India Refiners to Seek more Middle East Crude Supplies in 2012.

Indian oil refiners are likely to turn more to term crude supplies from the Middle East in 2012 to meet rising domestic demand for sour grades as more refining capacity comes onstream next year, sources said Tuesday.

Key OPEC producer Saudi Arabia, with its spare production capacity, is likely to feature as a major supplier.

However, Indian refiners may also tap other sources in the region to meet the additional demand.

"We'll maintain the same ratio [in procuring crude oil from various Middle East exporters]," a company source at an Indian refiner told Platts Tuesday.

In 2010, India imported about 63% of its crude oil from the Middle East, including 18% from Saudi Arabia and 11% from Iran, according to Global Trade Atlas cited by the US Energy Information Administration.

The proportion of Iranian crude supplies to India may shrink despite requests by the latter for more term barrels in 2012.

Iran has informed Indian refiners that it is unable to fully meet the request, a move likely to benefit other Middle East sour crude suppliers, including state-owned Saudi Arabian Oil Company, or Aramco.

Aramco stepped in to fill the void left by disruption to Iranian crude supplies to India in July and August caused by payment issues with Iran.

Mangalore Refinery and Petrochemicals Ltd. plans to almost double crude imports from Aramco from next year to meet greater crude requirements following the expansion of its refinery at Mangalore.

The refiner has requested Aramco to supply 20,000 b/d more Arab Super Light crude in 2012, above the 22,000 b/d under its current term contract. The kingdom's crudes will feed about one third of MRPL's capacity increase, which is expected to be commissioned by January or February.

MRPL will boost capacity at the refinery by 3 million mt/year, or 25% of the current capacity, to 14.82 million mt/year (300,000 b/d).

Separately, HMEL, a new joint venture between HPCL and Mittal Energy, is likely to request for more Saudi crude in 2012.

HMEL has bought crudes from Aramco on a spot basis during the commissioning of the new greenfield 180,000 b/d refinery at Bhatinda.

Full commissioning is scheduled to be completed at the end of the year at the earliest, or up to March 2012. HMEL will sign new term deals with Aramco once operations have stabilized and its requirements have become clearer, a source said.

The refinery is designed to process Arab Heavy Crude with flexibility to process other heavy/sour/acidic crudes.

Meanwhile, Bharat Petroleum may also seek an additional supplies of Saudi crude next year.

Source : platts.com