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MRPL boosts oil buying as war raises shipping risks

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In short

MRPL is adjusting its crude procurement framework to maintain optimal runs at its 300,000 barrels-per-day Karnataka refinery amidst elevated shipping risks in the Strait of Hormuz. Suppliers in the Middle East have accommodated these safety concerns by offering delivered cargo terms, freight discounts, and ship-to-ship transfers outside the critical transit corridor. Furthermore, MRPL fulfilled approximately one-third of its intake from Russia during the September quarter to build a diversified supply base. To guarantee adequate local fuel availability as national demand rises, the refiner anticipates scaling back its product exports over the coming months.

Key points

  • The refiner is shifting to delivered-at-port agreements so external suppliers assume all…: The refiner is shifting to delivered-at-port agreements so external suppliers assume all transit and shipping liabilities.
  • Sustained high runs at the 300,000 barrels-per-day Karnataka facility remain supported by…: Sustained high runs at the 300,000 barrels-per-day Karnataka facility remain supported by a diversified global crude procurement basket.
  • Refined fuel exports are expected to drop over the next few months as the refiner priorit…: Refined fuel exports are expected to drop over the next few months as the refiner prioritizes surging domestic consumption.

Sources checked by our analysis pipeline: 1

Attacks by Iranian forces on vessels transiting the Strait of Hormuz during the eight-month-long conflict have prompted Middle Eastern producers to offer more crude through ship-to-ship transfers outside the waterway, while also offering freight discounts on delivered-basis supplies. Under delivered-at-port (DAP) agreements, the supplier bears contractual responsibility for delivering the cargo to its destination.

"To de-risk, we would continue to insist on DAP cargoes, but going forward we will evaluate purely based on our delivered economics when things stabilise," MRPL CFO Devendra Kumar said at an analyst meeting.

The state-run refiner is diversifying its crude sourcing to operate its 300,000 barrels-per-day refinery in southern Karnataka state at full capacity.

MRPL met about a fifth of its crude oil requirements from the Middle East and around a third from Russia in the September quarter, Kumar said. Domestic crude accounted for about a quarter of its requirements, while it sourced the remainder from regions including West Africa and the Americas, he added.

Kumar said he hopes some Middle Eastern oil producers will offer delivered cargoes under annual supply deals, marking a shift…

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