Diesel imports scaling new highs in 2007-08
India will lift diesel imports to the highest to meet stronger demand fuelled by a booming economy and to cover shortfalls caused by major refinery maintenance works.business Updated: Sep 11, 2007 12:41 IST
India will lift diesel imports this fiscal year to the highest this decade to meet stronger demand fuelled by a booming economy and to cover shortfalls caused by major refinery maintenance works.
Asia's third-largest oil user may keep importing ample diesel volumes till 2010, when most refinery upgrades and new units will be ready, while lagging domestic supply from private refiners will add to the burden of state firms, industry officials said.
But company officials said inflows may ease next year as top state refiner Indian Oil Corp may halt diesel imports due to a slower maintenance plan and some added capacity, while Hindustan Petroleum Corporation may ship in some volumes.
India's imports of low-sulphur diesel this year, averaging 200,000 tonnes a month, will help sustain high premiums in Asia, which could make barrels from this region and the Middle East too pricey to ship to Europe or Latin America, traders said.
"Diesel demand is growing at a very high speed. We see a growth of 7 percent this year over a high base of last year," said GC Daga, IOC's director marketing.
A strong economy growing around 9 per cent and shutdowns removing 7 percent of refining output, will spur state refiners to import about 1.24 million tonnes of diesel this fiscal year (April-May), up 36 per cent on a year ago, as demand rises between 5.6 and 7.0 per cent, a Reuters poll found.
During April to July, India's diesel imports were already up nearly 146 per cent on year to 786,100 tonnes, data showed.
The country consumed 43 million tonnes of diesel last year, up 6.7 per cent. Diesel accounts for a third of India's oil products consumption and its share could grow further on increased usage of electric pumpsets in farms and higher commercial vehicle sales, which jumped 11 percent in the first quarter.
About 60,000 bpd of IOC's capacity have been or will be down for maintenance this year. But it only plans to conduct small shutdowns at some units next year.
"We are not hoping for diesel imports next fiscal year. I don't see any need, as our major shutdowns are planned for this year," IOC director of finance SV Narasimhan told Reuters.
"We will import some only when demand grows abnormally high."
Traders said diesel demand will stay strong as the economy is seen expanding 7-8 per cent for the next few years led by the private sector and spending by the growing middle class.
A lack of secondary units will push second-largest state oil refiner HPCL to import some 960,000 tonnes of low-sulphur diesel this year, after first-quarter sales rose 15 percent, said chairman and managing director Arun Balakrishnan.
"Our market share has gone up. Diesel demand is directly proportional to economic growth and industrial activity, so we will import some quantity next year too," said HPCL's director of refineries, MA Tankiwala.
HPCL hopes the residue upgrade projects at its Mumbai and Vizag plants will be online next year, after missing the December 2006 deadline, and allow it to limit low-sulphur diesel imports.
India is also deprived of high-grade diesel from private refiner Reliance Industries, which is diverted to the lucrative export market, instead of incurring losses from a subsidised domestic sector that shields only state firms from high oil.
Reliance, which owns the world's third-largest 660,000-bpd refinery, sold almost 20 per cent less diesel at its stations in April-July. Its sales to industrial buyers fell 72 per cent and overall sales dropped nearly 25 per cent.
Reliance is also importing diesel for its retail chain. In July private refiners imported 115,800 tonnes versus 3,000 tonnes in the same month last year. But Reliance may not import diesel beyond next year after the startup of its new 580,000-bpd refinery by second-half 2008.
Another private refiner, Essar Oil, has exported all the diesel produced so far from its refinery commissioned in November, as domestic sales are loss-making, an official said.
Political pressure has so far dashed hopes for price rises that could sway private refiners to sell more to domestic buyers.
India's imports have further tightened supplies in the Middle East and Asia, where demand for low-sulphur diesel from Indonesia to Vietnam has also been stoked by healthy economic growth, sending prices to near record highs.
"We have seen gas oil supply from the Middle East being reduced so badly it's almost becoming like finding gold," said Rifaat El Gohary, managing director of Bakri Trading Co (Asia).