Refiners and ONGC argue about north-east crude

Vol 6, PW 12 (14 Aug 02) Midstream & Downstream

ON ONE SIDE is ONGC, ranged against it are India's refiners, united and ready to buy its crude oil, but only at the right price.

It's a duel with no end in sight. Indian Oil, Bharat Petroleum and Hindustan Petroleum have joined forces to squeeze the best deal possible from ONGC.

An ONGC source sums up the situation thus: "Basically we would like to charge them the maximum possible but they are trying to pay the minimum possible. Negotiations are still on." We understand the main area of disagreement is the price of crude produced by ONGC in Assam and other north eastern states.

Refiners want a discount on the FOB price of north east crude. Indian Oil and Bharat Petroleum say this is vital to help their local refineries stay afloat.

ONGC is unwilling to oblige and is scathing in its response. "If the FOB crude price is $24 per barrel, the current retail prices at which the PSUs sell works out to be $30 per barrel if you add freight, port charges, etc.

Then you add on another $1.60 per barrel as the sales tax concessions to the north east refineries. If despite this they are not making money, they are inefficient." ONGC argues that any further discount amounts to an additional subsidy.

"There is absolutely no question of us giving them any subsidies," we learn. "ONGC is not here to subsidise any refinery." One of the charges hurled against ONGC is that it is making "too much money." ONGC is unrepentant.

"We make money when the crude price rises. Will the refiners subsidise us if the price falls If IOC or BPCL cannot run their businesses profitably let them ask for subsidies from the government.

What was the whole point of dismantling APM"