Future of Ravva crude hangs between IOC and HPCL

Vol 6, PW 8 (19 Jun 02) Midstream & Downstream

INDIAN OIL WANTS Shastri Bhawan to nominate it over Hindustan Petroleum as the sole buyer of crude from the Cairn Energy-operated 50,000 b/d Ravva oilfield.

But for next year at least, IOC has no chance of getting any because it has all been earmarked for Hindustan Petroleum's 7.5m t/y refinery at Visakhapatnam. PETROWATCH learns of a 20th February letter from IOC to Shastri Bhawan asking for Ravva crude so that it can improve refining margins at its Haldia (West Bengal), Barauni (Bihar) and Bongaigaon (Assam) refineries.

IOC argues that these refineries "will struggle for a competitive edge" in a deregulated market "because of higher crude input costs" than other refineries and reckons Ravva crude could give these refineries a "much needed boost in margins". Cheekily, IOC suggests an alternative for Hindustan Petroleum: it notes that Vizag port receives Ravva crude in 60,000-tonnes LR-1 tankers but that the higher draft means it can berth 135,000-tonne Suez Max tankers.

IOC suggests HPCL would save on freight costs if it brought crude into Vizag from alternative sources in Suez Max tankers! But Shastri Bhawan is unconvinced: eight days after the IOC letter, Shastri Bhawan decided against disturbing the existing arrangement between the Ravva consortium and HPCL. It did make one concession: if HPCL is privatised IOC will be "considered" a government nominee for Ravva crude.

A big if! Undeterred IOC repeated its demand for Ravva crude in a letter on 24th April. Oil ministry bosses are scheduled to discuss the issue sometime this month.

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