IOC and Reliance still deadlocked over post-APM

Vol 5, PW 19 (07 Nov 01) Midstream & Downstream

In our last issue we reported that Indian Oil and Reliance are locked in dispute over the post-APM marketing agreement they signed in April 1999.

We now learn the row figured high at an Indian Oil board of directors meeting on 30th October when additional oil secretary Naresh Narad was present. The board heard an outline of discussions on 20th October between Reliance and Indian Oil.

Both sides have dug in their heels. Reliance's position: Till the joint venture company is formed and starts operations Indian Oil is committed to uplift 15.455m t/y of 'agreed products' Out of this quantity, Indian Oil has to uplift 8.5m t/y on "existing terms and conditions except for obvious/minor corrections." Reliance agrees to work out the modalities of positioning the balance quantity at coastal consuming points of Indian Oil without any additional cost to Indian Oil, subject to Indian Oil committing to take this quantity in full If there is any surplus of these quantities after meeting domestic demand, Indian Oil and the other (state-owned) oil marketing companies should share the burden of exporting this surplus as the Reliance refinery should be treated on par with other oil PSU refineries Indian Oil should not buy any products from oil marketing companies and their associate refineries against Indian Oil's requirement in coastal areas such as Mumbai, Goa, Mangalore, Kochi and Vizag Oil marketing companies should buy their requirements in Koyali and north/north-west/north-east from Indian Oil Indian Oil's response: Indian Oil is committed to uplift nothing more than 8.5m t/y.

"Hence the question of commitment beyond 8.5m t/y to 15.455m t/y does not arise." Indian Oil will take Reliance products to meet its total demand (net of availability from Indian Oil's own sources including Chennai Refinery and Bongaigaon Refinery) in Mumbai and southern regions at no additional cost to Indian Oil Indian Oil agrees "to look into" any additional absorption of products if demand arises but with no additional cost to itself This is also subject to the plans of oil marketing companies to transport their surplus products in Mumbai and southern region and which can reduce their offtake of Reliance products from Indian Oil After meeting domestic requirement, "disposal of exportable surplus" should be on Reliance' account In view of the changed circumstances and the current depressed demand some of the commercial terms of the post-transition agreement need to be "reviewed and revised" Subject to Indian Oil and Reliance coming to an understanding on these issues Reliance should commit not to resort to direct marketing in India, except through Indian Oil