State refiners complain about Reliance

Vol 4, PW 8 (24 May 00) Midstream & Downstream

Rumblings of discontent are surfacing within state oil refiners Hindustan and Bharat Petroleum over what is perceived as a patently unfair marketing agreement with private sector Reliance Petroleum.

In September last year, Hindustan Petroleum agreed to lift quantities ofcontrolled-price products such as petrol, diesel and kerosene from Reliance's 27m t/y refinery in Jamnagar. Bharat Petroleum signed a similar agreement later in the year.

A source tells Petrowatch the agreements give India's all-powerful Oil Coordination Committee (OCC) - attached to the Ministry of Petroleum & Natural Gas - the right to issue directives to Hindustan and Bharat Petroleum to lift products from the Reliance refinery. These directives are now causing anger.

"Why should we lift their (Reliance) production at the cost of our own production" a senior official tells this report, "If I do not have demand on my hands why should I be forced to pick up his (Reliance) production" Under the agreement, Hindustan and Bharat Petroleum are each required to lift approximately 25% of Reliance's production. Indian Oil Corporation lifts the balance 50%.

"Technically we can choose not to lift production in a certain month if we have no requirements," adds the official, "But we seldom have the freedom to exercise this choice." In private, the official accuses Reliance of "using its clout" with the OCC to force the two state-owned refiners to offtake products they don't need. He said India is currently facing a glut of refinery products and this has compelled the oil ministry to ask refiners to cut overall production.

LNG Summit