India’s Hindustan Petroleum Corp said it will rather buy low-sulphur oil from the United States as a replacement for Nigeria’s sweet crude for its Vizag refinery.
Hindustan Petroleum’s chief executive, Chairman M.K. Surana said at a news conference monitored by Reuters News said”We are also going to buy in the near future, in some months. There are certain grades which we found suitable for us,”
“We should have a wider basket and more options. U.S. crude is an additional option for us,” he said.
According to its latest first quarter result, HPCL reported a 56 percent drop in net profit for the fiscal first quarter as inventory losses dragged down its refining margins. Net profit for the quarter ended June 30 came in at 9.25 billion rupees ($145.26 million), from 20.98 billion rupees a year earlier.
HPCL suffered an inventory loss of 15.95 billion rupees in the June quarter compared to a gain of 19.35 billion rupees a year ago, Surana said.
Gross refining margins, or profit earned on each barrel of crude processed, dropped to $5.86 per barrel, compared to $6.83 per barrel in the same period last year.
The Indian government has decided to sell its 51.1 percent stake in HPCL to state explorer Oil and Natural Gas Corp .
Surana said HPCL’s investment plans will not be hit by its integration with ONGC. HPCL aims to invest 71 billion rupees in this fiscal year to expand its refining capacity and strengthen its marketing and pipeline network.
HPCL plans to boost the capacity of its Mumbai refinery to 190,000 bpd by July 2019 from 130,000 bpd while its Vizag refinery will be ramped up to 300,000 bpd by July 2020.
It is not clear how the Nigerian National Petroleum Corporation, NNPC will react to the development. Yesterday, the NNPC said it signed an agreement with Chevron Corporation, Royal Dutch Shell for the Sonam Project agreement.
The Sonam Project is a joint venture agreement that will see the development of proven and probable reserves of 211 million barrels.
The NNPC said in a statement that “The project is expected to begin to bear fruits in (the) next three and six months,” NNPC said in a statement, adding it was targeting production of 39,000 barrels per day of liquids and 283 million standard cubic feet of gas per day.
The NNPC said it is also in a joint venture with Shell Petroleum Development Company would lead to the development of a project comprising of 156 development activities across 12 oil mining licences in the Niger Delta oil hub.
NNPC said the deal with Chevron would provide the $780 million needed to complete the Sonam project on which the U.S. company has already spent $1.5 billion.
NNPC said the project with Shell, called Santolina, required third-party funding of $1 billion, without saying whether this was covered by the deal.
Nigeria’s is Africa’s largest producer of crude oil but the country has failed to produce its counterpart funding in the wake of its recession that was caused by the crash in global crude prices.