The Hindu Business Line : IOC to step up crude import from Iraq

INDIAN Oil Corporation is showing increasing preference for Iraq crude, better known as `Basra Light', primarily due to the price advantage it offers.

Having entered the Iraq market last year, the company procured 4.8-million tonne (mt) Basra Light in 2004-05. It is now planning to step up imports from Iraq to 8 mt during the current fiscal, on term contract basis.

According to sources, BPCL and HPCL, the two other public sector oil majors, which had also entered the Iraq market last year, however, have so far "maintained their presence in the market" and are not considering any major increase in procurement. The two put together procure lower quantities from the world crude market compared to IOC.

The largest Indian refiner, IndianOil procures close to 40 mt of crude from the world market to feed its seven refineries. Of this, 25-26 mt are on annual term contract basis and the rest are spot purchases.

While a price advantage to the tune of 50 cents to $1 over comparable sour light variety available in the neighbouring region is described as a major reason behind IOC's shift towards Basra Light, informed sources said the company might also replace a part of the light-sweet variety, generally costlier than the light sour crude, in the current year underlining a change in refining strategy especially in regard to the increasing demand for Euro-III fuel.

Apart from Iraq, the other countries from which IOC is expected to procure in substantial quantities on term contract basis during 2005-06 are Kuwait (7 mt), Saudi Arabia (4.5 mt), UAE (2 mt), Iran (2 mt) and Nigeria (2 mt). Brunei crude which was a regular feature in the shopping list until very recently, is largely replaced.

PSUs show keen interest in futures

TRYING to cope with the crude price volatility and encouraged by the Union Ministry of Petroleum and Natural Gas, oil PSUs are showing increasing interest in the futures trading, the most recent entrant in the field being BPCL.

In terms of volumes traded, however, PSUs are still a poor comparison to their private counterparts. IOC, which had set the trend three years ago, is yet to register any significant volume in the futures market. The situation is same for BPCL. While anticipating increased participation in futures trading in the coming years, sources in both IOC and BPCL feel that they were still lacking on confidence. "Our participation in futures is so far limited to minuscule quantities. This is an evolving strategy and we are still on a learning curve", the sourcessaid.

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