The first post in the series described the volume of Russian Crude and the benefit to India’s trade balance. This post observes how and to whom India is exporting refined petroleum products and what it means short term.
Export destinations for Reliance include the west coast USA (up to 200,000 BPD of vacuum gas-oil, primarily a feedstock for processing into California blend gasoline and fuels), and the trade (not sanctioned by EU and USA rules) goes thru intermediary enterprises. Refined fuel exports to the EU have also increased (up to 360,000 BPD of diesel and other feedstocks), making India the EU’s largest refined fuels source.
The effect of lower (by global pricing for crude petroleum) inputs and in-demand outputs (with trade in USD) has India earning profits for Indian refining enterprises, like Reliance, at a spread assured by external price caps. Looking at global spot prices, estimates range from USD$18.50/bbl to USD$40.00/bbl with 400,000-600,000 BPD available for export across the industry. Reliance also benefits from tax reductions on production at the Jamnagar facility in the Gujarat special economic zone. The domestic Indian market is still controlled, with swings in global crude production affecting margins differently. This favorable trade balance is a help to the greater Indian economy in Challenging Times.
The refining margins are finite, limited by Russian crude shipping logistics capacity, global supply management by export producers, and refinery capacity constraints. The margins are likely to continue until EU/USA sanctions are resolved. In Challenging Times, this provides India, especially Reliance, a cashflow cushion.
EkaLore regularly writes about Dynamic India’s opportunities (and challenges) due to its talent pool, culture, and geo-political dynamics. You can find other stories about Dynamic India at www.ekalore.com/india-business
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