MOSCOW (MRC) -- Indian state refiners have stopped buying crude oil from China-linked companies, three sources said, after New Delhi’s recent regulation aimed at restricting imports from countries that it shares a border with, reported Reuters.
The new regulation, put in place on July 23, comes after a border clash between India and China that killed 20 Indian soldiers and soured relations between the two neighbors.
Since the new order was issued, state refiners have been inserting a clause in their import tenders on new rules restricting dealings with companies from countries sharing a border with India, the sources said and the tender documents show.
Last week, Indian state refiners decided to stop sending crude import tenders to Chinese trading firm like CNOOC Ltd, Unipec and PetroChina, among others, one of the sources said.
To participate in Indian tenders, the July 23 order makes registration with a department in the federal commerce ministry ‘mandatory’ for any bidders from nations sharing a border with India.
India shares borders with China, Pakistan, Bangladesh, Myanmar, Nepal and Bhutan, but the government statement did not name any specific country.
State refiners, which control 60% of India’s 5 million barrel-per-day refining capacity, regularly tap spot markets for crude.
India is the world’s third biggest oil consumer and importer and imports nearly 84% of its oil needs.
China does not export crude to India but Chinese firms are major traders of the commodity globally.
Chinese companies also hold equity stakes in many oilfields across the globe ranging from the Middle East to Africa and the Americas and often submit competitive bids in crude import tenders by Indian state refiners.
Indian state refiners have also decided not to deal with China Aviation Oil (Singapore), PetroChina and subsidiaries of Unipec among others for fuel imports, and have stopped chartering Chinese tankers for imports, sources said.
“There is no impact from the tanker ban and refined fuel imports restrictions as we hardly hire Chinese vessels and our (state refiners’) refined fuel imports are also almost nil except for liquefied petroleum gas (LPG),” a second source said.
State refiners will, however, take delivery of crude in tankers linked to China if the import tender was awarded on a cost, insurance, freight (CIF) basis, where the seller arranges the ships, the sources said.
State refiners Indian Oil Corp, Bharat Petroleum Corp, Hindustan Petroleum Corp, Mangalore Refinery and Petrochemical did not immediately respond to requests for comment.
CNOOC, PetroChina and Unipec parent Sinopec also did not immediately respond to requests for comment, while China Aviation Oil declined comment.
India has surplus refining capacity. Most refiners are operating their plants at below capacity as COVID-19-related restrictions have dented fuel demand.
“Nowadays our own requirement is very less, so these new rules are not hurting much. But at some point in time we will definitely be impacted by the new conditions. But we need to think of the larger picture and the national interest, also,” a third source said.
As MRC informed previously, PetroChina’s Ningxia refinery was scheduled to resume operation of its 100,000 barrels per day oil refining units in mid-August after an overhaul. The plant in northwestern China began 45 days of maintenance on July 1.
Besides, PetroChina Ningxia PC, part of PetroChina, bought on-stream its polypropylene (PP) plant following a turnaround. The company resumed operations at the plant on August 18, 2020. The plant was shut for maintenance on July 1, 2020. Located at Yinchuan, China, the PP plant has a production capacity of 110,000 mt/year.
Ethylene and propylene are feedstocks for producing PE and polypropylene (PP).
According to MRC's DataScope report, PE imports to Russia dropped in January-June 2020 by 7% year on year to 328,000 tonnes. High density polyethylene (HDPE) accounted for the main decrease in imports. At the same time, PP imports into Russia rose in the first six months of 2020 by 21% year on year to 105,300 tonnes. Propylene homopolymer (homopolymer PP) accounted for the main increase in imports.