(India's HDFC Bank and some foreign banks have stopped offering trade credit for oil imports to Nayara Energy, a Russian-backed refiner, and some suppliers are seeking payment upfront to avoid potential problems resulting from western sanctions against Moscow, reported Reuters with reference to four banking and industry sources.
Nayara has not been sanctioned as part of the international response to Russia's invasion of Ukraine, but Russian energy giant Rosneft, which owns 49% of the Indian refiner, has been.
To avoid the need for credit to fund overseas trade, the Mumbai-headquartered company is selling more of its refined fuels in India, two of the sources said.
All of the sources declined to be named because they are not authorized to speak to the media.
Nayara did not respond to a request for comment. Rosneft did not immediately respond to a request for comment.
Nayara imports crude oil worth about USD1 B every month on average for its 400,000 bpd Vadinar refinery in India's Gujarat state, the two sources told Reuters.
India's HDFC Bank and international banks such as Citibank, JP Morgan, Deutsche Bank and Japan's Mitsubishi UFJ Financial Group have stopped opening and confirming Letters of Credit (LCs), which are a standard form of payment guarantee in the oil trade, for Nayara, four sources said.
Citigroup, JP Morgan, Deutsche Bank and Mitsubishi UFJ declined to comment on Monday, while HDFC did not respond to requests for comment.
Kesani Enterprises Co Ltd, a consortium led by Trafigura Group and Russia's UCP Investment Group, is the other major stakeholder in Nayara, also with a 49.13% stake.
Kesani has pledged all of its shares in Nayara to Russian bank VTB, from which it took a loan to fund its acquisition of the Indian refiner in 2017, a fundraising document Nayara issued in August last year showed.
As MRC wrote before, in December 2021, Rosneft backed Nayara Energy, earlier known as Essar Oil, has chalked out massive expansion plans for India which include setting up of a greenfield petrochemical complex and ramping up its existing refining capacity from 20 million tonnes per annum (mtpa) to 46 mtpa at Vadinar near Jamnagar in Gujarat. The total envisaged investment for expansion, of which a major part is towards building a new petrochemical complex, is about Rs.1.5 lakh crore, they said. The expansion plans also include increasing its retail presence and additional investment at the captive port of Vadinar.
We remind that Nayara Energy hopes to operate its 400,000 barrels per day (bpd) refinery in western India at close to 100% capacity in 2021 as fuel demand is picking up, according to Hydrocarbonprocessing with reference to Chief Executive Alois Virag's statement at APPEC 2021 conference. Nayara, part owned by Russian oil major Rosneft, cut rates at its Vadinar refinery in Gujarat state last year.
MRC