Vitol to move gasoil from East India to Australia in rare deal: sources

Singapore — In a rare move, global trading company Vitol is shipping a 35,000-mt gasoil cargo from India's Paradip refinery to Australia, reflecting the slowdown in local demand across South Asia, shipping industry sources said Sept. 18.

While it is common for gasoil cargoes to be exported from India's West Coast refineries such as Reliance in Jamnagar and Nyara Energy in Vadinar, most of the output from the 300,000 b/d Paradip refinery in the eastern province of Orissa is sold in the domestic market.

"These are barrels [that were offered via tender] and they have been awarded to Vitol," said a source with a direct knowledge of the matter. Another source tracking the developments said that Vitol planned to load the gasoil cargoes over Sept. 19-20 for delivery in Australia after a few weeks.

Vitol executives could not be immediately reached for comment, but sources said that Australia's demand for gasoil is still strong because of regular mining activities.

In Australia, iron ore is the first commodity to have breached the $100 billion level in terms of annual export value, according to Australian government estimates which show shipments worth $101.7 billion were made in the financial year ended June 30, 2020.

The demand for Australian iron ore has been driven by China's infrastructure boom, notwithstanding the deadly coronavirus pandemic. The country's iron ore imports rose almost 12% year on year over January-July, according to Chinese government estimates.

Gasoil is used in mining operations and its import demand is strong in Australia at a time when India's needs have taken a hit due to the lockdown.

India has been under varied degrees of lockdowns over the past six months due to the pandemic which has hit the public transport sector -- a major consumer of gasoil.

According to Indian government estimates, close to 3 million kiloliters of High Speed Diesel is consumed by conventional trains annually but consumption has declined significantly during the pandemic as the rail network -- one of the world's largest -- is running a very small percentage of its original capacity.

While India's refineries have reduced their capacity utilization, they still have surplus gasoil to get rid of and are doing so by exporting to countries such as Australia, sources added.

If local demand does not recover in the near term, more gasoil exports from Paradip can't be ruled out, they said.