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Singapore — India's Nayara Energy is increasingly snapping up more ultra-heavy crude from Canada, West Africa and the Middle East to fill the vacuum created by Venezuela, and the refiner will be looking for new sources since those grades deliver the best economic value, its CEO B. Anand told S&P Global Platts.

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While their refinery configuration gives Nayara the flexibility to absorb a lot of new crude grades, having Trafigura, Rosneft and United Capital Partners as partners have helped to scout the globe and broaden its sourcing ability of ultra heavy and maintain robust margins, he said in an interview on the sidelines of the Platts Asia Pacific Petroleum Virtual Conference, or APPEC.

"We are altering our crude strategy not because of the pandemic but because of Venezuela. We continue to have a strong bias towards ultra heavy crude because that's what delivers the best value for our refinery," he said.

In 2017, Nayara, which was then called Essar Oil, closed a $12.9 billion takeover deal by Rosneft, Trafigura and UCP. As part of the deal, the consortium took over the 20 million mt/year Vadinar refinery, which has a complexity index of 11.8.

"We are opening to other suppliers for taking in heavy crude -- other Latin American supplies and West African Ultra heavies. Over the last one year, the differential between ultra heavy and medium grades has been eroded but we are hoping it will return to deliver us the best economics," Anand said.

S&P Global Platts Analytics expects Venezuelan supply to be capped at roughly 300,000 b/d through the end of 2021, since most international buyers stopped making deals with PDVSA after the departure of Russia's Rosneft and as tightening US sanctions have cracked down on shipping companies facilitating the country's exports.


Highlighting the company's expansion plans, Anand said Nayara's strategic push to expand its retail fuel outlet network and petrochemical footprint were progressing well despite COVID-19 creating some challenges.

Nayara in 2019 spelled out its first big expansion strategy since the takeover by announcing its foray into petrochemicals. The proposed first phase of asset development for the Vadinar refinery entailed an investment of $850 million for setting up a 450,000 mt/year polypropylene plant and a 200,000 mt/year MTBE plant.

"The expansion plan is on track. We are waiting for some approvals. And once we start the project, it should be completed in three years," Anand said. "On the oil refining side, we have no immediate plans to expand but we are watching that space."

On the retail oil segment, Anand said that Nayara was able to add 230 outlets this year despite the COVID-19 challenges. The company had added about 750 outlets in 2019.

"We are confident that we will be able to achieve our target of 7,300 retail outlets by end 2022 or early 2023," Anand said.

He said that the company's stable exports of jet fuel this year despite the pandemic had prompted to maintain relatively higher runs compared with some other oil refiners in the country.

"Since we had our already committed jet fuel term contracts with overseas suppliers we had to keep those commitments. So during the most difficult times this year, when some refiners cut runs by 50%-60% we went for only about 10% run cuts," he said.

He said that domestic demand for jet fuel would pick up slowly as flight occupancy was rising in the domestic sector.


Anand said that he was not expecting a v-shaped recovery in India's oil demand but gasoline remand would recover faster than gasoil.

"People are preferring to use their own cars and bikes rather the public transport, such as buses. That will help gasoline demand to rebound soon. But we are not very encouraged by the pace of gasoil demand growth," he said.

Platts Analytics expects India's year-on-year oil demand to fall 340,000 b/d over the second half of 2020, having contracted by 700,000 b/d in the first-half, taking the full-year drop to 520,000 b/d.

Sharing his views on the energy transition process, Anand said that while for Nayara oil would be the key focus, it would look for opportunities on how it could restructure its product portfolio in coming years to suit the needs of the consumers.

"For example if we get clarity on hydrogen, we will have the ability to recalibrate our refinery to produce hydrogen. But there are many issues on costs and safety that need to be addressed and we are aligned to those discussions," Anand said. "We are also participating in discussions on biofuels and ethanol blending at the industry level."

Anand said one of the key challenges that COVID-19 had created was how to optimize resources while keeping costs low, but the company was not altering its business strategy because of the pandemic.

"Over the next 10 years, we will look at how to transition from oil to chemicals and have a wide range of products but there won't be any fundamental change in our business model. It's a long-term vision."