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Indian Oil's fresh tenders belie India's claim to cut diesel imports

Key Asian buyer India's latest purchase tender for diesel signals a setback in its plan to end imports this year, traders said on Monday.

According to media reports emanating from Singapore, state-owned Indian Oil Corporation's issuance of a tender over the weekend, seeking September to November diesel imports have gone against its stated intentions to withdraw, traders said.

''It confirms my view that Reliance will not be fully reliable until next year. At the same time, diesel demand in India is very healthy, growing at 7-8 per cent,'' one trader with a European oil company said.

''I think IOC will continue to buy until first quarter of 2000 at least.''

IOC's latest tender sought 0.25 per cent sulphur cargoes in parcels of 40,000 to 45,000 tonnes, for delivery into east coast Indian ports of Madras/Haldia and closes on Thursday.

IOC officials had earlier said that India planned to withdraw completely from diesel imports, pending the start-up of Reliance Petroleum Limited's new Jamnagar refinery.

IOC officials could not be immediately reached for comment on Monday.

India's diesel import plans have hinged largely on Reliance's huge 540,000 barrel-per-day Jamnagar refinery.

The Jamnagar refinery started up on July 14 after nearly 30 days delay and has faced some teething production problems.

According to Indian officials last week, supply of diesel from Reliance would commence only from August 3.

This throws India's oil economy budget, passed in March this year, covering the period from April 1999 to March 2000, off target, traders said.

IOC had penciled in only 3.061 million tonnes of diesel imports -- all to be exhausted by June 1999, against some 11 million tonnes of diesel in the previous fiscal year.

''It is not proposed that we may go for the diesel at this moment after July, but it all depends as we go along,'' M A Pathan, IOC's chairman said at a conference in Kuala Lumpur at the end of May.

But IOC has already been committing to hefty diesel imports well into July and August, of nearly 800,000 tonnes per month through multiple spot tenders.

A company official had said buying was to build up contingency diesel stocks after disputes with Pakistan over Kashmir flared up last month.

An end to India's diesel imports would lead to intense competition among Asian export refineries for outlets.

Many would have to sharply cut back refinery runs as diesel comprised the bulk of production and was a key driver of profit.

IOC had already dropped nearly 20-year-old annually-renewed term diesel contracts with the Middle East refiners in April.

They last took up semi-term diesel supplies from Kuwait Petroleum Corporation of up to 180,000 tonnes per month from April to June, and from Bahrain National Oil Company (Banoco) for up to 45,000 tonnes per month, from May to July.

UNI/Reuters

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