Bharat Petroleum in talks with Azerbaijan’s SOCAR for LPG procurement, also looks at U.S.

China not taking U.S. LPG cargoes would also provide for India getting them cheaper, says Pandiyan of BPCL.
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SIVARAM V

Bharat Petroleum is in talks with State oil company of Azerbaijan for procurement of liquified petroleum gas (LPG), T.V. Pandiyan, head of LPG business with the State-owned refiner told The Hindu on the sidelines of the India Energy Week in Goa last week. Further, whilst elaborating on the company’s objective for diversification, Mr. Pandiyan also informed Bharat Petroleum had also floated a tender to import the cooking gas from the U.S.

The chief of the LPG business of the refiner informed the company’s basket hinges on 90% of the procurement being done through term-contracts and the rest via spot purchases. He stated the tender for U.S. is premised on their spot purchases operandi.

‘U.S. tender part of diversification strategy’

Elaborating on the rationale, Mr. Pandiyan, said, “There is a conflict in the Middle East. What if the [Strait of] Hormuz gets stuck up, what will we do?” adding, “This [the floated tender] forms part of our objective for diversification of sources.”

Reflecting on the broader dynamics, among other factors, Mr. Pandiyan explained that China not taking U.S. LPG cargoes would also provide for India getting them cheaper. “U.S. ships that were taking LPG to China, they are being taxed because of the prevailing tariff war, so the landed cost of LPG on China’s shores have become costlier. Therefore, China is not taking U.S. cargoes,” he stated, adding, “They [the Chinese] are instead taking Middle East cargoes because of which U.S. cargoes is in surplus. We are sensing the landed cost of U.S. cargoes on Indian shores would be cheaper and thus, we floated a tender only to the extent of 10% of our import requirement on an all oil-company basis to avail the advantage at present.”

‘Under-recoveries may go up to some extent subject to international prices’

According to Mr. Pandiyan, the under-recovery on LPG cylinder could go up to some extent should the international gas prices continue an upward trajectory. “International prices cooled off in the last year, and suddenly in the last 1-2 months it picked up. Therefore, next month as per the prices our under-recoveries might go up to some extent,” he stated.

He informed (January 28), that the under-recoveries stood at ₹90 per cylinder, and ₹30 per cylinder last month, that is, December.

In August last year, the Union Cabinet approved a compensation scheme worth ₹30,000 crore to oil companies for subsidising the sale of cooking gas during soaring global prices back then.

The LPG business chief stated the company’s share in the package is approximately ₹7,500 crore. He informed two instalments have been paid, that is November and December, and it would continue for the next 10 months.

“It may appear we are bleeding, but the government does not allow us to bleed,” he stated.