Reliance Industries (RIL) is currently assessing the impact of tightened restrictions on Russian crude oil imports, following the latest guidelines issued by the United States, the European Union (EU), and the United Kingdom. The company, India's largest importer of Russian crude, has stated it will comply with the EU's guidelines regarding the import of refined products into Europe.
This assessment comes in the wake of claims by US President Donald Trump that India would cease purchasing oil from Russia. The new restrictions and sanctions are part of a broader effort to tighten measures linked to the Ukraine conflict. These sanctions have specifically targeted major Russian oil firms such as Rosneft and Lukoil.
In a statement, a Reliance spokesperson said the company is evaluating the implications of these restrictions, including new compliance requirements. The spokesperson emphasized Reliance's commitment to adhering to all applicable sanctions and regulatory frameworks, and ensuring India's energy security. RIL also stated it would adapt its refinery operations to meet these compliance requirements.
Reliance has a long-standing agreement with Rosneft PJSC for crude procurement. However, with the recent sanctions, Reliance has already started diversifying its crude oil sources. The company has purchased millions of barrels of crude from the Middle East and the U.S., with shipments expected to arrive in December and January. These purchases include various oil grades such as Khafji from Saudi Arabia, Basrah Medium from Iraq, Al-Shaheen from Qatar, and West Texas Intermediate from the United States.
The shift in sourcing strategy is a notable change in India's energy procurement, influenced by global geopolitical dynamics. Reliance's diversified approach aims to maintain stability and reliability in its refinery operations, ensuring both domestic and export requirements are met. The company is confident that its "time-tested" strategy will continue to be effective.
Analysts are divided on the potential impact of these changes on Reliance's refining margins. Estimates range from a negligible impact to a reduction of as much as $5 per barrel. The company's reliance on discounted Russian oil, which has constituted over two-fifths of its crude basket, could lead to a squeeze on profitability. However, rising diesel cracks may help offset some of these losses. Some analysts believe that as Reliance switches to other markets, including West Asia, it will no longer benefit from the discounts available on Russian oil, even though those discounts have narrowed recently. Any impact on Reliance's refining margin is crucial, as the company receives nearly three-fifths of its consolidated revenue from its O2C (Oil to Chemicals) business.
As supply contracts evolve in response to changing market and regulatory conditions, Reliance has stated it will address these conditions while maintaining relationships with its suppliers. The company has a history of adapting to such changes, ensuring minimal disruption to its operations.
