State-run Indian refiner Hindustan Petroleum Corp. (500104.BY) plans to triple its annual term crude supply contract with Iran and reduce supplies from Iraq in the next financial year starting April, a person familiar with the matter said Friday, outlining HPCL's crude procurement strategy plan for the next fiscal year.
HPCL is likely to raise its annual term supply contract with National Iranian Oil Co. to 60,000 barrels a day from 20,000 barrels a day currently, said the person, declining to be named. The increased facility will be on a 90-day credit basis, compared with 30 days earlier, he said.
"The Iranian crude will be mainly for the Vizag (Visakhapatnam) refinery (in southern India)," he said.
"The existing contract with Iraq's SOMO (State Oil Marketing Organization) will be reduced to 1.25 million (metric) tons (about 25,000 barrels a day) from 3.25 million tons (about 65,000 barrels a day)."
The changes in the sourcing plan will help to provide "supply security and diversification of the term crude basket" he said. "HPCL will also have the flexibility to capture opportunities in the spot market."
It may buy about 31,000 barrels a day of spot crude in fiscal 2009-10, depending on availability of local crude and actual refinery throughput rates, he said.
HPCL's board has approved the changes in the term contracts as well as the crude purchase strategy, he added.
The company will import about 220,000 barrels a day of crude during the financial year and process nearly 92,000 barrels a day of oil produced in India.
It plans to sign a term deal with Saudi Arabian Oil Co. for about 45,000 barrels a day, and with Abu Dhabi National Oil Co. for about 40,000 barrels a day.
The company also plans a 30,000 barrel-a-day term deal with Malaysia's Petronas. The contract includes 15,000 barrels a day of optional supplies for both the buyer and the seller.
The contract with Kuwait Petroleum Corp. will be for about 20,000 barrels a day, he said.
HPCL's crude processing in the next fiscal year is likely to be lower than the previous fiscal year due to planned shutdowns.
It plans to process 311,000 barrels a day in the next fiscal year, the person said. It processed nearly 341,000 barrels a day in the previous year ended March 31, 2008, according to its Web site.
HPCL runs two refineries in India - in Vizag and Mumbai - with a combined nameplate capacity of about 260,000 barrels a day. Indian refineries usually operate at more than their installed capacity to meet domestic demand.