India's Reliance still in talks to settle 2013 term gasoil supply
Singapore (Platts)--6Dec2012/359 am EST/859 GMT
India's private refiner Reliance Industries Ltd. has yet to settle its
2013 term sale contract for 500 ppm sulfur gasoil and 10 ppm sulfur gasoil as
the gap between bid and offer levels was seen to be still too wide, traders
Talks are still ongoing, sources said, adding that the total volume of
gasoil being offered over the January-December 2013 term could not be
confirmed. Reliance declined to comment.
Early bid indications for the 500 ppm grade were seen around
$1.80-2.50/barrel over Mean of Platts Arab Gulf Gasoil assessments, while
Reliance offered at around $2.70-2.80/b to MOPAG 500 ppm gasoil, sources said.
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The pricing basis for the discussions is MOPAG 500 ppm gasoil, instead
of 0.5% as in previous years.
Meanwhile, bids for the 10 ppm grade were seen around $2.80/b over MOPAG
500 ppm gasoil assessments against Reliance's offer at around $3.60-4/b to
MOPAG 500 ppm gasoil.
Platts announced in 2011 that the sulfur specification of its benchmark
FOB Singapore/Arab Gulf Gasoil assessment would be reduced from the current
5,000 ppm to 500 ppm starting January 2, 2013.
"It would be hard to agree to Reliance's offer levels [for the 500 ppm
sulfur gasoil]. The price is already close to [the level] Bapco concluded its
first quarter 2013 tender," a trade source said.
Traders ideally seek Indian barrels to be priced cheaper than Middle
East barrels as a significant portion of the 500 ppm sulfur gasoil moves to
Saudi Arabia -- one of the largest buyers of 500 ppm gasoil in the region --
and adding freight to the overall price would make it economically nonviable.
Last month, Middle East gasoil suppliers like Bahrain Petroleum Co., or
Bapco, and Kuwait Petroleum Corp. or KPC, concluded their 2013 term gasoil
Bapco settled its term price for the first quarter 2013 with term buyers
at $3/b over MOPAG 500 ppm sulfur gasoil assessments, while Kuwait Petroleum
Corp., or KPC, settled its term premium for the whole of 2013 at $2.25/b over
MOPAG 500 ppm gasoil assessments.
As such, buyers would prefer to buy from Bahrain or Kuwait as freight
from the two countries to Saudi Arabia works out cheaper than from India's
Sikka, sources said.
But some said there was still some advantage in buying gasoil from
Sikka, even if the price was close to Middle East cargoes.
"There is some advantage to loading barrels from Sikka -- one of which
is the better freight economics to countries in East Africa where we see some
demand, compared with loading a similar cargo in the Middle East and moving
to East Africa," a trade source said.
Private refiner Reliance has the potential to export 1 million-1.5
million mt/month of gasoil, depending on domestic gasoil consumption. It has
a nameplate capacity of 1.24 million b/d at its Jamnagar complex in the
western Indian state of Gujarat. Jamnagar has two refineries, including a
580,000 b/d plant in a Special Economic Zone that is fully export-oriented.
--Jonathan Nonis, email@example.com
--Edited by Haripriya Banerjee, firstname.lastname@example.org