BPCL to trim spot crude buying, lifts term

KUALA LUMPUR, June 12 (Reuters) Bharat Petroleum Corporation Ltd. (BPCL) will cut its spot crude purchases this fiscal year as it boosts its term buying from West Asia producers, its chief said on Monday.

BCPL will buy 3.5-4.0 million tonnes of crude from spot markets in the year from April 2006 to March 2007, down from a planned estimate of 5.0 million tonnes.

''We have increased term deals, for West Asia crudes such as Arab and Kuwaiti,'' the firm's chairman Ashok Sinha told Reuters in an interview.

He said total crude imports for the year would be up to 13 million tonnes, higher than 11 million the previous year, to feed its domestic refineries.

Refining margins were profitable at around a barrel for May, though will drop to about after a customs duty change, he said.

But the firm is still losing money on marketing oil products at around 5-7 rupees a litre despite a government fuel price hike this month.

''Losses are not on the refining side -- we pay them the full price but then sell the fuel at a loss,'' he said on the sidelines of the Asia Oil and Gas Conference.

''The balance is compensated through upstream and oil bonds.'' He said it was too early to say what total losses would be for the year, following expected losses of 25 billion rupees (0 million) for the 2005/2006 financial year.

Sinha welcomed the level of the government's fuel price hike and said it balanced the needs of refiners and consumers.

''It puts us on the right keel for the rest of the year and removes uncertainty,'' he said. ''An even higher rise would have seen a drop-off in demand and might have seen unrest that could have derailed the whole process.'' POSSIBLE IPO India, China and other Asian countries have cut back on fuel subsidies this year as they seek to reduce losses for state run refiners and to reduce the blow of soaring world oil prices on state budgets, but they remain concerned that higher retail fuel prices could feed inflation or spark riots.

Despite the retail losses, BPCL is planning to boost its production with a planned 50,000 barrel-per-day (bpd) expansion at its Kochi refinery and a greenfield 120,000-bpd refinery at Bina, both slated to come onstream by 2009.

Sinha said BPCL has around 50 percent of equity for the new plant, estimated to cost KUALA LUMPUR, June 12 (Reuters) Bharat Petroleum Corporation Ltd. (BPCL) will cut its spot crude purchases this fiscal year as it boosts its term buying from West Asia producers, its chief said on Monday.

BCPL will buy 3.5-4.0 million tonnes of crude from spot markets in the year from April 2006 to March 2007, down from a planned estimate of 5.0 million tonnes.

''We have increased term deals, for West Asia crudes such as Arab and Kuwaiti,'' the firm's chairman Ashok Sinha told Reuters in an interview.

He said total crude imports for the year would be up to 13 million tonnes, higher than 11 million the previous year, to feed its domestic refineries.

Refining margins were profitable at around $5 a barrel for May, though will drop to about $4 after a customs duty change, he said.

But the firm is still losing money on marketing oil products at around 5-7 rupees a litre despite a government fuel price hike this month.

''Losses are not on the refining side -- we pay them the full price but then sell the fuel at a loss,'' he said on the sidelines of the Asia Oil and Gas Conference.

''The balance is compensated through upstream and oil bonds.'' He said it was too early to say what total losses would be for the year, following expected losses of 25 billion rupees ($560 million) for the 2005/2006 financial year.

Sinha welcomed the level of the government's fuel price hike and said it balanced the needs of refiners and consumers.

''It puts us on the right keel for the rest of the year and removes uncertainty,'' he said. ''An even higher rise would have seen a drop-off in demand and might have seen unrest that could have derailed the whole process.'' POSSIBLE IPO India, China and other Asian countries have cut back on fuel subsidies this year as they seek to reduce losses for state run refiners and to reduce the blow of soaring world oil prices on state budgets, but they remain concerned that higher retail fuel prices could feed inflation or spark riots.

Despite the retail losses, BPCL is planning to boost its production with a planned 50,000 barrel-per-day (bpd) expansion at its Kochi refinery and a greenfield 120,000-bpd refinery at Bina, both slated to come onstream by 2009.

Sinha said BPCL has around 50 percent of equity for the new plant, estimated to cost $2.2 billion, and is considering an initial public offering for the remainder, among other financing options.

The plant will be built to take cheaper heavy crude, which forms much of new output coming onstream from OPEC, and will have hydrocracker and coker units to increase higher value light products and reduce fuel oil output.

Indian fuel oil exports have surged this year, which Sinha put down to upgrades for lower-sulphur fuels that result in higher fuel oil output, as well as flat domestic demand.

Indian refiners are planning a slew of new refineries, together with China, leading analysts to warn against the risk of oversupply and a pull back in strong refining margins by the end of the decade. But Sinha said he was not worried.

''The new refinery is to meet our current deficit -- we're short by 5 million tonnes a year in the north and have to buy from other refiners. The refinery is there for the next 30-40 years, not just tomorrow.'' (US$=45.86 rupees) REUTERS DKS HS1713 .2 billion, and is considering an initial public offering for the remainder, among other financing options.

The plant will be built to take cheaper heavy crude, which forms much of new output coming onstream from OPEC, and will have hydrocracker and coker units to increase higher value light products and reduce fuel oil output.

Indian fuel oil exports have surged this year, which Sinha put down to upgrades for lower-sulphur fuels that result in higher fuel oil output, as well as flat domestic demand.

Indian refiners are planning a slew of new refineries, together with China, leading analysts to warn against the risk of oversupply and a pull back in strong refining margins by the end of the decade. But Sinha said he was not worried.

''The new refinery is to meet our current deficit -- we're short by 5 million tonnes a year in the north and have to buy from other refiners. The refinery is there for the next 30-40 years, not just tomorrow.'' (US$=45.86 rupees) REUTERS DKS HS1713