Sanctions choke crude shipments to indian refiner nayara

Sanctions choke crude shipments to indian refiner nayara

Indian refiner Nayara Energy is set to receive the lowest-ever amount of crude this month, as oil imports and product exports buckle under the weight of EU sanctions.

Nayara — part-owned by Russian oil giant Rosneft PJSC and blacklisted by Brussels in July — is expected to receive just under 94,000 barrels of crude per day for all of this month, ship-tracking data from Vortexa and Kpler show. That compares with nearly 366,000 barrels a day in July through September last year.

It has received four cargoes of Russia’s flagship Urals grade, or nearly 2.9 million barrels, this month, but the last delivery was on Aug. 9. No more shipments are expected for the rest of the month, according to a shipbroker and the ship-tracking data, although this may still change.

The refinery, the country’s third-largest by capacity, was operating at nearly 70% of its capacity as of late July. Traders say that figure could fall further if the refinery is unable to obtain feedstock.

The picture is equally challenging when it comes to overseas sales of petroleum products. While Nayara has managed to export some cargoes in recent days, it relied on dark-fleet vessels to move those deliveries as legitimate shipowners and traders stayed away to avoid running afoul of the European Union sanctions.

Currently, two blacklisted medium-range tankers are docked at Nayara's terminal in Vadinar, according to ship-tracking data. Ocean Autumn and Varg had arrived, empty, on Tuesday morning, the data show. Both tankers are sanctioned by the UK, with Ocean Autumn also blacklisted by the EU.

Nayara exports that were already on water before the EU sanctioned the refiner on on July 18 also faced delays in finding buyers. A cargo of ultra-low sulfur diesel that was loaded onto the EM Zenith that day idled in the Straits of Malacca until late Tuesday, when the vessel showed that it was sailing to China. That would make it India's first diesel export to the country in more than four years, data show.

Domestic shippers have also pulled out from collaborating with Nayara, with The Great Eastern Shipping Co. Ltd. and Seven Islands Shipping Ltd. backing out of agreements to send fuel from one local port to another, according to people familiar with the development. They asked not to be named due to sensitivity of the trade. As a result, Nayara has turned to surface transport, such as trucks and rail to bring more of its fuel to market.

A Nayara spokesperson did not immediately respond to an email seeking comment.

Payment Challenges

The EU sanctioned Nayara for its support of the Kremlin's war in Ukraine through the Russian oil trade. Since then, Nayara has faced challenges issuing as well as receiving payments, leading it to seek advance payment or letters of credit before its fuel shipments are loaded, while cutting run rates at its Vadinar refinery.

Executives at the Mumbai-based refiner have held meetings with several Indian government ministries to seek advice on various issues that have hobbled its business since the sanctions. New Delhi, however, hasn't provided much support to Nayara as it scrambles to handle the fallout from additional tariffs announced by US President Donald Trump.

State Bank of India, the country's largest lender, stopped processing trade and foreign currency transactions for Nayara over potential sanctions, the Economic Times newspaper reported this week. The refiner has already reached out to the federal government to broker a relationship with a local lender such as UCO Bank Ltd. after the EU sanctions prompted greater caution among larger banks.

Nayara operates a 400,000-barrel-per-day refinery and owns nearly 7,000 fuel outlets across India. It is also developing an integrated petrochemicals plant next to its refinery. The ownership of Nayara is currently split between Rosneft and investment consortium SPV Kesani Enterprises Co., while the remaining shares are held by retail investors.