Aramco might not renew imports contract with India
Talks over contract terms have stalled due to pricing disagreement
Saudi Aramco might not renew its term contract for diesel and gasoline imports with India’s Reliance Industries, The Economic Times, has reported.
The term deal talks had stalled because the companies had not been able to agree a price yet, sources close to the matter told the news site.
Another source added that a deal might not be reached since there was less logic this year on both sides and Reliance could use the barrels itself particularly given higher freight rates.
With a deal normally signed by the first quarter of the year, prolonged negotiations could be interpreted as an early sign that the long-standing contract may not be renewed.
Such an outcome is even more likely at a time when Saudi Arabia is becoming less reliant on imports and more focused on expanding its refinery capabilities at home and abroad.
The volumes in the term of the deal between the Saudi oil giant and India’s conglomerate typically range around 1.5mn to 3.7mn barrels a month of diesel, a trader said.
If no deal is reached, reduced demand from Saudi Arabia and continued exports from its new refineries would weigh on Asian diesel margins, which are down 26% from the same period last year, the news site reported.
Saudi Arabia added 800,000 barrels per day (bpd) of new capacity in its refineries of Yanbu and Jubail over the last two years, and is planning another 400,000 bpd in Jazan, bringing its total capacity to over 3mn bpd.
The Kingdom has been an annual net exporter of diesel since 2007. Last year it exported about 88.8mn barrels of diesel and imported 72.6mn. In comparison, diesel imports in 2013 were 92.4mn barrels and exports 45.8 barrels.