Saudi Arabia’s state oil company, Saudi Aramco, and Iraq’s state oil marketing company, SOMO, have suspended crude oil sales to the Nayara Energy refinery located in Vadinar, India. This decision follows the adoption of the European Union’s 18th sanction package against Russia, which was released last month. According to Reuters, unnamed sources indicated that this refinery, which has a 49.13% stake held by Russia’s Rosneft, has been operating at only 70-80% of its capacity due to limited access to crude oil.
The Nayara refinery, with a daily capacity of 400,000 barrels, represents approximately 8% of India’s total refining capacity and is the country’s second-largest facility. The recent sanctions have severely impacted its operations, particularly in terms of exports. As a result, Nayara Energy has shifted its focus towards the domestic fuel market.
Reports from Oilprice.com noted that Nayara Energy’s exports were never the primary goal, with its operations being more oriented towards local demands. Historically, the refinery mostly sold jet fuel to the United Kingdom, which has not imposed restrictions on the Rosneft-owned entity or the products it produces.
Despite this pivot, Bloomberg recently highlighted a significant decline in Nayara Energy’s crude oil imports, which are projected to drop to an estimated 94,000 barrels daily for the month—a record low since the refinery commenced operations. This figure starkly contrasts with the average import rate of 366,000 barrels daily recorded for the third quarter of the previous year.
The EU’s latest sanctions expand restrictions on entities conducting business with Russian oil, targeting asset freezes, travel bans, and resource provision prohibitions. The sanctions specifically address companies managing shadow fleet vessels and traders dealing in Russian crude oil, which notably includes Nayara Energy as a major client of the Russian oil sector, largely due to its association with Rosneft.
The ramifications of these sanctions extend beyond mere numbers, affecting local fuel supply chains and potentially altering market dynamics in the region. As India navigates the complexities of its energy needs in light of these developments, the impact of reduced imports from significant suppliers like Saudi Arabia and Iraq will continue to unfold in the coming months.
