Singapore: Indian Oil Corp (IOC) has barred Switzerland-based Vitol, the world’s largest oil trading firm, from participating in its tenders and other state-run refiners may follow suit, three sources with direct knowledge of the matter said.
IOC, the country’s biggest refiner, put Vitol SA Geneva and Vitol Asia Pte Ltd Singapore on a list of companies barred from doing business with it from 3 September as the trader withdrew and modified a binding offer made in a crude import tender, the sources said.
Officials at Indian Oil declined to comment. Vitol, responding to an email, said it never comments on commercial relationships.
IOC has informed other state-run refiners about the move and has asked them to explore the possibility of initiating similar action, the sources said.
Indian Oil was at one point the country’s sole crude importer and used to buy oil on behalf of other companies. State-run firms still work closely on matters such as international trade and retail fuel prices.
The ban may allow Vitol’s competitors Glencore and Trafigura, which have significant Indian operations and have invested heavily to build their businesses there, to expand in Asia’s third-largest economy. A lot would depend on whether other state-run companies follow IOC’s lead, traders said.
“Certainly this now opens the door for the likes of Glencore and Trafigura to take over from Vitol’s position in the tenders,” a Singapore-based trader said. “Now the question is will other refiners impose the same action on Vitol? Potentially this could be a major blow to Vitol’s trading ops.”
Other state-refiners would consult the oil ministry on suspending Vitol from participating in their tenders, the same sources said.
“IOC is like the godfather here, no one messes with it,” an India-based trader said. “On the products side, Vitol is a market leader, it picks up a lot of cargoes from India, and so, if its bids are not there, others would definitely get an advantage.”
The impact of this ban for Vitol would be particularly serious for West African grades, traders said. India imports about 80% of its crude requirement. In the fiscal year ending 31 March, it imported about 3.3 million barrels of oil.
“It’s going to be a huge impact on Vitol because they would lose a big outlet for West African crudes,” a Singapore trader said. “India might see higher prices on their tenders.”
Indian Oil imports about 25% of its crude requirement through spot tenders, with the rest purchased through annual term deals.
Vitol is not the first trading firm to fall foul of Indian state-run refiners. The second-biggest, Bharat Petroleum Corp, barred Glencore from participating in its tenders in January but within three months lifted the ban following a settlement.
India is the world’s fourth-largest oil importer. State refiners control nearly two-thirds of the country’s 4.17 million barrels per day (bpd) refining capacity, which includes Reliance Industries’ export-focused 580,000 bpd plant.
IOC directly owns 1.08 million bpd of crude processing capacity through its eight refineries, while subsidiary Chennai Petroleum Corp owns 230,000 bpd. Indian Oil floats tenders almost every week seeking sweet barrels.