Indian refiners are declaring force majeure on crude purchases from the Middle East after fuel demand plummeted due to a nationwide lockdown to stem the spread of coronavirus and the companies' tanks are full.

 

This has led to a sharp decline in local fuel demand, leading companies to cut crude refining as their storage tanks are full to the brim.

 

Indian Oil Corp (IOC), the country's top refiner, has reduced its crude processing by 30 per cent to 40 per cent and shut its naphtha cracker plant in northern India because of falling demand and "to avoid tank top-up situation", the company said in its force majeure letter to crude suppliers.

 

"...circumstances arising out of COVID-19 outbreak are beyond our control ...all of which adversely impact the performance of our obligation," IOC said in the letter.

 

IOC, which owns about a third of the country's 5 million barrels per day (bpd) refining capacity, has sent a force majeure notice to most Middle Eastern suppliers.The company is yet to decide whether to reduce its crude supplies or cancel lifting of oil cargoes altogether in April.

 

Mangalore Refineries and Petrochemicals Ltd has already shut a third of its 300,000 bpd refining capacity and is preparing to shut the remainder next week as demand slumped.

 

In a letter, MRPL said operations at its refinery have been totally disrupted due to a nationwide lockdown which is "unpreventable and beyond the control of MRPL" . Therefore the company has declared force majeure with respect to the contracts with our all suppliers, buyers, customers, dealer, contractors.

 

Haldia Petrochemicals has shut its naphtha cracker after ports in the country declared force majeure to prevent the spread of the coronavirus. 

 

The petrochemical maker operates a 670,000 tonnes per year cracker, which on average would need more than 150,000 tonnes of naphtha feedstock a month if the unit is at full capacity. The company has been buying naphtha from Kuwait Petroleum Corp (KPC) and Indian Oil Corp (IOC).