India's Nayara Cuts Oil Refinery Run Rate After EU Sanctions

Nayara Energy is reducing run rates at its west India refinery as more domestic and global players spurn the refiner after EU imposed sanctions on the company. 

The 400,000 barrel-a-day Vadinar refinery is currently operating at about 70%-80%, said the people, who asked not to be named due to the sensitivity of the matter. Across India, processors typically run their plants at close to 100% of their nameplate capacity, or over. 

The lowered operations are due to mounting logistical issues and trading partners turning away from Nayara, making it difficult for the company to monetize and transport its refined oil output to customers. 

This week, local shipowners are reassessing their dealings with Nayara, citing pressure from mutual-insurance groups known as P&I clubs, said two shipbrokers who specialize in fixing tankers for Indian routes. Many ships plying Indian coastal routes rely on P&I clubs that are based in the UK and across Europe, which comply with EU sanctions. 

Ships found to be handling Nayara cargoes and trades could lose coverage from western P&I groups, which largely represent European insurers. 

A company spokesperson didn’t immediately reply to email and phone message seeking comments. Nayara exports up to 30% of its oil-product output, and sells the balance to local markets through its network of petrol pumps and sales to state refiners, according to rating agency CareEdge. 

At least one ship, the Bourbon, is currently idling off the Indian coast after loading a Nayara fuel cargo from Vadinar port, ship-tracking data show. The tanker, owned by Mumbai-based Seven Islands Shipping and covered by UK-based NorthStandard P&I club, was meant to deliver diesel to Mangalore. 

Shippers are keenly monitoring the status of this vessel due to the sensitivities around its Nayara cargo and western P&I coverage. Seven Islands and NorthStandard didn’t immediately reply to emails seeking comment. 

The EU sanctioned Nayara on July 18, saying its profits support Moscow’s war in Ukraine. Russian oil giant Rosneft PJSC owns 49.13% of Nayara, which accounts for nearly 8% of India’s refining capacity and 7% of its retail fuel network. 

The refiner’s ability to maintain operations in the wake of the sanctions hinges on fuel sales at home and abroad, and crude feedstock imports. Both of these activities require the support of tankers, a global network of maritime insurers as well as western financiers, a stress point for the company in recent days.