NEW DELHI: India’s monthly naphtha exports could fall by more than 15 percent from July versus the first-half average of about 450,000 tonnes as domestic demand grows amid growing gasoline appetite, a development that could hurt traders who need the spot barrels to fill their supply shortfalls.
Although India’s current naphtha exports make up less than 15 percent of Middle Eastern exports, and Abu Dhabi’s additional naphtha can fill India’s gap, the former sells mostly spot cargoes while Middle East prefers year-long contracts.
“India is nearer. It sells through tenders which is a straight forward process. You want the cargo, you put a big number and you own the cargo. You do not have to repeatedly negotiate,” said a trader who tracks naphtha.
Saudi Aramco sells spot cargoes but through private negotiations or participation in buyers’ tenders.
Abu Dhabi National Oil Co will raise its yearly naphtha exports to over 10 million tonnes from 7.5 million tonnes once production at its newly expanded Ruwais refinery increases.
But the impact of lower spot volumes from India would be obvious during supply crunch when traders need cargoes fast as Asia is short of naphtha.
This was evident in March 2013 when Indian spot premiums shot up to $70 a tonne. The average Indian premium for June 2015 cargoes is $22 a tonne.
India exported as much as 750,000 tonnes of naphtha a month in 2012.
From July, India’s exports will fall with the government allowing three southern fertilizer plants to use local naphtha as some gas supply pipelines are not ready.
India’s growing gasoline appetite has also sapped the country of its naphtha. Depending on the grade, naphtha can be reformed into gasoline or used as a gasoline blendstock.
It is also used as a feedstock to make petrochemicals such as plastics which are found in almost all industries spanning from consumer to electronics, construction and automobile.
“The main reason for lower naphtha exports seen in the recent months is the gasoline demand,” said Premasish Das, director of downstream R&A at consulting firm IHS Energy.
“India’s net naphtha export declined by about 45,000 barrels per day (bpd) for the first four months, while at the same time, India’s gasoline demand has grown 19 percent (about 80,000 bpd) as compared to last year.”
He expects India’s naphtha exports for 2015/2016 to be 20,000 to 25,000 bpd lower than in 2014.
