RIL has shed its refinery to make up for the expected scarcity in diesel and petrol they may face in 2009-10.

We bought a 40,000-tons diesel parcel from RIL the day before yesterday, a HPCL official said. They (RIL) had only 40,000 tons to offer to us (in May) as they said their rest of output was committed for exports.

HPCL presently is purchasing three million tons of petrol, diesel and kerosene from Essar Oil Limited (Essar Oil), which has a refinery just five kilometers away from J-1.

We buy 150,000 to 180,000 tons of diesel a month from Essar Oil and 250,000 tons of the products per month from Mangalore Refinery and Petrochemicals Ltd (MRPL), official said.

HPCL currently has 8,033 petrol pumps but does not have an oil refinery in the northern area. In the absence of a product source in the north, HPCL till 2008 imported 1.5 million tons of petrol and diesel besides sourcing another 2-3 million tons of products yearly from MRPL to feed the needs of its consumers in the northern area.

Ideally, we would like to replace all of our imports with domestic supplies. But we have to see how of much products are available (from RIL), the official said adding an yearly contract for purchasing diesel and also petrol was expected to be signed within a month’s time.

BPCL, which is also sourcing 1.5 million tons of products from Essar Oil, may require 400,000-500,000 tons of diesel in fiscal 2009 due to closing of its two refineries, but it has not yet started sourcing any product from J-1.

IOC had estimated a need of 60,000 tons of diesel from RIL over the next two months but is reworking the numbers after a fall in fuel demand in April 2009.

Diesel consumption increased just 2% to 3% in April 2009. We will buy from RIL whenever we need but we don’t need anything immediately, IOC Chairman, Sarthak Behuria said.

Buying from RIL would help the state-run companies save on ocean freight. Besides, purchasing from RIL would also be cheaper than imports as products would be priced at the local refinery gate pricing formula, which is a mix of 80% import cost and 20% export price of the product.