Nayara Energy Faces Oil Supply Crisis Amid EU Sanctions

Saudi Aramco and Iraq's SOMO Oil have halted crude oil supplies to India's Nayara Energy due to the recent sanctions imposed by the European Union on Russia's Rosneft. This development has significant implications for Nayara, which is now entirely reliant on Russian crude imports, leaving it vulnerable in a rapidly changing energy landscape.

Typically, Nayara Energy receives around 2 million barrels of Iraqi crude and 1 million barrels of Saudi crude each month. However, in August, the company did not receive any shipments from either supplier, indicating a severe disruption in its supply chain. The halting of these supplies has been attributed to payment issues arising from the sanctions, further complicating Nayara's ability to operate efficiently.

Nayara Energy, which operates a refinery in Vadinar, Gujarat, is facing operational challenges, running at only 70-80% capacity. This reduced capacity is largely due to a lack of buyers, which has been exacerbated by the sanctions. The company has struggled to transport fuel effectively, relying on a "dark fleet" of vessels as other shippers have withdrawn their services.

The company’s situation is precarious, as it controls about 8% of India's total refining capacity of 5.2 million barrels per day. The recent resignation of its CEO in July has added to the uncertainty surrounding its operations. In a bid to stabilize leadership, Nayara Energy has appointed a senior executive from Azerbaijan's national oil company SOCAR as its new chief executive.

The impact of these developments is significant, not just for Nayara Energy but for the broader Indian refining sector, which is grappling with the implications of international sanctions and fluctuating oil supplies. As Nayara navigates these challenges, its ability to adapt and find new suppliers will be crucial for its survival in the competitive energy market.