MRPL to increase delivered purchases of crude oil to mitigate shipping risks

Mangalore Refinery and Petrochemicals Limited (MRPL) has decided to adopt a significant strategy for the procurement of crude oil. According to a report by The Economic Times, the company is now planning to increase the purchase of crude oil on a delivered basis. The primary reason behind this decision is the increased shipping risks on maritime routes due to the ongoing Iran war.

Generally, when companies purchase crude oil, the responsibility and associated risks of shipping and transportation are critical. However, considering the instability and risks in shipping caused by the Iran war, MRPL has focused on the delivered model.

The company's main objective is to maintain the full capacity of its refinery. In war-like situations, there is a possibility of disruption in the supply chain, which could affect refinery production. Therefore, MRPL is now emphasizing diversifying its crude sourcing. By diversifying sourcing, it will be able to obtain crude through other sources even if tensions increase in any one region, ensuring that the production process does not stop.

Providing further information on this matter, MRPL CFO Devendra Kumar expressed hope that the company would be able to enter into annual supply agreements with Middle Eastern oil producers. If these agreements are successful, the company will secure a stable supply of crude oil for the long term, providing protection against market volatility.

Along with this strategy, the company's export figures may also be affected. According to the report, as fuel consumption is likely to increase at the local level, MRPL's fuel exports may decrease. To meet the growing demand within India, the company may have to make changes in its production and distribution planning.

The company is currently in a situation where it faces global political tensions and shipping risks on one hand, and the challenge of satisfying the growing demand of the local market on the other. Through the increase in delivered purchases and measures to diversify sourcing, the company aims to tackle both these challenges.

Thus, the uncertainties created by the Iran war have forced MRPL to change its procurement method. Through potential annual agreements with Middle Eastern countries and the delivered model, the company seeks to ensure its efficiency and security, so that there are no obstacles in meeting the country's energy requirements.