Essar Oil Ltd., India’s second-biggest oil refiner, processed crude from Brazil’s Peregrino field for the first time as it seeks to boost margins by using grades that are heavier and cheaper.
Peregrino, a heavy, high-sulfur oil, is among the crudes Essar refined in the quarter ended Dec. 31, according to Managing Director Lalit Kumar Gupta. A record 98 percent of the grades it processed over those three months at its 400,000 barrel-a-day Vadinar refinery in western Gujarat state were heavy or ultra-heavy, the company said in a Feb. 10 statement.
“We wanted to take advantage of the increased spread between light and heavy crude,” Gupta said in a phone interview from Mumbai on Feb. 11. “Complex refineries like ours have this flexibility.”
Heavier crudes are cheaper than lighter grades because they are denser and harder to process into higher-value products. Oil is considered heavy if it has an API measurement of 22 degrees or below, according to the U.S. Energy Information Administration. Peregrino has a gravity of 13.7 degrees, according to Statoil SA, which produces it.
Brent crude, produced in the North Sea and used as a price benchmark for more than half the world’s oil, is 38 degrees, EIA data show. Saudi Arabia, the world’s biggest exporter, is selling its 27-degree Arab Heavy to European buyers for March at a $6.60 a barrel discount to Brent, according to a notice e-mailed Feb. 5.
While Essar processed a record volume of heavier crudes, 84 percent of its product output was higher-value middle and light distillate fuels, the company said in the statement.
The refiner processed 4.86 million metric tons of crude during 85 days of the quarter, or about 419,000 barrels a day. Operating rates fell 5.5 percent from a year ago because of a seven-day shutdown for maintenance during November.