Nayara Energy, backed by Russia's Rosneft, claws its way back after sanctions
Nayara Energy is now working with banks including State Bank of India to facilitate local currency payments. UCO Bank is already working with the refiner.
Two months after sanctions plunged Indian refiner Nayara Energy Ltd. into crisis, upending trade and forcing the abrupt exit of its European executives, the company’s operations and sales are recovering, thanks to government support and workarounds.
The refiner—part-owned by Russia’s Rosneft PJSC and arguably the most high-profile Indian company to be hit by comprehensive sanctions—is now working with banks including State Bank of India to facilitate local currency payments, according to people familiar with the matter. They asked not to be named given the sensitivity of the matter. UCO Bank had already received government approval to work with Nayara earlier this month, and is expected to manage overseas transactions.
Operations are also returning to normal, allowing the company to go beyond meeting its domestic commitments—supplying its over 6,500 fuel outlets—and to reestablish an export network with the aid of floating storage and a fleet of ships that includes sanctioned vessels, according to ship-tracking data compiled by Bloomberg. At least one state processor, Hindustan Petroleum Corp. Ltd., has increased its purchases of products from Nayara, according to a government official, asking not to be named discussing private information.
The refiner is operating at 75% capacity and that level is increasing, one of the people directly involved in the matter said. Once reliant on a range of Saudi Arabian, Iraqi, and Russian oil grades, the refinery in Vadinar is now running predominantly on Russian Urals, supplemented by small volumes of Indian crude, according to the person.
“Our refinery continues to operate at normal levels and we have been actively fulfilling demand for our Indian outlets and customers,” Nayara said in a statement on Monday, adding that it was “exploring various options to export, once the domestic demand is met.”
The July announcement of EU sanctions on Nayara, made by the EU’s foreign policy chief Kaja Kallas on social media platform X, caught the company off-guard. It rapidly upended management and froze even basic software dependent on Western providers like Microsoft Corp.
Several of the 11 members on the board resigned immediately, including Chief Executive Officer Alessandro Des Dorides, and others who are EU citizens. The crisis deepened as vessel providers such as Great Eastern Shipping Co. terminated contracts after EU-backed P&I insurance clubs withdrew coverage. Banks compounded the turmoil.
Nayara’s troubles are not yet over.
Even after meetings with the refiner’s executives, large lenders with overseas exposure like SBI are supporting only domestic payments, in Indian rupees, the people said.
The refiner is set to export nearly 2.2 million barrels of products in September — less than half of the volume sold in the same period last year when Western exports were still open, according to data compiled by Kpler. More than half of the amount already loaded this month at the western port of Vadinar is idling, or has been involved in ship-to-ship transfers near Sohar off Oman.
Some of Nayara’s oil products are being sent to storage in tankers at sea. At least four so-called floaters at a ship-to-ship transfer spot off the port of Sohar have received nearly 130,000 tons since late August, ship-tracking data show.
One of the floating storage ships, the Wu Tai, was the first to receive a Nayara cargo. It was previously managed by Gatik Ship Management, a Mumbai-based entity that emerged with a large tanker pool just after Russia began building its shadow fleet following its invasion of Ukraine in 2022.
Wu Tai, which is now managed by Yue Liang Hu Shipmanagement Co in Shanghai, took another shipment of Nayara product from the tanker Varg in late September. Blue Talu, currently sailing away from Sohar and signalling Vadinar, took on Nayara-produced diesel in early September, ship-tracking data and port agent’s reports show. The tanker was also once managed by Gatik in 2023 before switching managers two months later.
“India’s big domestic fuel demand is a strong buffer for the country’s refiners,” said Vandana Hari, founder of market analysis firm Vanda Insights. Given Nayara’s plant can fully run on Russian crude, feedstock isn’t an issue and low product exports can be managed by reducing run rates and diverting flows to the local market, she added.
To secure future supply, the refiner has been in talks with Saudi Arabia and Iraq to resume purchases, the person directly involved in the matter said. The company is eager to convince sellers that the absence of US sanctions means there are no real risks—and expects to resume shipments within weeks.
India’s “refining sector has the resilience to ensure that whatever happening in the geopolitics, we would continue to run at more than 100% capacity”, Nayara Chairman Prasad Panicker said at an energy conference in New Delhi earlier this month.
India’s oil ministry and HPCL did not respond to queries from Bloomberg. SBI also did not reply to requests for comment.
