Russia sanctions may cause short-term disruptions, stabilisation expected in 2–3 months, says BPCL CMD

markets

G Krishnakumar, Chairman and Managing Director of Bharat Petroleum Corporation Limited (BPCL) in a CNBC-TV 18 interview stated that the company is assessing the impact of sanctions on Russia. He anticipates a minor disruption lasting one to two months. In the short term, supply shortages may occur, but the situation is expected to stabilize within two to three months.

BPCL is actively rebalancing its crude procurement strategy, focusing on sourcing from the Middle East and the US. He noted that US President Donald Trump’s comments on increased drilling activity suggest that supply constraints are unlikely in the long run. However, BPCL may incur a premium of $2–$3 per barrel, which is expected to balance out over the year.

Currently, 35% of BPCL’s crude mix is sourced from Russia. While the next two months present challenges, Krishnakumar expressed confidence in navigating this period. The company’s gross refining margin (GRM) has seen sequential improvement, rising to $5.6 per barrel in the December quarter from $4.4 per barrel in Q2, though it fell short of analysts’ expectations. BPCL aims to achieve a GRM of $6.5 per barrel for FY25.

The company forecasts crude oil prices to stabilize in the $75–$80 range over the long term, despite short-term fluctuations. At the current price level of $80, inventory losses could reverse if prices remain steady. Additionally, the company does not anticipate a significant spike in crude oil prices by March.

Addressing under-recoveries, Krishnakumar expressed hope for government support to offset losses in LPG sales. BPCL's current LPG under-recovery stands at approximately Rs7,200 crore. While the government is expected to announce relief by the end of March, the extent of support remains uncertain. Krishnakumar acknowledged that the company may not receive full compensation and will need to manage the remaining shortfall internally.

BPCL's Q3 profit was affected by lower marketing margins and losses from liquefied petroleum gas (LPG) sales. The company's revenue loss on LPG sales below market rates amounted to about Rs7229 crore, according to a stock exchange filing.

BPCL, in its concall, said it anticipates significant EBITDA growth from the CGD business starting next year. The company has outlined its targets for CNG station expansion, planning to establish 150 stations in FY 2024-25, 165 stations in FY 2025-26, and approximately 200 stations annually in the following years.