Indian refiner Nayara Energy, part-owned by Russian oil giant Rosneft, could likely delay its planned petrochemicals expansion as a result of Western sanctions in response to Russia’s invasion of Ukraine, industry executives with knowledge of the matter said.
Rosneft owns a 49% stake in Nayara Energy, which operates a 20 million tonnes a year refinery in Gujarat and more than 6,000 fuel retail outlets across India.
Oil trader Trafigura and Russian investment group UCP are other shareholders in Nayara.
Nayara operates the 400,000 barrels per day (bpd) Vadinar refinery in India’s western Gujarat state and has plans to raise its petrochemical capacity in phases.
Last year, Nayara raised 40 billion rupees ($528 million) for its planned $850 million polypropylene plant in Gujarat state, which is to be funded through a mix of debt and equity.
The petchem project will very likely get delayed as lenders will not want to touch this until the geopolitical tensions and the storm of sanctions enveloping Russian entities subside, said industry executives, requesting anonymity.
So, despite the project financing agreement, it will be hard for Nayara to access capital. Similarly, the equity contribution, if any by the shareholders, for the petrochemical project will be tough to bring in due to cross-border payment challenges, they said.
“We are making steady progress on our petrochemicals expansion, in a phased manner which is in line with our asset development strategy,” Nayara said in its statement.
Indian banks are awaiting clarity from Prime Minister Narendra Modi’s government and the central bank on assets and payment settlements relating to Russia, which has meant putting loans to businesses related to Nayara on hold, the sources said.
Surging fuel demand currently, however, means strong refining margins and cash flows for Nayara. But that wouldn’t be sufficient to fund the petchem project, executives said.
Also, Nayara will not be able to pay dividends to Rosneft due to problems in moving money internationally, executives said.