EU sanctions hits Nayara's coastal fuel supply as shipowners snap ties; co sends govt SOS

New Delhi: Rosneft-backed Nayara Energy used ships to transport fuels like petrol and diesel to key consumption hubs along the west coast, reaching as far as Odisha. However, this supply chain has now been disrupted after shipowners, wary of European Union sanctions, halted the lifting of products from the company’s refinery in Vadinar, Gujarat.

Top executives from the company met with Shipping Ministry officials on Thursday, seeking assistance in securing vessels to transport fuels to key locations, including Maharashtra, Mangalore in Karnataka, Chennai, and parts of Andhra Pradesh and Odisha, according to sources familiar with the matter.

Nayara operates a 20-million-tonne-a-year oil refinery in Vadinar, Gujarat. Unlike other refiners, the facility is not connected to a pipeline network that delivers fuel directly to consumption centers. Instead, the company relies on ships to transport products to nearby ports, from where they are distributed by truck.

But Indian shipping lines pulled out of this arrangement after the European Union, in a bid to punish Moscow for its war in Ukraine, last month sanctioned Nayara Energy for its Russian ties.

Sources said shipping companies were unable to secure insurance coverage for the voyages from Protection and Indemnity (P&I) clubs, most of which are based in Europe. Both European individuals and entities are obligated to comply with the sanctions, further complicating the situation.

Nayara, which has already cut run-rate at the refinery to match offtake, is seeking an arrangement with Indian shipping lines under which local insurance companies would provide coverage for the voyages, they said.

The firm, which typically needs three ships, had managed to get one ship after the EU sanctions. That ship could do one voyage.

Sources said the Directorate General of Shipping (DG Shipping), the apex regulatory body for the maritime sector in India, has flagged certain concerns around the EU sanctions and their implications.

A political decision will have to be made to resolve the situation, they added.

An email sent to Nayara Energy for comments remained unanswered.

EU sanctions had forced the company's CEO, three directors and two other senior executives - all European nationals - to resign from the company.

First, the company's chief executive Alessandro Des Dorides quit shortly after the European Union imposed sanctions on Nayara as part of a new raft of measures against Russia over its war with Ukraine.

He was followed by three other directors - Victoria Cunningham, Avril Mary Anne Conroy and Jorg Tumat - resigning from the company. Besides, Barbara (Hofbauer) Oberhauser, who was senior vice president and Head HSE, too resigned.

Nayara had last month denounced the latest EU sanctions against it as unjust and harmful to India's interests, and said it was studying legal options.

Rosneft too had condemned sanctions on Nayara Energy as unjustified, illegal, and described them as a direct threat to India's energy security.

The European Union's 18th package of sanctions against Russia over its war with Ukraine was approved earlier this month with a view to weakening its revenue sources. Nayara Energy was one of the companies that were sanctioned.

Rosneft owns a 49.13 per cent stake in Nayara Energy Ltd, formerly Essar Oil Ltd. Nayara owns and operates a 20-million-tonne-a-year oil refinery at Vadinar in Gujarat, as well as over 6,750 petrol pumps.

Besides Rosneft, an investment consortium SPV, Kesani Enterprises Company, holds another 49.13 per cent stake in Nayara. Kesani is owned by Russia's United Capital Partners (UCP) and Hara Capital Sarl, a wholly-owned subsidiary of Mareterra Group Holding (formerly Genera Group Holding S.p.A.).