Actionable insights on equities, fixed-income, macros and personal finance Start 14-Days Free Trial
Actionable investing insights Get Free Trial

Saudi Takes Up Libyan Shortfall, RIL benefits


A fallout of the Libyan Crisis is that Saudi Arabia is taking up the slack. Except, it can’t easily replace Libyan Crude.

“Libya is a producer of light, sweet crude,” says Andy Lipow, president of Lipow Oil Associates, a Houston consultant. “The spare capacity among Opec members is heavy, high-sulphur crude.”

Heavy, sour = higher density, higher sulphur content than "light, sweet". I doubt people are weighing or tasting the darn thing.

The spiel is that refinining heavy-sour is much more difficult, and there are a lot of refineries doing only light-sweet (in industry parlance, aren’t "complex" enough). The article goes on to say that these refineries are in trouble, they have to find other light, sweet sources, blah blah.


There are enough complex refineries processing heavy-sour, like Stuart Staniford says:

But it’s an entirely different matter to claim that the entire global refining industry cannot make more use of Saudi crude right now, which is what these news stories are implying.  After all, if there’s any refinery anywhere that could take more Saudi crude and refine it into gasoline, diesel, or some other useful product, then that refinery could substitute for the lost output from refiners of Libyan crude that cannot switch.  So there’s no requirement for individual refineries to switch as long as someone, somewhere, anyone, anywhere can refine more Saudi crude at present.  If that were to be true, then global production of refined products need not fall, as long as at least 1.3mbd of additional Saudi oil can be refined to replace the 1.3mbd of Libyan crude exports that are soon not going to be showing up at oil terminals in Europe.

Among the biggest of the heavy-sour capable refiners is the Reliance Industries RPL plant in Jamnagar. If heavy-sour refining is going to be in demand, and the light-heavy crude price differences sustain, we should see RIL making a good run in the months ahead.

Also, the BP deal is a huge positive. $7.2 billion is usually good enough for a lot – and they already have another $7 billion (31,000 cr.) in the bank. This is a war chest, and they’ll buy something with it, surely.

Disclosure: Long.


Like our content? Join Capitalmind Premium.

  • Equity, fixed income, macro and personal finance research
  • Model equity and fixed-income portfolios
  • Exclusive apps, tutorials, and member community
Subscribe Now Or start with a free-trial