New Delhi: Bharat Petroleum Corporation Limited's (BPCL) Director (Finance) VRK Gupta sent a direct price signal to investors during an investors' call on May 20, warning that sustained under-recoveries from the ongoing West Asia conflict could force fuel price revisions. "Some point of time, the price revision and the burden has to be shared among all the stakeholders," Gupta said during BPCL's Q4 FY26 earnings call, adding a firm caveat: "If it continues for a longer period of time, definitely, there will be stress if no price revisions happen."
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He was equally unsparing about the limits of balance sheet resilience: "Once the cash flow mismatch happens, we can absorb 1 month or 2 months. But subsequently, if it continues, definitely, there will be some solution so that our cash flow will continue." He said unequivocally that "no balance sheet can take that absorption" indefinitely.
The immediate trigger is the disruption to crude flows through the Strait of Hormuz, which has upended BPCL's carefully planned supply mix and pushed landed crude costs well above benchmark prices. Gupta said the company's current cost of bringing in a barrel of crude has diverged sharply from market benchmarks.
"Indicatively, you can take today's date — if you want to finalise any deal, the Brent is at around USD 110, maybe our landing will be USD 120 or USD 122, maybe today, if you ask me. So every day it changes, my landing," he told analysts.
That gap of USD 10-12 per barrel compares starkly to pre-war norms: Gupta confirmed that before the conflict, term crude was being secured at Brent plus USD 4-5 per barrel.
Q1 FY27, he warned, would reflect the full force of the disruption: "While our financials for FY '25-'26 have been strong since the large impact of the war is not fully realised in Q4 due to timing differences, Q1 '26-'27 is going to be a challenging period."
A critical shift in the crude procurement story is Russia's changed pricing dynamic. What was a reliable source of discounted crude has turned into a premium market, even as BPCL's dependence on it has only grown.
Russian crude as a share of BPCL's total procurement climbed from 25 percent in Q3 FY26 to 31 percent in Q4, and has since risen further. "Russian product offtake is — I said around 40 percent, 41 percent in the recent time we have taken (sic.)," Gupta said. Yet the discount advantage that made Russian crude attractive has evaporated. "Discount presently, it is not available at discount, at least I can say that," he confirmed.
The company's ability to source from term contracts — originally planned to cover 55 percent of requirements — has been curtailed by the Strait of Hormuz constraints, with only 45-46 percent of term supply coming through. "Beginning of the year, we have planned for 45 percent for spot. Now it is happening at around 55-60 percent spot (sic.)," Gupta said, underscoring the extent to which market disruption has forced the company's hand.
To fill the gap, BPCL has been testing new crude grades and geographies with limited but growing success. Gupta said the company tested four new grades last year — from Venezuela, Brazil and Angola — alongside Middle Eastern spot grades, such as Murban. He noted, however, that Venezuelan crude cannot be processed directly and must be blended with other grades before it reaches the refinery.
On LPG, with under-recoveries widening sharply on account of freight and spot premiums. In January this year, the company begun sourcing LPG from the United States, with around 10 percent of the industry's LPG requirement contracted from US suppliers. However, against the backdrop of the West Asia crisis, spot cargoes are now being brought in on time-charter vessels at considerably higher landed costs to make up for loss of supplies from the Middle East.
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The flagship Bina Petrochemical and Refinery expansion project, however, is running behind schedule, having achieved 23 percent progress against a planned 32 percent, with Rs 4,700 crores incurred and Rs 25,400 crores already committed. Geopolitical supply chain disruptions affecting manufacturing and delivery timelines are the primary cause, with Middle East conflicts also affecting supply pricing. "Critical long lead items remain on track and all major packages have been awarded by February 2026," Gupta said, noting that the company expects to complete the project within plus or minus 10 percent of the approved cost.
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