NEW DELHI: Indian state-owned refiner MRPL has asked for more Saudi Arabian oil in April, according to an industry source close to the matter, as it awaits clarity from India’s government on how it will insure plants using crude from sanctions-hit Iran.
Indian insurers said in February they could no longer cover refineries processing Iranian oil as European reinsurers had stopped helping them hedge their risk. New Delhi and industry officials have been considering establishing a domestic reinsurance scheme, but it is unclear how that would be funded.
Mangalore Refinery and Petrochemicals Ltd (MRPL) and Hindustan Petroleum Corp have both said they will halt oil imports from Iran in April if insurance cover is not available for their refineries.
Europe and the US introduced tough sanctions last year targeting Iran’s oil exports to force the Islamic nation to the negotiating table over its disputed nuclear programme. Those sanctions gave rise to a similar reinsurance issue that stopped non-Iranian shipowners from carrying Iranian oil.
MRPL, Iran’s biggest Indian customer, has asked for an extra 23,000 barrels per day (bpd) of oil from Saudi Aramco for April, after already increasing its annual contract to 55,000 bpd for the fiscal year ending March 31, 2014, the industry source said.
The volume including the extra barrels would be around 70 percent higher than the 46,000 bpd that MRPL took from Saudi Aramco in 2012/13, the source said. HPCL is turning to Iraq to replace Iranian barrels it won’t be lifting from April.
HPCL doesn’t want a firm contract with Iran for 2013/14 but wants an option to take up 20,000 bpd, about 57 percent lower than last year, according to company sources.
HPCL aims to buy 60,000 bpd from Iraq’s State Oil Marketing Organisation (SOMO) in 2013/14, up from about 45,000 bpd in the last fiscal year.
It is also looking at signing an annual deal with Total to buy about 40,000 bpd Basrah crude oil.
Indian Oil Corp, the country’s biggest refiner, plans to ship in two million barrels of oil from Iran this month. IOC’s refinery insurance policy is not due for renewal until November, a company source said.
State refiners have made provisions for Iranian crude in their annual import plans, but those are pending a decision from the government on resolving the insurance problem.
Oil Secretary Vivek Rae last month said that Indian insurers and the Oil and Industry Development Board (OIDB) under the federal oil ministry may jointly set up a fund to back local insurers.
A government source said initial talks included a proposal for insurers and OIDB to contribute `10bn ($184.21m) each for the planned reinsurance scheme. That may not be enough to cover an accident or incident at a refinery, and it is unclear how the rest would be funded.
The Indian Express Newspaper last week reported that the federal government could extend a sovereign guarantee of up to `100bn. The finance ministry declined to comment.Reuters
