India’s HPCL seeks for replacing Iran oil with Iraqi imports

14/02/2013
The third-biggest purchaser of Iranian crude in the current economical year, HPCL, from India has got plans to slash its purchases and replace them with the Iraqi oil as sanctions on Tehran bite harder, a source with direct knowledge of the refiner’s plans said.

The move is in line with a broader goal fixed by India, the fourth largest oil importer across the world and Iran’s second-biggest client after China, for cutting deliveries from Tehran, and comes a s a tough new U.S. condition on funding such purchases has been imposed.

The state-run Hindustan Petroleum Corp. Ltd. (HPCL) had an annual contract with Iraq for purchasing 40,000 barrels per day (bpd) and another option for another 20,000 bpd for the year ending 31st March. It has raised about 44,000-46,000 bpd in the current year.

HPCL has goals to have a deal for only token volumes from Iran in the year, starting from April, the source said, partly because of growing concerns insurance for installations, including refineries, handling Iranian crude might be hard to find because of the tighter sanctions.

Volumes from Iran depend on the impact of sanctions. If the sanctions are eased or if the insurance matters get government’s helps, then Iran imports may go up. But at this moment no one wants to take any risk, the source said to the media, who is not authorized to speak to it.

HPCL wants to increase its increase its annual contract with the State Oil Marketing Organization (SOMO) of Iraq to about 60,000 bpd in the year starting in april from 45,000 bpd in the current year, the source added.

ALTERNATIVE SUPPLY SOURCES

The refiners of India have been compensating for lost Iranian volumes with crude from Iraq and Latin America. Iraq replaced Iran as the country’s No. 2 supplier after Saudi Arabia in the year that ended in March of 2012, as Tehran ceded a position it had held for five long years.
Sanctions on Tehran aimed at curbing its nuclear program have also prompted its other main Asian clients, such as; Japan, South Korean and China, for cutting imports and secure a waiver allows them continued access to the U.S. financial system. Iran says that its nuclear program is completely for peaceful purposes.

Refiners are already finding it difficult to import because of an EU ban on insuring the vessels carrying Iranian oil. In addition, under new sanctions of U.S. from 6th February, payments for Iranian crude must be held on a bank account in Indian in rupees, which are not freely traded on global markets.

India has aims to cut deliveries from Tehran by 10-15 % in the year beginning in april after the reductions of about 15 % in the current year.
The refiners of India, both private and the state-run, have already cut imports by about 19 % in April-December of 2012 to about 270,000 bpd. HPCL transported around 17 % of that, with fellow state-run refiner MRP: and privately-owned Essar the top purchasers.
Last Update:: 14/02/2013
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