OPEC’s biggest oil producers are in talks to supply
extra crude to India as the nation prepares to halt purchases from Iran because of global sanctions, four people with
knowledge of the matter said.
Indian refiners, which are waiting for an order
from the oil ministry to stop buying Iranian cargoes, are discussing annual term
contracts with Saudi Arabia, Iraq
and Kuwait
for the year starting April 1, the people said this
week, asking not to be identified because the information is confidential.
While the volume hasn’t been set, the Indian companies have been told there is
enough supply to cover the loss of Iranian crude, the people said.
The assurances reduce the risk of disruptions to
oil supplies for Asia’s third-largest economy as it seeks to cut fuel
subsidies and narrow its budget deficit. They are also evidence of how global penalties
against Iran because of its nuclear program are squeezing the nation’s
revenues. At current prices, Iran stands to lose about $11.5 billion in sales
annually if India stops buying its oil.
Prospects for resolving the conflict over Iran’s nuclear program have improved following signs of “good faith” from
Western powers, Iranian Foreign Minister Ali
Akbar Salehi said March 10. The
state-run Iranian Students News Agency on the same day cited an unidentified Iranian
diplomat as saying world powers have offered to ease economic sanctions on Iran
if it limits the enriched uranium in its possession within six months.
India’s refiners currently have term contracts to
receive a total of about 300,000 barrels a day of Iranian crude, or 110 million
a year. Iran Heavy traded at $104.87 a barrel on 11 March.
Saudi Arabia, the largest producer in the Organization of
Petroleum Exporting Countries, pumped 9.1 million barrels of oil a day in
February, the group said in its monthly oil market report on 11 March, citing
secondary sources. Daily output was 3.1 million barrels for Iraq and 2.8
million for Kuwait.
Iran produced 2.7 million barrels a day, the data
show. The nation’s crude shipments plunged 40 percent in the last nine months
of 2012, the state-run Iranian Students News Agency reported Jan. 7. China, India and South Africa buy 70 percent of Iran’s oil exports, or about
910,000 barrels a day, the Fars news agency reported Jan. 14.
“Saudi Arabia pumped 10 million barrels a day last
year, and though that’s come down, they can easily increase production again,”
Ul-Haq said. “Iraq’s production is also rising. All these can replace Iranian
crude, so India shouldn’t face a problem.”
India has struggled to get tankers and insurance
for transporting supplies from Iran after the U.S. and the European Union
imposed sanctions on the Islamic Republic to curb its nuclear program, which
they say is designed to develop an atomic weapon. Iran says its program is for
civilian purposes including electricity production and medical research.
India may cease buying Iranian crude as local
insurers refuse to cover the risks for using the oil, P.P. Upadhya, the
managing director at Mangalore Refinery & Petrochemicals Ltd. (MRPL), said March 8.
Iran has offered to provide insurance cover to
Indian plants if they continue purchasing Iranian crude, two of the people said
this week. While the processors have been shipping crude on tankers operated
and insured by Iran, they won’t agree to have their plants covered because they
aren’t confident the country will be able to pay them if they make a claim, the
people said.
The U.S. in December renewed a waiver for India and
eight other nations from a law that cuts institutions off from its banking
system if they process payments for Iranian oil. The the nations “significantly
reduced” their purchases of Iranian crude, the State Department said. The
exemption is subject to a review every 180 days.
Indian refiners planned to reduce their purchases
from Iran by as much as 20 percent in the year starting April 1 to keep the
waiver from the U.S., a News survey of five refinery officials last month
showed.
India imported 171 million tons of crude in the
year ended March 31, 2012, according to data from the Associated Chambers of
Commerce and Industry of India. Iraq overtook Iran as the nation’s
second-biggest supplier, after Saudi Arabia, during the period, the data show.
Kuwait was third-biggest.